Questrade Wealth Signs $ 3 Million Contract With Ontario Securities Commission

Questrade Wealth Management Inc. agreed to pay fines of $ 3 million after the investment regulators discovered that the company had not protected its clients from a dispute over the past year. Potential interest following the sale of his publicly traded fund business to WisdomTree Investments Inc.

In an agreement reached Tuesday, Questrade Wealth – which operates an online portfolio manager (also known as a robo-advisor), agreed to pay an administrative penalty of $ 2.9 million and costs of $ 100,000 to the Commission. Ontario securities after the regulator had expressed concerns. Questwealth Portfolios, which has recently changed its name and now calls Portfolio IQ.

Last week, the OSC alleged that Questrade did not put in place the appropriate compliance measures to ensure that client portfolios are not at risk after its portfolio sub-advisor invested $ 15 million in WisdomTree funds. That was immediately after Questrade's sale of its ETF business to WisdomTree.

With the change of ownership of the ETFs, the OSC is concerned that the investments may not be suitable for clients because they did not have any documentation.

"[Portfolio managers] must take reasonable steps to identify and respond to a conflict of interest before investing client funds to ensure that they act in the best interest of their clients, "said the OSC in regulation.

In July 2017, ETF fund provider WisdomTree paid $ 2.4 million to acquire and manage Questrade's eight ETF products with badets under management of approximately $ 89 million. During this purchase agreement, WisdomTree indicated to Questrade that it wanted the WisdomTree ETFs to be included in the robo-advisor ETF portfolios before finalizing the transaction, in accordance with the settlement with the OSC. Questrade declined, explaining to WisdomTree that the ETFs would not be included in the clients' portfolios unless the portfolio manager determines that the purchase is "in the best interest" of robo-advisor clients.

Prior to the completion of the transaction, Questrade's sub-advisor One Quest Management LLC, which provided investment advice for managing the ETF portfolios, decided to recommend a significant number of WisdomTree ETFs for client portfolios. without however explaining how it was considered to be in the true interest. client.

In the OSC Settlement, it is noted that Questrade, as a portfolio advisor to the Robotic Advisor, was "ultimately responsible for determining whether [the sale to WisdomTree] agreed and did not conflict with the interests of its clients. "

The OSC also concluded that Questrade did not explain why no conflict of interest was present until almost one month after the sale of its ETF business to WisdomTree, contrary to its own policy.

In addition to paying a fine, Questrade hired an independent consultant to conduct a review of the adequacy of all clients of all relevant ETF portfolios. The independent consultant will review the suitability of the WisdomTree ETFs for the model portfolios and will communicate the findings of the review to both Questrade and the OSC.

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