A hearing panel for the Mutual Fund Dealers Association of Canada (MFDA) has released its reasons for the decision to ban an Ontario-based advisor and to impose a fine of $400,000, double the minimum amount suggested by MFDA staff.
The decision, released on Friday, concerns the actions of Gabriel Richard Frank, an advisor formerly employed by Winnipeg-based Investors Group Financial Services Inc., who was found to have committed three infractions.
Frank’s first infraction was recommending and implementing leveraged investments in the accounts of 10 clients between 2006 and 2011 without the approval of his employer. This is contrary to Investors Group’s policies and procedures. Frank did not change his conduct even after receiving a warning letter in August 2010 from Investor’s Group stating that the dealer was aware of his actions and that Frank was required to submit his leverage strategies to the firm for approval. Investor’s Group terminated Frank in February 2012 in part because of undisclosed leveraged sales.
Frank was also found to have engaged in personal financial dealings using client funds between March 2011 and February 2012. During this time, he borrowed approximately $245,000 from one client, referred to as “AF.” Frank repaid only $73,100, which the panel found created a conflict or potential conflict of interest between Frank and his client.
AF’s testimony reveals that Frank had offered to do AF a “favour” by providing a 12% investment return on funds that AF agreed to loan to Frank. This return would offset losses incurred by AF on his leveraged investment portfolio, which he had obtained based on Frank’s recommendations.
The decision also notes that two other clients appear to have been involved with improper borrowing by the respondent.
Lastly, Frank was found to have failed to cooperate with an investigation of his activities by the MFDA, beginning in January 2013. The decision states that he failed or refused to produce documents and information requested by the MFDA.