(February 3, 2005) The Ontario Securities Commission has ordered hedge fund manager Portus Alternative Asset Management to stop opening new accounts and to stop accepting new assets under a temporary order issued late Wednesday. That order could be extended at a hearing scheduled for Thursday, February 17.
The OSC issued the order “in the public interest” following actions by the manager that the commission says appear to contravene sections of the Ontario Securities Act regulating the firm’s selling practices and record keeping. On its website, Portus says it will continue to manage client investments, and the company expects the issue will be resolved at the hearing.
Currently, Portus manages accounts for roughly 26,000 clients across Canada, each containing securities held and traded to mimic the performance of the BancNote Trust mutual funds that Portus manages for accredited investors.
Portus Alternative Asset Management is a securities registrant, but the manager of the Bancnote Trust, Portus Asset Management, is not registered with any securities commission, the OSC says. The company receives approximately $20 million of new investment funds each week from new and existing clients and has approximately $800 million in assets under management.
In issuing the temporary order, the OSC cites securities law referring to various Know Your Client, suitability and good faith rules in setting up the accounts, and maintaining a sufficient record of business transactions and financial affairs.
The section of the Securities Act cited in the temporary order also provides guidelines for requirements other companies must take to guard against the risk of falsified information being recorded.
The MFDA weighed in today by issuing a warning to its members to immediately cease referring clients to Portus during the period covered by the OSC order and any subsequent orders. “MFDA members should take appropriate steps to determine if approved persons have entered into referral arrangements directly with Portus and, if so, cease such activity immediately,” the order states, adding that any cases of non-compliance will be referred to the fund dealer’s enforcement division.
Filed by Kate McCaffery, Advisor.ca, kate.mccaffery@advisor.rogers.com
(02/03/05)