Vancouver’s Credential Asset Management to pay $300,000 for internal incentive programs, inadequate controls and supervision
Vancouver – Vancouver-based mutual fund dealer, Credential Asset Management Inc., has agreed to pay $300,000 to the British Columbia Securities Commission (BCSC) for providing financial incentives to its representatives for selling certain funds.
Credential Asset Management is a mutual fund dealer for various financial institutions that operate throughout Canada. In a settlement agreement with the BCSC, the firm agreed that it provided incentive payments contrary to National Instrument 81-105, Mutual Fund Sales Practices. NI 81-105 is designed to minimize conflicts of interest by forbidding incentive payments to representatives for recommending certain mutual funds over others.
The firm paid the incentives through two separate programs to promote the sale of mutual funds to clients at the financial institutions. The representatives who received the incentives were employed by both Credential Asset Management and the respective institutions where they were based.
Credential Asset Management shared revenue from the sale of these mutual funds with the financial institutions, which then paid incentives to the representatives.
The firm also provided performance bonuses to two representatives who worked in its head office tied to the sale of mutual funds in one of the programs. This also breached securities legislation.
In addition to violating the ban on incentive payments, Credential Asset Management also failed to establish a system of controls and supervision to ensure that improper incentives were not taking place, a requirement of National Instrument 31-103, Registration Requirements, Exemptions and Ongoing Registrant Obligations.
Despite Credential Asset Management’s misconduct, none of the incentive programs had any bearing on the fees or costs borne by mutual fund clients. The firm has also taken steps to correct the deficiencies.
As part of the settlement, Credential Asset Management has agreed to pay $300,000 to the BCSC. It has also ended any remaining incentives offered to its head office representatives and dually-employed representatives that are contrary to National Instrument 81-105 and put in place acceptable systems and policies.
The settlement of this matter was a joint effort of the BCSC and the Mutual Funds Dealers Association of Canada (MFDA), a self-regulatory organization. Credential Asset Management has entered into its own settlement agreement with the MFDA, agreeing to pay an additional $300,000 to the organization. The BCSC would like to thank the MFDA for its assistance in this matter.
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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