Court rules in favour of labour-sponsored venture fund against fund manager

A former mutual fund sales representative has been banned from the industry and fined after a regulatory hearing panel found that he participated in an undisclosed referral arrangement that resulted in clients losing almost $9 million on exempt-market securities.

A Mutual Fund Dealers Association of Canada (MFDA) hearing panel has issued its reasons in a disciplinary case that resulted in a permanent ban for former fund rep Jack Oosterveld, who worked for Assante Financial Management Ltd. in Edmonton. He was also fined $50,000 and ordered to pay costs of $10,000.

In 2015, the MFDA brought two allegations against Oosterveld in connection with the referral of 56 of his clients, and three others, to a company selling an exempt-market product. According to the decision, the 59 investors put a total of $8.8 million into the company’s notes, and Oosterveld received at least $33,000 in referral fees. However, the company that received the funds subsequently went bankrupt, and the investors “realized a near total loss” of their investments.

The regulator alleged that the referral arrangement that led to these investments was not disclosed to his firm, as required by securities rules. It also accused him of engaging in an undisclosed outside business activity.

Following a hearing, which Oosterveld didn’t participate in, the panel found that the allegation of engaging in an improper referral arrangement was proven. However, it did not make a finding on the second allegation.

In handing down a permanent ban, the panel noted that “the respondent’s refusal to face up to his professional responsibility for the significant amount of financial loss to a large number of clients who reposed trust in him demonstrates not only a disturbing lack of remorse but also an insufficient understanding of the nature and extent of his misconduct.”

As for the monetary penalty, the decision indicates that the panel questioned whether the $50,000 fine sought by the MFDA was adequate under the circumstances, and contemplated whether a larger fine was warranted. Ultimately, however, it concluded that the fine sought by MFDA staff was appropriate.

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