The Ontario Securities Commission (OSC) announced on Friday it will hold a hearing on Nov. 10 to consider whether to approve a no-contest settlement agreement with Quadrus Investment Services Ltd., after the firm discovered the certain clients were overcharged in its funds.
The OSC recently began to use these sorts of deals to expedite enforcement action in order to settle cases more quickly by not requiring firms to admit to wrongdoing. The actual terms of the settlement will only be revealed if the commission approves the deal.
According to the statement of allegations published by the OSC, Quadrus self-reported in February that its funds indirectly overcharged certain clients. Specifically, certain clients were not told that they qualified for its “L series” funds, which have higher minimum investment levels, and charge lower MERs. As a result, the clients “indirectly paid excess fees when they invested in the higher MER retail series of securities of the same Quadrus fund,” the statement of allegations says.
The OSC alleges that there were inadequacies in Quadrus’ compliance controls and supervision that resulted in the clients paying excess fees; and, that these deficiencies amount to breach of its registration requirements, and are “contrary to the public interest.”
The allegations also note that the firm planned to pay compensation to clients that were affected by the issue, and to implement additional controls to prevent similar issues in the future. Any regulatory penalties stemming from the issue will be set out in the settlement.