The Mutual Fund Dealers Association of Canada has fined and suspended an Alberta mutual fund salesman for selling products that were not approved by his fund dealer.

Michael Franco was registered in Alberta as a mutual fund salesperson with Aegon Dealer Services Canada Inc. from March 14, 2003 to June 26, 2008, when he was terminated.

Aegon was a member of the MFDA until it amalgamated with MFDA member Investia Financial Services Inc. on Sept. 25, 2008.

Prior to becoming registered with Aegon, Franco incorporated Franco Financial Inc., a business through which he intended to sell life insurance and provide financial planning and tax preparation services to clients and other individuals.

At the time of his registration with Aegon, Franco disclosed the existence of Franco Financial. However, other than approving the sale of life and disability insurance by Franco Financial, Aegon did not give permission to Franco to sell or attempt to market or sell any other financial products or services, nor did Aegon give permission to Franco to accept payment of any compensation or remuneration from any other persons or organizations.

Between October 9, 2003 and December 27, 2007, Franco, through Franco Financial, sold or facilitated the sale of a total of $428,279 of the four charitable donation programs to twenty-six clients.

These programs were not approved by Aegon, and Franco never sought or obtained approval from Aegon to market or sell them. In addition, Franco did not disclose to Aegon that he, through Franco Financial, was being paid commissions or fees by the charitable donations programs for doing so.

In addition, by facilitating selling the charitable donation programs without disclosing to the clients the compensation that he would receive for doing so, Franco placed his own interests ahead of the clients’ interests.

At an MFDA hearing in Calgary on Tuesday, Franco admitted misconduct on his part and for which he could be penalized.

The hearing panel imposed the following penalties on Franco:
> a five-year suspension from conducting securities related business in any capacity over which the MFDA has jurisdiction;
> a fine in the amount of $40,000; and
> costs in the amount of $5,000.

IE