The Nova Scotia Securities Commission (NSSC) has approved a settlement agreement with Toronto-based Quadrus Investment Services Ltd. for failing to properly supervise a mutual fund rep, and for failing to ensure that an investment strategy he recommended was suitable for a client, the commission announced on Thursday.
According to the settlement agreement, in July 2008, Glenn Dunbar recommended that a client sell three mutual funds and buy a different, single mutual fund. “There was no apparent benefit of this transaction [to the client],” the NSSC says in the settlement agreement, noting that the switch generated a commission of approximately $6,000 to Dunbar and approximately $4,000 to Quadrus. As well, approximately $8,900 in deferred sales charges were also charged as the account was redeemed over the next couple of years.
Quadrus observed that the redemptions “seemed unusual, and as a result contacted Dunbaras to the legitimacy and suitability of the transactions. Although Dunbar provided the [firm] with explanations for the transactions, [Quadrus] did not contact [the client] to verify the accuracy of those explanations,” the NSSC says. As a result, the commission concluded that the firm failed to properly supervise Dunbar and the account.
Under the settlement, Quadrus agreed to pay an administrative penalty of $40,000, costs of $1,000, and to be reprimanded.The firm has accepted responsibility for its conduct, was co-operative with commission staff, and has made numerous changes to its supervisory structure, including hiring new compliance personnel and salaried branch managers, and implementing heightened oversight of suitability, the NSSC notes. Quadrus also agreed to compensate the client.
“It’s important for investors to open their financial statements that come in the mail,” says Heidi Schedler, senior enforcement counsel for the commission, in a statement. “Statements tell you where your money is going and if there is something that doesn’t seem right, or they don’t understand, investors should contact the firm’s head office immediately.”