The Mutual Fund Dealers Association of Canada (MFDA) has settled with a second firm in connection with supervisory failures involving a former rep who misappropriated several million dollars from clients.
Specifically, an MFDA hearing panel has approved a settlement with Worldsource Financial Management Inc. concerning allegations that the firm failed to properly investigate alleged misconduct by Conrad Eagan, who was later found to have misappropriated at least $3.5 million from clients.
Most of Eagan’s misconduct took place while he was a rep with Desjardins Financial Security Services Inc., but he transferred to Worldsource in 2011 and continued his misconduct there as well.
Last week, the MFDA settled with Desjardins, fining the firm $200,000, and ordering it to pay costs of $25,000. Now, it has settled with Worldsource, which will see the firm pay a fine of $150,000 and costs of $20,000 for its alleged failures. The MFDA has already also banned Eagan permanently and fined him $5 million.
According to the MFDA settlement with Worldsource, Eagan’s branch manager (who had previously worked with him at Desjardins) wrote a letter to the firm in 2011 setting out various compliance concerns. However, it says that the firm did not report the allegations to the MFDA’s Member Event Tracking System (METS), as required; the settlement indicates that Worldsource did not carry out an adequate investigation of the allegations.
When another compliance issue arose in 2012, the firm investigated again, which ultimately led to Eagan being terminated by the firm, police being called in and the MFDA’s disciplinary action against Eagan.
The settlement indicates that Worldsource has since enhanced its supervisory procedures and that it co-operated with the MFDA’s investigation.
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