Monarch Wealth Corp. has been fined $60,000 by the Mutual Fund Dealers Association of Canada for failing to properly supervise leveraged trades and for financial compliance deficiencies.

In a settlement agreement released on Friday, the MFDA highlights findings against the Toronto-based mutual fund dealer, which is registered in Ontario, British Columbia, Nova Scotia and Quebec, and as an exempt market dealer in Ontario.

The self-regulatory organization found that between July 2006 and December 2008, Monarch had established, implemented and maintained insufficient policies and procedures to supervise leveraged trades and to ensure the suitability of leveraging recommendations made by approved persons to clients. These deficiencies occurred both at the branch level and head office.

Specifically, the MFDA found that in some client files, the firm’s former branch managers failed to sign off on Leveraged Detail Worksheets, as required by Monarch’s leveraging review procedures. The branch managers also failed to detect and query leveraging recommendations in cases where they may have been unsuitable, in light of the client’s documented KYC information.

Head office-level compliance staff also failed to detect and query these potentially unsuitable leveraging recommendations, according to the MFDA.

Monarch also admitted that it failed to maintain sufficient records of the supervision of leveraged trading that was conducted by its registered representatives, including records of trades reviewed, inquiries made, responses received and resolutions achieved.

The SRO also found financial compliance deficiencies at Monarch Wealth. In particular, the firm failed to maintain an adequate level of risk-adjusted capital, and failed to notify MFDA staff of this deficiency.

For these contraventions, Monarch has paid a fine of $60,000 and costs of $2,500.

Monarch has also revised its policies and procedures with regard to supervision of leveraging, and has developed a plan to address its existing leveraged accounts, according to the MFDA. The regulator warns that the company may be subject to further disciplinary action if it fails to adequately implement the plan.