Scotia dealers to pay $20M to clients

Three wealth management companies owned by Scotiabank have agreed to pay $ 20 million to clients and $ 850,000 to the Ontario Securities Commission to resolve a case in which the bank mistakenly overcharged mutual fund investors.

The “no contest” settlement reached between OSC staff and Scotia Capital Inc., Scotia Securities Inc. and Holliswealth Advisory Services Inc. was approved Friday at an OSC hearing.

The bank reported the overcharges to the OSC in February after it discovered the errors. The OSC looked into the matter and concluded the overcharges were unintentional.

The “no- contest” settlement means the Scotia dealers have not formally admitted wrongdoing. At the same time, the dealers don’t deny the facts and conclusions of OSC staff.

“This settlement follows allegations by OSC Staff that there were inadequacies in the Scotia dealers’ systems of controls and supervision, which resulted in certain clients paying excess fees that were not detected or cor- rected in a timely manner,” the OSC said in a statement. “OSC staff do not allege, and have found no evidence of dishonest conduct by the Scotia dealers.”

In a deal worked out between the bank and commission staff, the Scotia dealers have agreed to pay compensation to affected clients of just under $20 million. They have also agreed to make a “voluntary payment” of $800,000 to the OSC for use in the regulator’s investor protection program, plus an additional $50,000 in costs.

The OSC said the overcharges breached provisions of Ontario securities law requiring firms to deal fairly with clients in regard to fees, and requiring firms to have controls in place so mistakes are caught in a timely manner.

The breaches were mitigated by several factors, the OSC said. “After reporting this matter, the Scotia dealers provided prompt, detailed and candid co-operation to OSC Staff. The Scotia Dealers have also implemented additional controls and supervision to prevent a recurrence of this matter.”

The OSC, the largest of Canada’s 13 provincial and territorial securities regulators, set up the no- contest” settlement process in 2014. To date, five such settlements have been reached that have paid about $ 200 million in compensation to investors.

THE SCOTIA DEALERS PROVIDED CANDID CO-OPERATION.