Firm ran afoul of securities legislation due to payments made under two separate programs
Credential Asset Management, a mutual fund dealer based in Vancouver, has agreed to pay the British Columbia Securities Commission (BCSC) $300,000 for improperly giving financial incentives to its representatives for selling certain funds.
According to the settlement agreement document, the firm paid the incentives through two separate programs designed to promote the sale of mutual funds to clients at financial institutions that it works with, contrary to provisions set out under NI 81-105, Mutual Fund Sales Practices. The incentives were paid to representatives employed both by Credential Asset Management and the partner financial 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 BCSC said.
The firm also gave two representatives at its head office performance bonuses that were tied to the sale of mutual funds in one of the programs, which was also prohibited under NI 81-105.
Aside from violating restrictions on incentive payments, Credential Asset Management also failed to comply with National Instrument 31-103, Registration Requirements, Exemptions and Ongoing Registrant Obligations. Specifically, it did not put a system of controls and supervision in place to ensure incentives weren’t being paid improperly.
Notwithstanding the firm’s misconduct, the BCSC recognized that none of the incentive programs that Credential Asset Management put together had any bearing on the fees and costs borne by mutual fund clients.
The firm also explained that one program, which related to the sale of mutual funds focused on socially responsible investing, was “intended to encourage dually-employed representatives to recommend that clients consider environmental, social and governance factors in their investment decision-making process,” according to the BCSC.
Aside from agreeing to the payment, Credential Asset Management has taken steps to correct the deficiencies. It has put an end to any remaining incentives offered to it head office representatives and dually employed representatives that contravene NI 81-105, and has established acceptable systems and policies.
The contraventions described in the settlement agreement happened from 2011 until 2017.
