A Mutual Fund Dealers Association of Canada (MFDA) hearing panel has banned a former dealing representative permanently for infractions that include misappropriating $20,000 of client money for the purpose of paying his own debts.
Gerard Campbell MacKinnon of Halifax has also been fined $15,000 and ordered to pay costs of $7,500 in a settlement, according to the reasons for decision the MFDA released on Thursday. In addition, MacKinnon admitted to misleading his dealer, Toronto-based Quadrus Investment Services Ltd., about his involvement in activities that could lead to a conflict of interest with clients and not attending an interview with MFDA staff about the matter.
In determining the penalty, the hearing panel considered the MFDA staff's view that MacKinnon showed remorse for his actions by entering into the settlement agreement and agreeing to the immediate payment of the fine and costs. It was also noted that MacKinnon did repay the client whose funds were misappropriated, which is why the fine is not significantly higher.
However, MacKinnon's attempts at reparation do not disqualify the severity of the infraction, according to the hearing panel's decision: "While the repayment of the misappropriated funds is a mitigating factor, it does not dispel the fact that [MacKinnon] breached his position of trust and took advantage of his client. …We believe that by imposing the ultimate penalty of a permanent prohibition from conducting securities related business while in the employ of, or associated with, a member of the MFDA, the appropriate message will have been conveyed."
The initial infraction occurred in 2010 when MacKinnon convinced his client, referred to as "AD" in the decision, to withdraw funds from his RRSP. MacKinnon then falsely told AD that the money would be invested in an unspecified fund not offered by Quadrus that would provide better returns than the firm's own funds. However, MacKinnon would take that cash and use it to pay his own personal debts.
In total, AD withdrew approximately $28,500 from his RRSP over two occasions in 2010 but would receive net proceeds of $20,000 once taxes and deferred sales charges were excluded.
MacKinnon admitted that he did not inform his dealer of this situation during a standard audit of his practices in March 2013. Instead, Quadrus became aware of MacKinnon's actions in the summer of 2013 following a complaint from a different client who said the advisor was selling investments outside of the firm. Quadrus initiated an investigation and terminated MacKinnon in August 2013.
Through the course of the investigation, AD complained to Quadrus in December 2013 and asked for the whereabouts of the $20,000 provided to the advisor.
MacKinnon provided a personal cheque to AD in February 2014 for the amount of $23,400 in order to repay the client for his initial investments and a purported interest payment. He also paid approximately $4,700 to Quadrus to reimburse the firm for compensation it provided to AD for the client's losses.
MacKinnon has not been registered in the securities industry since his termination.
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