In a settlement with regulators, Toronto-based robo advisor, WealthBar Financial Services Inc., agreed to sanctions stemming from failings in its compliance with provisions of the Client-Focused Reforms (CFRs).

The British Columbia Securities Commission (BCSC) settled with WealthBar — which was formerly based in Vancouver, and does business as CI Direct Investing — after a compliance sweep uncovered shortcomings with the firm’s handling of conflicts of interest, certain referral arrangements and know-your-client (KYC) responsibilities.

According to the settlement, regulators carried out a compliance review in 2022 to examine firms’ adherence to the CFRs, which took effect in 2021.

“The exam revealed several deficiencies in WealthBar’s compliance system, including the firm’s failure to identify all existing material conflicts of interest and to address those unidentified conflicts in the best interest of the clients,” the regulator said.

It also found that the firm didn’t meet its KYC obligations because its online survey wasn’t extensive enough, and that it failed to ensure that its reps were having meaningful discussions with clients as required by the CFRs.

Additionally, the BCSC said that the firm failed to prioritize the interests of certain clients when it automatically put those that had been referred to WealthBar into model portfolios from the referring firm, without considering a “reasonable range of alternative actions.”

“WealthBar assumed that clients expressed a preference for their investment portfolio when signing up for WealthBar’s services through the referral party. This assumption fell below the standards required of a discretionary [portfolio manager],” the settlement said — adding that the disclosure provided to investors in these circumstances wasn’t adequate to meet its duties as a portfolio manager.

“WealthBar was required to assess suitability based on all its portfolio offerings, including a reasonable range of alternatives available at the firm, for every client,” the settlement noted.

As a result, the firm failed to meet its suitability obligations, the regulator said.

In the wake of the compliance sweep, the BCSC imposed a series of conditions on WealthBar’s registration, which included requiring it to hire an independent compliance monitor to bring the firm’s practices into line with the CFRs.

Those conditions were lifted in October, the BCSC said, and it noted that the firm cooperated with regulators, and hasn’t been the subject of any complaints as a result of the compliance shortcomings.

As part of the settlement, the firm agreed to pay $60,000 to the BCSC. It also paid $14,800 for the cost of the compliance exam, the regulator said.