An Investment Industry Regulatory Organization of Canada (IIROC) hearing panel has accepted a settlement with Scotia Capital Inc. that will see the firm pay $175,000 after admitting it failed to properly supervise Krishna Sammy, a former portfolio manager with DWM Securities Inc., whose misconduct cost the firm $3.57 million in client restitution.
Scotia Capital acquired DWM in 2011 and the misconduct in question occurred from January 2009 to December 2011, the settlement notes. The firm admitted that it “failed to adequately supervise” Sammy during that time.
The settlement indicates the firm failed in its oversight by allowing the holdings in Sammy’s clients’ managed accounts to exceed the risk tolerance levels that were suitable for them. Scotia Capital also failed to ensure that conflicts of interest between Sammy and his clients were properly identified and managed when he recommended certain securities to clients while also selling those securities from his personal account.
The settlement notes that Scotia Capital’s compliance team uncovered the misconduct after it acquired DWM and that it has since paid $3.57 million to 47 clients to “remediate and compensate those clients for Sammy’s conduct.” In addition, the firm has also adopted enhanced compliance policies and procedures.
An IIROC hearing panel has also sanctioned Sammy for his misconduct last year, although he is seeking a review of that ruling.
Read: IIROC suspends and fines advisor for conflict of interest
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