BCSC settles with portfolio manager for sales practice and compliance system violations
VANCOUVER, BC, Aug. 25, 2023 /CNW/ - A now-defunct Vancouver portfolio manager firm, along with its former chief compliance officer and a former director, have agreed to pay the B.C. Securities Commission (BCSC) $300,000 after a BCSC examination revealed that their firm provided improper incentives to dealer representatives and lacked adequate systems of control and supervision.
The BCSC's examinations of Vertex One Asset Management Inc. in 2018 and 2019 found that Vertex provided approximately $107,183 in monetary benefits to dealer representatives (DRs), including:
- Co-operative marketing expenses paid to a team of DRs
- Sports event tickets paid to participating representatives
- Participating dealer-sponsored events, and
- Participating dealers' golfing events.
Vertex also provided non-monetary benefits to DRs, including entry to sporting events, concert tickets and gift baskets valued at approximately $151,322.
Providing these incentives to DRs violated a National Instrument regarding mutual fund sales practices.
The BCSC also found significant deficiencies in Vertex's overall compliance systems, record-keeping systems, administrative requirements, financial reporting, registration and supervision. Specifically, Commission staff found that Vertex:
- Failed to establish, maintain and apply policies and procedures that establish a system of controls and supervision
- Failed to ensure that its staff were appropriately registered to advise as well as being registered in each province in which it had clients
- Did not have evidence to demonstrate that it has taken steps to pre-approve an associate advising representative's advice
- Did not maintain records to demonstrate Vertex's compliance with mutual fund sales practices
- Failed to comply with terms set out in an inter-fund trading exemptive relief previously granted by the BCSC, and
- Failed to maintain adequate insurance coverage.
These deficiencies violated a National Instrument regarding registration requirements and ongoing obligations.
Jeffrey David McCord of North Vancouver was the former director and former Ultimate Designated Person (UDP) for the firm from 2010 to 2019. Martin David Lang of Vancouver was the former Chief Compliance Officer (CCO) from 2013 to 2021. McCord and Lang failed to adequately perform several of their obligations as the UDP and the CCO of a registrant, thereby failing to ensure that Vertex's compliance systems were adequate. Their failures led to Vertex's contraventions of the National Instruments regarding mutual fund sales practices and registration requirements and obligations.
Lang, and McCord are prohibited from becoming or acting as a CCO or UDP of any registrant for four years. In addition, they will be subject to strict supervision during any periods for which they are registered in any category under the Securities Act, a condition that will apply cumulatively for a total of three years from the date of registration.
Vertex clients were not charged increased fees as a result of the improper incentives. Vertex ceased operations on its own initiative in 2021, and Vertex, McCord and Lang applied to surrender their respective registrations that same year. The firm, McCord and Lang fully cooperated with BCSC staff throughout the investigation into this matter.
The B.C. Securities Commission is the independent provincial government agency responsible for regulating capital markets in British Columbia through the administration of the Securities Act. Our mission is to protect and promote the public interest by fostering:
- A securities market that is fair and warrants public confidence
- A dynamic and competitive securities industry that provides investment opportunities and access to capital.
Learn how to protect yourself and become a more informed investor at www.investright.org.
SOURCE British Columbia Securities Commission
Media Contact: Brian Kladko, 604-899-6713; Public inquiries: 604-899-6854 or 1-800-373-6393 (toll free), [email protected]
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