A hearing panel of the Mutual Fund Dealers Association of Canada (MFDA) has sanctioned fund dealer Investia Financial Services Inc. for failing to supervise the outside business activities of several reps, the MFDA announced on Tuesday.
The panel approved a settlement in which Investia agreed to pay a $200,000 fine, and $20,000 in costs, after admitting to supervisory failures.
According to the settlement, the fund dealer failed to properly supervise the outside business activities of four of its reps, three of which have already been disciplined by the MFDA for these activities.
In particular, the firm failed to conduct a proper supervisory review of Bemelekot Tewahade, the settlement says. He was registered as a fund dealer rep from 2005 to 2012, despite the fact that he lived in the United States, and, starting in 2006, worked as a registered rep with Sunset Financial Services, Inc., a Colorado-based brokerage firm. He only visited Canada once a month, and served clients over the phone from the U.S.
The unusual work arrangement was discovered by the U.S. firm, which fired Tewahade. However, he then joined another U.S. brokerage firm, without disclosing his Canadian mutual fund business. Ultimately, Investia terminated Tewahade, nine months after discovering his undisclosed outside business activities.
The other incidents involved reps that were involved in other sorts of financial services businesses, including reps who were charging their mutual fund clients additional asset-based fees for financial planning and other services through outside businesses. The settlement indicates that the firm didn't conduct adequate due diligence to ensure that these activities did not stray into business that should be conducted through the dealer.
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