The Insurance Council of British Columbia (ICBC) has ordered an agent’s life and accident and sickness insurance licence be suspended for a year after it found that he made inappropriate recommendations to a client regarding investments in exempt market securities.
The ICBC published a decision earlier this week ordering that the licence of James William Duke, who operates Duke Wellington Financial Group Inc., be suspended for a year after he inappropriately put a recent widow into risky, illiquid exempt market securities.
According to the decision, “The client was retired, recently widowed, and in possession of relatively modest resources. After presenting unregulated, illiquid, and high-risk investments to the client, the licensee facilitated the redemption of investments which had a level of guarantee and security in order to invest in the high-risk products he was offering. Council determined that the licensee’s conduct and, in particular, the facilitation of the investment of 65% of the client’s available investment funds into high-risk products, was objectively unreasonable.”
The decision notes that Duke maintained that “he acted reasonably and in good faith in presenting the exempt market securities to the client and facilitating her investments”, and that the percentage of investments in the exempt market securities was appropriate for the client.
However, the council disagreed, adding that, “… the eventual performance of the exempt market securities was irrelevantto the appropriateness of the recommendation. In light of the client’s overall financial profile, as well as the recent death of her spouse, council found that it was objectively unreasonable for the licensee to present the client with such high-risk investments.”
It concluded that “by facilitating the investment of such a significant percentage of the client’s funds into highly speculative securities, the licensee failed to act in the client’s best interests.”
In terms of the sanctions it handed down in the case, the council noted that a penalty was required that would both have a deterrent effect, “and address the issues of competency and failure to act in accordance with the usual practice of the business of insurance.”
It also noted that it was particularly concerned about the agent’s failure to acknowledge the inappropriateness of his recommendations, and so, it concluded he “poses a risk to the public which cannot be mitigated solely through supervision, education, or licence conditions. Council further determined that education and supervision conditions were required to address the issue of competency.” As a result, it ordered the suspension, along with the educational requirements.
In addition to the suspension, the council ordered Duke to complete the courses necessary to obtain either the Chartered Life Underwriter designation, or the Certified Financial Planner designation; and that he pay the council’s investigative costs of $1,925.