TORONTO - A division of Scotiabank has been fined $500,000 and faces other penalties under a settlement agreement with the Investment Industry Regulatory Organization of Canada.
The agreement follows an admission by the division of regulatory failings by DWM Securities Inc., which subsequently amalgamated with Scotia Capital under the HollisWealth brand and is an independent wealth advisory unit of Scotiabank.
IIROC says Scotiabank investigated and self-identified the problems after the amalgamation.
According to a statement issued Tuesday, DWM failed to establish and maintain a system of controls and supervision that was adequate to ensure that certain retail clients were qualified to purchase investment funds offered pursuant to prospectus exemptions, contrary to IIROC rules.
In addition to the fine, Scotiabank (TSX:BNS) is required to report on the execution of the remediation plan by Oct. 30 and is to impose internal fines on individual client advisers ranging from $2,500 to $30,000.
The proceeds, totalling some $440,000, are to be donated to charity.
Advisers with clients who experienced losses in connection with identified funds will also be required to contribute towards remediation payments to affected clients.
In all, the investigation identified 1,710 affected clients, more than 1,100 of whom collectively experienced about $16.7 million in net gains, and 594 who suffered total net losses, including unrealized losses, of $4.5 million.
About 84 per cent of the individual net losses totalled less $25,000 and just one client lost more than $100,000, the IIROC said.
IIROC is the national self-regulatory organization that oversees investment dealers and trading activity on debt and equity marketplaces in Canada.
