The Mutual Fund Dealers Association of Canada has fined a former mutual fund salesman with Dundee Private Investors Inc. in Halifax, and banned him for two years, for falsifying client documents and failing to disclose an outside business activity.
According to the settlement agreement released on Tuesday, Hugh Smilestone forged client signatures between June 2004 and March 2010 for the purpose of completing new client application forms (NCAF), updating Know-Your Client documents and banking information and implementing changes to pre-authorized contributions and withdrawal plans.
As well, between January 2008 and March 2010, Smilestone, who was licensed as a mutual fund salesman in both Nova Scotia and Ontario, engaged in authorized and unauthorized discretionary trading in terms of the timing of a trade, the amount of a trade and the securities traded.
Finally, between January 2007 and March 2010, Smilestone offered tax preparation services to clients. However, at that time, he failed to have clients sign a disclosure document acknowledging that these services were an outside business activity.
Smilestone’s branch manager first reported him to Dundee’s compliance department in the fall of 2009. Suspecting that certain documents had been falsified, the branch manager confirmed with one of Smilestone’s clients that the client had not written in the net-worth recorded in the NCAF form and that the client’s signature on the document was a forgery.
In December 2009, Dundee’s compliance department conducted a branch review in which Smilestone provided false information about his business practices. He later admitted to falsifying documents during a subsequent investigation by the MFDA.
In addition to the $10,000 fine, Smilestone paid $5,000 as part of the settlement agreement and is prohibited from conducting any securities related business for two years.
Smilestone has not worked for Dundee since March 2010.