HSBC subsidiary agrees to pay $1,050,000 for failing to deal fairly with investors
Vancouver – A B.C.-based firm that failed to deal fairly with investors in its mutual funds has agreed to pay $1,050,000 as part of a settlement agreement with the British Columbia Securities Commission (BCSC).
HSBC Global Asset Management (Canada) Limited (GAM Canada) admitted that it required people to redeem their units in HSBC-branded mutual funds, potentially causing them financial harm, including investment losses and unanticipated tax consequences.
The units had been purchased through independent dealers. But starting in 2014, GAM Canada, also known as AMCA, terminated its agreements with 51 independent dealers, having decided that the dealers no longer aligned with its overall strategic focus.
As a result, GAM Canada required investors who had bought units from these dealers to redeem them. The total market value of the required redemption was approximately $21.9 million in 1,042 accounts. The proceeds from the redemptions were deposited into investors’ accounts, and the redemptions were completed by June 2016.
GAM Canada admitted that requiring people to redeem their units early was unfair, because investors were initially told that the funds were suitable for long-term investment time horizons. In addition to the investment losses and tax consequences, the redemptions may have also led to lost investment opportunities, and potential re-acquisition costs to replace investments.
As a result, GAM Canada – a registered portfolio manager, investment fund manager, and exempt market dealer and subsidiary of HSBC Bank Canada – has agreed to pay up to $700,000 to investors who suffered financial harm. The firm will also pay $350,000 to the BCSC, plus any part of the $700,000 not paid to investors.
The settlement agreement notes that GAM Canada did not profit or receive an economic advantage from the required redemptions and it fully cooperated with the BCSC’s investigation.
About the British Columbia Securities Commission (www.bcsc.bc.ca)
The British Columbia 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
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