Caldwell Investment Management Ltd. to pay $1.8M for violating trade execution rules
For Immediate Release OSC Enforcement
TORONTO – A Panel of the Ontario Securities Commission (OSC) today approved a settlement agreement with Caldwell Investment Management Ltd. (CIM) in connection with failures to comply with its best execution obligation, which requires dealers and advisers to execute trades for clients on the most advantageous terms reasonably available under the circumstances.
As part of its settlement with the OSC, CIM has agreed to pay an administrative penalty of CAD $1,800,000, plus a further CAD $250,000 towards the cost of the OSC’s investigation. Additionally, CIM has agreed to terms and conditions being imposed on its registration, which include a requirement to pay for an independent consultant, approved by OSC staff, to review and test CIM’s new best execution procedures.
In settling this matter, CIM admits that over an almost four year period from January 1, 2013 to November 15, 2016, it failed to provide best execution of equity and bond trades for its clients by directing most of its client trades through Caldwell Securities Ltd. (CSL), its own related investment dealer, when in many cases unaffiliated dealers offered better commission rates and bond spreads. CIM also admitted that it had inadequate policies and procedures relating to best execution, made misleading statements in the Annual Information Forms for two of its mutual funds, and provided insufficient and inaccurate information to the Independent Review Committee for these two funds.
“CIM’s failure to develop, document and enforce clear policies and procedures for best execution led to self-interest dictating how client orders were handled,” said Jeff Kehoe, Director of the Enforcement Branch at the OSC. “These are serious lapses in oversight that will not be tolerated.”
The OSC appreciates the assistance of the Investment Industry Regulatory Organization of Canada (IIROC) in the investigation of this matter.
The mandate of the OSC is to provide protection to investors from unfair, improper or fraudulent practices, to foster fair and efficient capital markets and confidence in the capital markets, and to contribute to the stability of the financial system and the reduction of systemic risk. Investors are urged to check the registration of any persons or company offering an investment opportunity and to review the OSC investor materials available at www.osc.ca.