A hearing panel of the Mutual Fund Dealers Association of Canada (MFDA) has permanently banned a former mutual fund rep after finding he misappropriated money from a vulnerable client through unauthorized fund redemptions, the self-regulatory organization announced last week.
In addition to the ban, the panel fined Leo Thach Quang Lam, a former rep with Portfolio Strategies Corp. in Calgary, $100,000 and ordered him to $7,500 in costs.
The panel levied the penalties after finding Lam violated MFDA rules by: misappropriating funds from a client, who was also his sister-in-law; engaging in unauthorized discretionary trading in her account; and failing to co-operate with the MFDA’s investigation into the allegations against him.
According to the MFDA’S notice of hearing, Lam’s sister-in-law was a “vulnerable, unsophisticated investor,” who invested the proceeds of a divorce settlement with Lam. In 2013, he processed two unauthorized redemptions from her account, totalling about $5,000, and misappropriated those funds. After resigning from his firm at the end of 2013, Lam processed additional redemptions totalling approximately $23,000 from her account, and deposited them into a joint bank account held by Lam and his spouse.
The client was initially unaware of these misdeeds, because “all account statements, trade confirmations and other documentation concerning her investments were being directed to the respondent’s home address,” the notice of hearing states.
Once the client discovered the activity, she complained and received some compensation from the bank that deposited the cheques, and from one of the mutual fund companies that accepted the unauthorized trading directions.