A Mutual Fund Dealers Association of Canada (MFDA) hearing panel has issued a fine of $150,000 and permanently prohibited a former advisor from conducting securities-related business in connection with four infractions, which include borrowing from a client and engaging in an outside business activity (OBA).
In addition, the hearing panel is imposing costs of $10,000 on Keith Lorne Davis, the former advisor in Edmonton who was with WFG Securities Inc. at the time of the rule violations.
Most of the infractions are connected to Davis’s choice to start a tax return preparation business called Davis and Associates, according to the MFDA hearing panel’s findings released this past Friday.
In October 2009, Davis borrowed $80,000 from one client, referred to as “MJ” in the findings, to help fund that secondary business without WFG Securities’ knowledge. He provided a promissory note to MJ in October 2012, which stated that Davis would pay MJ interest at a rate of 6% in addition to the original amount that he borrowed by October 2015.
However, in March 2015, Davis was declared bankrupt and the MFDA hearing panel notes that he has not made any of the promised payments to his client. Davis was fined $90,000 specifically for this allegation.
Davis’s action in borrowing from his client gave “rise to a conflict or potential conflict of interest, which the respondent failed to address by the exercise of responsible business judgment influenced only by the best interests of the client, contrary to MFDA Rules 2.1.4 and 2.1.1,” the MFDA’s findings state.
The MFDA hearing panel also established that Davis engaged in his accounting business between October 2009 and September 2013 without the knowledge or approval of his firm. This is contrary to WFG Securities’ own policies and procedures and those of the MFDA.
In addition, when Davis was required to complete a form disclosing OBAs in February 2013, he stated that he was not involved in any such activity. Davis was fined $50,000 for those two infractions.
The fourth infraction is related to the possession of at least 17 blank or partially completed pre-signed account forms, which included multiple know-your-client forms and trade tickets. He held these documents in respect of nine clients. Davis was fined $10,000 for this infraction.
Davis was registered as a mutual fund salesperson, now known as a dealing representative, between February 2002 and September 2013, at which point he resigned from WFG Securities. He is no longer registered in the securities industry in any capacity.
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