A former mutual fund rep has been fined and banned for conflicts of interest, including accepting appointments as power of attorney and executor of a client’s estate.
A hearing panel of the Canadian Investment Regulatory Organization (CIRO) permanently banned former rep Ann Marie Reid after finding she violated numerous fund dealer rules while at Desjardins Financial Security Investments Inc. and later, IPC Investment Corp.
The panel also imposed a $125,000 fine and ordered $20,000 in costs.
The sanctions follow an earlier ruling from the panel, which upheld various allegations of misconduct. These included that she accepted a power of attorney from a client and was appointed as the executor and trustee of the client’s estate; that she borrowed money from another client; and that she used pre-signed account forms to process transactions.
CIRO staff sought a three-year ban against Reid and a $100,000 fine. The panel unanimously agreed to impose stiffer sanctions, however. The panel found that Reid’s misconduct was “widespread, long-term and of an extremely serious nature.”
Specifically, it said a rep “accepting a financial interest in a client’s estate is totally inconsistent with the trusted position that a mutual fund advisor holds. It clearly and unambiguously prevents the [rep] from being able to fulfil his or her role as an independent and impartial advisor influenced only by the best interests of the client.”
The panel also found the misconduct was aggravated by several factors, including that the client was vulnerable. The client was a senior with memory problems and a friend, which increased her vulnerability.
Additionally, the panel said Reid misled her dealers about these conflicts.
“Such conduct is fundamentally dishonest and inhibits the [dealer’s] supervisory function and prevents the [dealer] from ensuring that client interests are at all times protected,” it said. “In our view, a permanent prohibition, along with an appropriate fine, will prevent the respondent from causing any further harm to the mutual fund industry and will deter others in the capital markets from engaging in similar activity.”
Along with the permanent ban, the panel set the monetary penalty at $125,000.
“The fine must be high enough to deter other [reps] from ignoring vital regulatory requirements in the hope that they can obtain financial benefits from clients that would be disallowed or jeopardized if the [dealer] became aware of the underlying conflict.”