A hearing panel of the Mutual Fund Dealers Association of Canada (MFDA) has ordered fines totalling $865,000 against 12 former mutual fund reps at a Mississauga, Ont. branch of WFG Securities Inc., the MFDA announced Thursday.
The panel found the reps falsified know-your-client (KYC) information in order to secure investment loans for clients, among other offences, and conspired to hide the scheme from both the firm and regulators.
In total, the scheme affected about 50 clients, who borrowed a combined $4.2 million to invest in mutual funds, according to the panel’s decision, generating between $100,000 and $150,000 in combined commissions (not including trailer commissions).
The fines for the individual reps range from $35,000 to $110,000. The panel also order the reps to pay a combined $32,500 in costs.
In its decision, the panel wrote: “in view of the significant nature of the misconduct, namely, the long-lasting, deliberate, widespread, and co-ordinated deceit of the participants in the scheme, the conspiracy to cover up and mislead the investigation of WFG, the disregard for the suitability criteria, the unsophistication of the clients involved, and the apparent unfamiliarity of the respondents with the nature of the leveraged investments sold to their clients, appropriate fines were necessary as a deterrent to others in the industry.”
Nany of the reps that were involved with the scheme were part timers, who held down other jobs, and were themselves naïve, the panel noted.
“We concluded that the respondents were unsophisticated and not knowledgeable about the leveraged investments they sold. This was inexcusable,” the panel wrote.