News Release

Vancouver – A Vancouver portfolio manager has paid $100,000 to the B.C. Securities Commission (BCSC) for failing to comply with various investor protection requirements, after a BCSC examination revealed significant deficiencies.

In addition, the firm’s head, Marcus Ming Xu, is prohibited under the settlement from becoming or acting as a chief compliance officer of any investment market registrant for four years.

Xu’s firm, M.Y. Capital, is registered as a portfolio manager, investment fund manager and exempt market dealer in British Columbia, Alberta and Ontario, and is registered as a portfolio manager and exempt market dealer in Manitoba. Xu has been the firm’s president since 2012 and served as its chief compliance officer from 2012 to 2022.

BCSC staff conducted a compliance examination of M.Y. Capital in 2020 and found that the firm and Xu:

• Made short-term fund-to-fund investments that were unsuitable
• Told clients that redemptions were not allowed for some of its funds, when in fact redemptions during lockup periods were allowed in certain circumstances
• Allowed certain investors who claimed they were experiencing financial hardship to redeem their investments during lockup periods
• Had no written policies or procedures to deal with redemptions during lockup periods
• Didn’t manage and properly disclose potential conflicts of interest relating to the sale of an investment to a referral agent
• Didn’t maintain sufficient and up-to-date know-your-client information for some clients, and
• Didn’t disclose all management fees that clients indirectly paid by investing in one of the firm’s funds that invested in another of the firm’s funds.

These deficiencies violated National Instrument 31-103, which includes requirements for registrants relating to know-your-client obligations, suitability determinations, conflicts of interest and financial relationship disclosure. The deficiencies also violated the B.C. Securities Act’s standard of care requirements for investment fund managers, and the B.C. Securities Rules’ requirement that registrants deal fairly, honestly and in good faith with clients.

After identifying the deficiencies, the BCSC imposed terms and conditions on M.Y. Capital – including the hiring of an independent compliance monitor for one year at its own expense – that were aimed at mitigating the ongoing risks to clients and improving its compliance. The BCSC removed the terms and conditions after M.Y. Capital corrected the outstanding deficiencies.

As part of the settlement, M.Y. Capital and Xu also consent to any regulatory orders by other Canadian securities regulators that are based on the BCSC’s order.

About the B.C. Securities Commission (www.bcsc.bc.ca)

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.

Media Contact:
Brian Kladko
604-899-6713

Public inquiries:
604-899-6854 or 1-800-373-6393 (toll free)
inquiries@bcsc.bc.ca

Learn how to protect yourself and become a more informed investor at www.investright.org