From the Regulators

OSC to hear both sides in case of advisor who accepted loan from clients

By James Langton |

 

The Ontario Securities Commission (OSC) will hear an appeal from both sides in a disciplinary case against a former mutual fund rep involving an alleged conflict of interest.

The appeal relates to a disciplinary decision brought against former mutual fund rep John Wolfenden by a hearing panel of the Mutual Fund Dealers Association of Canada (MFDA) earlier this year.

Wolfenden is appealing the findings against him by the hearing panel, and MFDA staff is appealing the penalty that was ultimately handed down in the case. The OSC announced today that it will hold a hearing on Jan. 15 to consider the appeals.

An MFDA hearing panel found that Wolfenden violated MFDA rules when he accepted $100,000 in loans from a couple of friends, who were also clients, to help fund the purchase of a cottage. MFDA staff sought a three-year ban and a $50,000 penalty in the case.

However, the panel found that the breach was an inadvertent, one-off mistake, and not prolonged misconduct. It fined him just $5,000, along with $5,000 in costs. The panel also ruled that a suspension was not warranted in the case.

In its ruling, the MFDA panel found that this "constitutes the rare case" in which suspension is not necessary. It also found that Wolfenden "suffered severe emotional distress" in facing a disciplinary action in which some of the allegations were not proven in a hearing. Further, it acknowledged that Wolfenden "showed appropriate recognition and remorse, in hindsight, with respect to his unintended breach of industry standard."

According to Wolfenden's application, he is seeking an order that the MFDA hearing be reopened to admit evidence that was ruled inadmissible at the original hearing, and to hear from additional witnesses. He alleges that MFDA counsel deliberately misled him about the evidence that would be presented at the hearing and failed to disclose other information. Those allegations have not been proven.

MFDA staff says that the panel erred in the penalty phase, and is asking that either the penalty it initially sought, a three-year ban and $50,000 fine, be imposed, or that the case be sent back to the panel to reconsider.

Among other things, the MFDA argues that the panel erred by "imposing a sanction that was unfit and inappropriate having regard to the seriousness of the respondent's misconduct"; that it didn't properly consider the principle of deterrence; and that it overlooked material evidence in the case.

The MFDA also argues that the panel was wrong to suggest that Wolfenden had "already effectively suffered" a four-year suspension from the industry, because he hadn't been formally suspended, even though he was unable to find employment in the industry after being terminated by his previous dealer. Those allegations have not been proven.

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