MFDA cites failures to accurately reflect status of branch and sub-branch reviews that had to be completed
The Mutual Fund Dealers Association of Canada (MFDA) has fined an ex-chief compliance officer for submitting deficient annual reports to his former firm’s board of directors.
In a settlement agreement document, the MFDA outlined its allegations against Kenneth Parker, who was registered as the chief compliance officer and a mutual fund dealing representative of Portfolio Strategies Corporation (PSC) from around February 20, 2008 to June 20, 2017, when he was terminated by the firm.
According to the document, MFDA Compliance Staff conducted a compliance review of PSC in 2012, and found that the company had not implemented a branch and sub-branch review program that complied with MFDA requirements. The MFDA issued a compliance examination report, in response to which PSC submitted an action plan and a branch and sub-branch review schedule that would span the next three years.
“In his annual CCO Reports, the Respondent included updates on the status of the Member’s implementation of its Branch Review Program,” the MFDA said.
It said that through a 2013 CCO report dated April 1, 2014, Parker told the PSC board of directors that seven branches and 20 sub-branches had been reviewed by PSC staff. He said “[t]he review schedule previously given to the MFDA is being met,” and that he believed PSC had adequate staff to adhere to its compliance requirements.
However, the MFDA said that as of January 1, 2013, data from the National Registration Database (NRD) showed that PSC was conducting business from 15 branch locations and 150 sub-branch locations. “Contrary to the Respondent’s statement in the 2013 CCO Report, the Branch Review Schedule that was submitted to MFDA Compliance in 2012 was not being met,” the settlement agreement said.
The MFDA said Parker’s CCO reports in 2014 and 2015 were similarly flawed, indicating that the branch review schedule submitted to MFDA compliance staff in 2012 was being met. In its own compliance examinations, the MFDA continued to find branches and sub-branches that had not been reviewed, with some branches not having ever been subject to review as of July 31, 2016.
“The Respondent’s inaccurate statements to the Board hindered the Member’s ability to assess its compliance with applicable regulatory requirements,” the MFDA said, noting that Parker “knew or ought to have known” that the number of branch and sub-branch reviews during the relevant periods fell short of the branch review schedule PSC had committed to.
