The Mutual Fund Dealers Association has fined defunct Ontario fund dealer M. Hershberg Capital Ltd. $10,000 for a series of trading and know your client violations.

At an MFDA hearing in Toronto on Monday, the firm admitted that:

  • from July 2004 to October 2008, it failed to ensure that trades in the accounts of clients were consistent with the clients’ documented KYC information in that purchase transactions of “medium/high” and “high” risk investments were made in accounts of clients who had a risk tolerance of “medium” recorded on their KYC forms;
  • from July 2004 to May 2009, it engaged in discretionary trading in that trades were executed in client accounts according to limited trading authorizations but absent evidence of specific client instructions, and several days after receiving client instructions for trades; and
  • from July 2004 to May 2009, it conducted trades for multiple family members’ accounts when the firm had received trade instructions from only one person in the family who did not have trading authority over the other accounts.

As a consequence of these MFDA rule violations, the firm paid a fine of $10,000 and $2,500 towards the costs of the proceeding.

On April 6, 2011, the firm gave notice to the MFDA of its intention to resign from MFDA membership, and has since ceased operations as a mutual fund dealer.

The hearing panel advised that it will issue written reasons for its decision in due course.