A former mutual fund salesperson with Peak Investment Services Inc. has been fined $120,000 by the Mutual Fund Dealers Association of Canada for failing to reimburse clients for deferred sales charges on dozens of mutual fund redemption and repurchase transactions.
Gregory Burner was registered between October 2000 and January 2008 in Manitoba, Alberta and British Columbia as a mutual fund salesperson with Peak Investment Services and as branch manager in Manitoba for Peak.
In early 2007, Peak\u2019s compliance department found that in numerous instances, Burner processed redemptions in clients\u2019 accounts which resulted in DSC fees being incurred by the clients. He then used proceeds of these redemptions to purchase similar funds sold by other mutual fund companies. He earned sales commissions on the purchases of the new funds and his clients would commence a new DSC schedule in respect of the reinvested redemption proceeds.
Burner failed to rebate clients the DSC fees that they incurred on the redemptions. In total, the MFDA found that $83,000 in DSC fees were paid by 45 clients, and that Burner received approximately $120,000 in commissions on the transactions where DSC fees were not reimbursed.
Burner stated that all transactions, including fees incurred, were placed with \u201cfull and informed consent of the client\u201d, but the MFDA found no evidence of client approval in writing or otherwise.
\u201cThe Respondent argued that all transactions were in the best interests of and approved by the clients, but again, no evidence was provided,\u201d the MFDA said in its decision.
The MFDA also found that Burner processed many of the redemptions and re-purchase transactions directly with the mutual fund companies instead of through Peak\u2019s electronic order entry system, which caused interference with Peak\u2019s ability to supervise his trading.
\u201cWithout question, the actions of the Respondent failed to observe high standards of ethics and conduct in the transaction of business as required by Rule 2.1.1, were improper and damaged the reputation of the securities markets and his clients,\u201d the MFDA said in its decision.
The regulator added that it believes Burner had, and still has, no conception that his actions constituted misconduct.
Burner is permanently prohibited from conducting securities-related business, and has been ordered to pay a fine of $120,00 and costs of $10,000.
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