From the Regulators

Sherry Cheng-Hui Kao borrowed money from clients to speculate in real estate and misled both the clients, and her employer, the ICBC found

By James Langton |

An Insurance Council of British Columbia (ICBC) hearing committee has ruled that Sherry Cheng-Hui Kao's life insurance licence should be suspended for five years — and that she should be fined $10,000 and pay back $6,000 in investigative and hearing costs — after it found that she put herself in conflict with clients by borrowing money from them and misled her insurer about the nature of these financial dealings.

The ICBC hearing committee notes that Sun Life Assurance Co. of Canada terminated Kao in December 2014 after it found that she violated the firm's policies and procedures by engaging in outside business activity without the firm's consent. In particular, the ICBC hearing committee says she borrowed money from clients to buy investment real estate and to fund her other debts. By November 2015, her borrowing from clients totalled $1.5 million.

Ultimately, when Kao failed to repay those loans, the clients complained to Sun Life, which investigated, and subsequently terminated her employment. The ICBC hearing committee also indicates that she lied to the firm about her financial dealings with the clients.

According to an ICBC order, Kao did not dispute the facts at the hearing. The order notes that her lawyer argued Kao did not benefit financially from the transactions, "although acknowledged that most of the funds borrowed and subject to promissory notes have not been repaid."

Furthermore, the ICBC hearing committee ruled that Kao "set out to borrow funds from her insurance clients for the purpose of investing in real estate for her own benefit" and that she misled the clients about how the funds were being used.

"The hearing committee noted that the client group, in particular, were led to believe that the funds had been invested either with Sun Life or with an affiliated company of Sun Life," the ICBC's order says. "At no time were the clients aware that the funds had been used by the licensee for the sole purpose of purchasing, and speculating in, real estate properties."

The ICBC hearing committee also found that Kao's actions were "improper and not in her clients' best interest," and that two of the clients she borrowed from had themselves borrowed money to lend to her.

"The hearing committee was left to conclude that the licensee had used the monies for personal benefit and, for all intents and purposes, had operated a Ponzi scheme to the detriment of her insurance clients," the ICBC's order states.