Pace Savings & Credit Union

Last updated
Pace Savings & Credit Union
Company type Credit union
Industry Financial services
DefunctAugust 11, 2022 (2022-08-11)
FateLiquidation; operating assets absorbed into Alterna Savings in 2022
Successor Alterna Savings
Headquarters
Vaughan, Ontario
,
Canada
Products Savings; chequing; consumer loans; mortgages
Revenue$34.5 million CAD (2019)
Total assets $1.1 billion CAD (2019) [1]
Subsidiaries
    • Pace Securities Corp.
Website www.pacecu.ca OOjs UI icon edit-ltr-progressive.svg

PACE Savings & Credit Union Limited was a Canadian credit union based in Ontario. Pace grew through consolidation of several smaller credit unions in Ontario but the company was placed under administration by Financial Services Regulatory Authority of Ontario (FSRA) (previously the Deposit Insurance Corporation of Ontario) in September 2018 after the regulator found evidence of civil fraud, potential self-dealing by the CEO Larry Smith, and poor governance practices. After leaving administration in January 2020, the credit union went into administration again in November 2020 after the new CEO and several recently appointed directors resigned following the disclosure of additional regulatory problems at subsidiary Pace Securities Corp. [2] [3]

Contents

On 11 July 2022, the majority of assets and employees of PACE transferred to Alterna Savings following a purchase administered by the Financial Services Regulatory Authority of Ontario. [4] KPMG is overseeing the liquidation of PACE's remaining non-operational assets and liabilities, including litigation against the former president and the CEO, and various insurance claims. [5]

History

Pace participated in the consolidation of the Ontario's credit unions by purchasing or merging with at least six other credit unions since 2000. In 2002, Greater Toronto Area (GTA) Savings and Credit Union merged with PACE. [6] In April 2012, PACE purchased McMaster Savings and Credit Union Limited, which had two branches and $30 million in assets at the time of the transaction. [7] Later in 2012, PACE announced that it would amalgamate with Peoples Credit Union of Innisfil and ETCU Financial Credit Union. The ECTU transaction closed on October 1, 2012, and the Peoples Credit Union transaction closed on 1 January 2013. At the time, Peoples had four branches and $150 million in assets. [8] There was a failed deal in 2014 when a letter of intent regarding a merger with the much larger Alterna Savings was announced in April, but the merger was never completed. [9] Additional deals were finalized in 2017 when PACE purchased Durham Educational Employees' Credit Union Limited and London Fire Fighters' Credit Union Limited. [10] [11] A deal to purchase City Savings & Credit Union Ltd. was announced on 24 July 2017, however, it was not completed and City Savings merged with Alterna Savings in 2019. [12] [13]

Regulatory Investigations

Fraud and self-dealing allegations

A whistle-blower complaint in 2017 led to an investigation by Ontario's regulatory agency responsible for credit unions that resulted in the regulator putting Pace under administration due to concerns about possible fraud and weak controls at both the Board and management levels. In September 2018, the Deposit Insurance Corporation of Ontario (FSRA's predecessor agency) took the unusual step of assuming control of an institution that was not in financial distress. It was reported that the regulator found a "... culture of systematic self-dealing and secret commissions... [that] was facilitated by Board negligence, poor judgment and complicity". [6] The chief executive officer, Phillip Smith, and his father, Larry Smith, in his role as president, were placed on administrative leave and then terminated by the regulator later in 2018, without severance. [14] The regulator alleges that Larry Smith - who was CEO of Pace from 2002 to 2015, and Phillip Smith, who replaced his father as CEO in 2015, committed "civil fraud". [6] As reported by The Globe and Mail: "An early estimate by the regulator put the potential damages suffered by the credit union at approximately $58-million. That included nearly $3.4-million in alleged secret payments to numbered companies owned by Larry Smith, and another $49-million relating to allegedly questionable loans that PACE may have to write down." [6] Additionally, the regulator filed charges against Pace's board of directors for acting "negligently and in breach of their duty of care." [15]

In January 2020, FSRA allowed Pace to emerge from administration after a member vote to appoint a new board of directors. A new senior management team was appointed between January and April 2020. After several directors resigned, FRSA placed Pace under administration once more on 20 November 2020. [2]

Pace Securities Corp

In June 2020, a second regulatory investigation was disclosed regarding the sale of high risk investments by a subsidiary of Pace called Pace Securities Corp. [16] The basis of the investigation was that, starting in 2018, Pace Securities Corp sold preferred shares in two subsidiaries of Pace Securities Corp. that reportedly lost 80-90% of their value in the first quarter of 2020.[ citation needed ] The self-regulatory organization responsible for Canadian securities dealers, the Investment Industry Regulatory Organization of Canada disclosed enforcement actions against the former CEO of Pace Securities Corp, Joseph Anthony Thomson, and the former chief compliance officer, Douglas Gerald McRae. [17]

A few months after the Pace Securities Corp problems were publicized, the newly hired chairman of the board, the new CEO of Pace, and many of the remaining board members resigned. That led to FSRA taking over the management of Pace for the second time in just over two years. [18]

Related Research Articles

<span class="mw-page-title-main">Canadian Imperial Bank of Commerce</span> Canadian banking institution

The Canadian Imperial Bank of Commerce is a Canadian multinational banking and financial services corporation headquartered at CIBC Square in the Financial District of Toronto, Ontario. The Canadian Imperial Bank of Commerce was formed through the 1961 merger of the Canadian Bank of Commerce and the Imperial Bank of Canada, in the largest merger between chartered banks in Canadian history. It is one of two "Big Five" banks founded in Toronto, the other being the Toronto-Dominion Bank.

<span class="mw-page-title-main">Desjardins Group</span> Canadian association of credit unions

The Desjardins Group is a Canadian financial service cooperative and the largest federation of credit unions in North America. It was founded in 1900 in Lévis, Quebec by Alphonse Desjardins. While its legal headquarters remains in Lévis, most of the executive management, including the CEO, is based in Montreal.

The Laurentian Bank of Canada is a Schedule 1 bank that operates primarily in the province of Quebec, with commercial and business banking offices located in Ontario, Alberta, British Columbia, and Nova Scotia. LBC's Institution Number is 039.

<span class="mw-page-title-main">Office of Thrift Supervision</span>

The Office of Thrift Supervision (OTS) was a United States federal agency under the Department of the Treasury that chartered, supervised, and regulated all federally chartered and state-chartered savings banks and savings and loans associations. It was created in 1989 as a renamed version of the Federal Home Loan Bank Board, another federal agency. Like other U.S. federal bank regulators, it was paid by the banks it regulated. The OTS was initially seen as an aggressive regulator, but was later lax. Declining revenues and staff led the OTS to market itself to companies as a lax regulator in order to get revenue.

<span class="mw-page-title-main">KeyBank</span> American regional bank headquartered in Cleveland, Ohio

KeyBank is an American regional bank headquartered in Cleveland, Ohio, and the 25th largest bank in the United States. Organized under the publicly traded KeyCorp, KeyBank was formed from the 1994 merger of the Cleveland-based Society Corporation, which operated Society National Bank, and the Albany-headquartered KeyCorp. The company today operates over 1,000 branches and 40,000 ATMs, mostly concentrated in the Midwest and Northeast United States, though also operates in the Pacific Northwest as well as in Alaska, Colorado, Texas and Utah.

<span class="mw-page-title-main">Alterna Savings</span>

Alterna Savings and Credit Union Limited, commonly called Alterna Savings, is a credit union based in Ottawa, Ontario, Canada. In addition to its credit union branches in Ontario, it also operates across Canada through its direct banking subsidiary Alterna Bank.

CS Alterna Bank, operating as Alterna Bank, is a Canadian direct bank and a wholly owned subsidiary of the Ontario-based credit union Alterna Savings. The bank offers chequing and high-interest savings accounts and mortgages.

<span class="mw-page-title-main">Flagstar Financial</span> American bank holding company

Flagstar Financial, Inc. (FLG), is a bank holding company for Flagstar Bank headquartered in Hicksville, New York. In 2023, the bank operated 395 branches in New York, Michigan, New Jersey, Ohio, Florida, Arizona and Wisconsin. Branches used to be operated under the names Queens County Savings Bank, Roslyn Savings Bank, Richmond County Savings Bank, Roosevelt Savings Bank, and Atlantic Bank in New York; Garden State Community Bank in New Jersey; Ohio Savings Bank in Ohio; and AmTrust Bank in Arizona and Florida. However, they rebranded all of these under the Flagstar name on February 21, 2024. FLG is on the list of largest banks in the United States and is one of the largest lenders in the New York City metro area.

<span class="mw-page-title-main">Canaccord Genuity</span> Canadian financial company

Canaccord Genuity Group Inc. is an investment banking and financial services company that specializes in wealth management and brokerage in capital markets. It is the largest independent investment dealer in Canada. The firm focuses on growth companies, with operations in 10 countries. Canaccord Genuity, the international capital markets division, is based in Canada, with offices in the US, the UK, France, Germany, Ireland, Hong Kong, China, Singapore, Dubai, Australia, Barbados, and The Bahamas.

<span class="mw-page-title-main">Investment Industry Regulatory Organization of Canada</span>

The Investment Industry Regulatory Organization of Canada is a non-profit, national self-regulatory organization (SRO). Established through the merger of the Investment Dealers Association of Canada (IDA) and Market Regulation Services Inc. (RS) on June 1, 2008, IIROC oversees all investment dealers and trading activity on debt and equity markets in Canada.

<span class="mw-page-title-main">Financial Services Regulatory Authority of Ontario</span> Crown agency in Ontario, Canada

The Financial Services Regulatory Authority of Ontario is a self-funding Crown agency which acts as the financial regulator for the Canadian province of Ontario. Established in 2016, FSRA officially succeeded its predecessor agencies – the Financial Services Commission of Ontario and the Deposit Insurance Corporation of Ontario – on June 8, 2019. The Financial Services Regulatory Authority of Ontario operates at arms-length from the Government of Ontario, and reports to the Legislative Assembly of Ontario through the Minister of Finance.

Ione Glorianne Felice Stromberg was a Canadian securities lawyer, commissioner of the Ontario Securities Commission, and author of numerous reports, papers and other articles on securities regulation reform in Canada.

<span class="mw-page-title-main">Bank</span> Financial institution which accepts deposits

A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans, mobilising saver surplus to deficit spenders. Lending activities can be directly performed by the bank or indirectly through capital markets.

<span class="mw-page-title-main">Wachovia</span> Defunct banking company

Wachovia was a diversified financial services company based in Charlotte, North Carolina. Before its acquisition by Wells Fargo and Company in 2008, Wachovia was the fourth-largest bank holding company in the United States, based on total assets. Wachovia provided a broad range of banking, asset management, wealth management, and corporate and investment banking products and services. At its height, it was one of the largest providers of financial services in the United States, operating financial centers in 21 states and Washington, D.C., with locations from Connecticut to Florida and west to California. Wachovia provided global services through more than 40 offices around the world.

<span class="mw-page-title-main">Libro Credit Union</span> Credit union in Canada

Libro Credit Union, Libro, or Libro Credit Union Limited, is a credit union based in London, Ontario, Canada. Libro is owned by its customers, who direct the institution's decisions. Libro offers many financial services, including chequing and savings accounts, loans, mortgages, investments, financial coaching and advice for consumers and farm and business owners. Deposits are insured by the Financial Services Regulatory Authority of Ontario (FSRA).

Postmedia Network Canada Corp. is a foreign-owned Canadian-based media conglomerate consisting of the publishing properties of the former Canwest, with primary operations in English-language newspaper publishing, news gathering and Internet operations. It is best known for being the owner of the National Post and the Financial Post. The company is headquartered at Postmedia Place on Bloor Street in Toronto.

Home Capital Group is a Canadian holding company. Through its subsidiary Home Trust Company, it provides Canadians a range of credit products including mortgages, credit cards and deposit services. It is regulated under federal legislation. Home Trust operates mainly in regions considered low risk where above average returns may be achieved; it also tends to focus on areas largely ignored by other mortgage lenders. During the 2008 economic crisis, it faced less competition and its customer base is unique. Mortgaged properties are residential and non-residential and include apartment and office buildings, hotels, construction and industrial complexes. In 2009, its stock outperformed that of eight major competitors in the uninsured mortgage market.

<span class="mw-page-title-main">DUCA Credit Union</span> Canadian credit union

DUCA Financial Services Credit Union Limited, commonly shortened to DUCA Credit Union, is a Canadian credit union. Financial products include chequing and savings accounts, loans, mortgages, insurance and small business products. It is a member-owned institution and its deposits are insured through the Financial Services Regulatory Authority of Ontario.

Credential Qtrade Securities Inc., operating as Qtrade, is a stockbrokerage firm based in Vancouver, Canada. It runs the online investment platform Qtrade Direct Investing and robo-advising service Qtrade Guided Portfolios. As of November 2016, it claimed to have $11.5 billion in assets and partnerships with over 150 Canadian credit unions, as well as insurance companies including Sun Life and Great West Life. Like all brokerages and investment dealers, they are members of Investment Industry Regulatory Organization of Canada (IIROC) and as such, the Canadian Investor Protection Fund (CIPF) protects investors should the brokerage become insolvent.

<span class="mw-page-title-main">CI Financial</span> Largest investment management firm by assets under management in Canada

CI Financial is a Canadian investment management company based in Toronto, Ontario. It offers investment management and wealth management services targeted to high net worth retail investors, as well as brokerage and trading services to portfolio managers and institutional investors.

References

  1. ↑ "Pace 2019 Financial Statements" (PDF). Archived from the original (PDF) on 22 September 2020. Retrieved 22 November 2020.
  2. 1 2 Ontario, Financial Services Regulatory Authority of. "FSRA Resumes Oversight of PACE Credit Union's Day-to-Day Operations". www.newswire.ca. Financial Services Regulatory Authority of Ontario. Retrieved 26 November 2020.
  3. ↑ "FSRA resumes oversight of PACE Credit Union". Investment Executive. 23 November 2020. Retrieved 26 November 2020.
  4. ↑ "Transaction between Alterna and PACE successfully completed". Financial Services Regulatory Authority. 6 July 2022. Retrieved 12 March 2023.
  5. ↑ Langton, James (29 August 2022). "Remains of PACE to face liquidation". Investment Executive. Archived from the original on 28 November 2022. Retrieved 5 November 2023.
  6. 1 2 3 4 Bradshaw, James (22 November 2019). "Web of deals: PACE credit union executives committed civil fraud with years of 'secret' payments, regulator alleges". The Globe and Mail. Archived from the original on 7 December 2019. Retrieved 22 November 2020.
  7. ↑ "McMaster Credit Union sold". The Hamilton Spectator. 10 May 2012. Archived from the original on 22 November 2020. Retrieved 22 November 2020.
  8. ↑ Hain, Bruce (17 September 2012). "Peoples Credit Union merges". www.simcoe.com. Innisfil Journal. Archived from the original on 14 February 2018. Retrieved 22 November 2020.
  9. ↑ "PACE Credit Union and Alterna to merge". Investment Executive. 4 April 2014. Archived from the original on 22 November 2020. Retrieved 22 November 2020.
  10. ↑ "Credit Union Mergers". Deposit Insurance Corporation of Ontario. Archived from the original on 12 March 2020. Retrieved 22 November 2020.
  11. ↑ "London Fire Fighters' Credit Union and PACE to partner" (PDF). 17 March 2020. Archived from the original (PDF) on 22 November 2020. Retrieved 22 November 2020.
  12. ↑ "Toronto Area Credit Unions Sign Letter of Intent to Merge". Global Newswire (Press release). 24 July 2017. Archived from the original on 22 November 2020. Retrieved 22 November 2020.
  13. ↑ "Alterna Savings merges with City Savings & Credit Union". Investment Executive. 1 May 2019. Archived from the original on 22 November 2020. Retrieved 22 November 2020.
  14. ↑ Bradshaw, James (26 April 2019). "Inside the downfall of a deal-making duo". The Globe and Mail. Archived from the original on 7 November 2020. Retrieved 22 November 2020.
  15. ↑ Bradshaw, James (25 November 2019). "Regulator adds former PACE credit union directors to lawsuit alleging negligence in 'secret' payments". The Globe and Mail. Retrieved 22 November 2020.
  16. ↑ Bradshaw, James (11 June 2020). "PACE credit union launches investigation of improper investment sales by brokerage division". The Globe and Mail. Retrieved 22 November 2020.
  17. ↑ Langton, James (18 June 2020). "IIROC alleges misconduct at PACE Securities". Investment Executive. Archived from the original on 7 July 2020. Retrieved 22 November 2020.
  18. ↑ Bradshaw, James (20 November 2020). "Ontario's financial regulator takes over PACE credit union again, after plans to stabilize it unravel". The Globe and Mail. Archived from the original on 22 November 2020. Retrieved 22 November 2020.
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.