Kalkine defends lack of licence for Canada operation

Kalkine has secured a financial licence in many of the markets it operates, but the firm has defended its decision to not register in Canada.

Kalkine chief executive Kunal Sawhney, centre, with Kalkine staff in India in 2020.

Kalkine, a Sydney-based financial services outfit, is operating in Canada without a licence but says it has legal advice from a “top tier” firm saying it does not need one.

The Australian reported earlier this month that Kalkine – which describes itself as a global research firm – was using international call centres to pressure clients into making investment decisions.

Transcripts of outbound calls from the company’s call centres, obtained by The Australian, show customers – including one who was 90 years old at the time – being told to sell specific stocks and take out subscriptions to the company’s equity newsletters.

Kalkine – which launched in 2014 – is licensed in Australia to provide general advice. The company also operates in Canada and in New Zealand, where the Financial Markets Authority ordered it to stop its calls until it was “satisfied that Kalkine’s compliance processes are sufficient for outgoing sales calls to resume”.

The FMA said the group was “likely to mislead prospective clients generally in relation to Kalkine’s advice service” and was “likely to mislead clients in relation to Kalkine’s primary place of operations”.

Kalkine set up operations in Canada in 2020 in a move it said offered it “diverse opportunities”.

The Canadian Securities Administrators, an umbrella organisation of provincial regulators, confirmed the company did not hold a licence, noting “anyone in the business of trading securities or advising clients on securities must be registered with the securities regulator in each province or territory where they do business”.

“Kalkine has never been registered to legally offer financial services in any province or territory,” a CSA spokesman said.

“The CSA and its members do not comment on the existence and/or status of investigations or related enforcement matters.

“Firms and individuals in the business of trading securities or advising clients are accountable for their actions and may face enforcement action by their respective jurisdiction if they are not compliant with the regulations they are expected to adhere to.”

A Kalkine spokesman said the company had received legal advice that said it did not need to be registered in Canada.

“Where appropriate, we will of course always engage with the regulators in the jurisdictions in which we operate, consistent with our licensing and operational obligations,” the spokesman said.

The company only “operates a subscription research newsletter business in Canada”, he said, adding that the firm had never applied for registration in Canada.

“We refer you to Kalkine’s disclaimer which clearly stipulates advice given by Kalkine and provided through the services is for general information only.”

David Palumbo, a Baker McKenzie corporate and securities partner in Toronto, said Kalkine may need to be registered in Canada to comply with the country’s regulatory regime.

“It is not a simple yes or no as there are exemptions available in Canada that would not require registration if the entity is conducting the same activities that it is already similarly registered to do in its home jurisdiction and meets certain criteria, including notifying the client they are not registered in Canada” he said.

“If they do not have registration elsewhere that permits the same activities as they undertake in Canada and are conducting activities that would require registration of a Canadian-based adviser, then registration would be required.”

Mr Palumbo said the exemption would permit dealing with a certain level of client, either individuals with net financial assets of $C5m ($5.3m) or if another entity with at least $C25m in net assets.

“They would only be able to advise on foreign securities not securities of Canadian issuers unless the Canadian securities are seen as incidental to the overall strategy of the foreign securities,” Mr Palumbo told The Australian earlier this week.