Unsuitable investments and conflicts of interests were among the issues
A Vancouver portfolio manager has been fined $100,000 by the British Columbia Securities Commission following an examination that identified several significant deficiencies.
M.Y. Capital is a registered portfolio manager investment fund manager and exempt market dealer in British Columbia, Alberta and Ontario, and an exempt market dealer in Manitoba. Since 2012 its president has been Marcus Ming Xu, who also served as chief compliance officer between 2012 and 2022.
During a compliance examination in 2020 the regulator found multiple failures to comply with investor protection requirements including:
- Making short-term fund-to-fund investments that were unsuitable.
- Telling clients that redemptions were not allowed for some of its funds, when in fact redemptions during lockup periods were allowed in certain circumstances.
- Allowing certain investors who claimed they were experiencing financial hardship to redeem their investments during lockup periods.
- Having no written policies or procedures to deal with redemptions during lockup periods.
- Not managing and properly disclosing potential conflicts of interest relating to the sale of an investment to a referral agent.
- Not maintaining sufficient and up to date know-your-client information for some clients, and
- Not disclosing 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.
As well as the six-figure financial penalty for the firm, the BCSC ordered the firm to hire an independent compliance monitor for one year at its own expense and other terms and conditions that were removed once the firm corrected the outstanding deficiencies.
In addition, Xu is banned from becoming or acting as a chief compliance officer of any investment market registrant for four years.
