Questrade will make a $2.9-million payment to the OSC as part of a settlement agreement over conflict of interest allegations related to its sale of eight ETFs to WisdomTree Asset Management, the regulator said Tuesday.
The OSC alleged that Questrade failed to address a possible conflict of interest after it sold the ETFs to WisdomTree in July 2017.
The day after announcing the sale, Questrade purchased approximately $15 million in WisdomTree ETFs for its client portfolios. The “significant purchase” required Questrade to determine if there was a conflict of interest with its clients, the OSC said.
The agreement says Questrade failed to document why there was no conflict of interest until approximately a month after the trade, contrary to its own policies.
“Questrade acted contrary to the public interest by failing to take appropriate steps to determine whether a conflict of interest existed before investing client money,” the settlement says.
“As a result, Questrade failed to meet the high standards of conduct expected of a registrant when identifying and responding to conflicts of interest,” potentially putting clients at risk.
The OSC did not allege “dishonest or wilful misconduct” by Questrade, the agreement says. The firm has engaged an independent consultant to conduct a suitability review for all clients in affected portfolios, it added, and has improved internal controls.
The firm will also pay costs of $100,000.
Read the settlement agreement here.