The Ontario Securities Commission (OSC) has suspended a mutual fund dealer rep for three months after he was duped by an identity thief, an incident that revealed compliance failings.
The OSC has ruled that the registration of Dhiren Desai, a rep with Investors Group Financial Services Inc., be suspended for three months. In addition he must pass the Conduct and Practices Handbook (CPH) course before re-registering and his registration will be subject to terms and conditions for one year, including that he be under strict supervision.
OSC staff had sought a six-month suspension against Desai alleging that he failed to comply with Ontario securities law, stemming from compliance violations that were revealed in connection with an incident of apparent identity theft.
According to the OSC decision, the Investors Group discovered that identity theft was used to secure an RSP loan, arranged by Desai, as well as to subsequently carry out a mutual fund redemption. Once the deception was uncovered, the transaction was unwound and Desai was required to pay interest costs and to return the commission he’d earned. Investors Group issued a warning letter to Desai, as did the Mutual Fund Dealers Association of Canada after carrying out its own investigation into the incident.
The OSC decision indicates that its investigation found that Desai falsified client-meeting notes, and made “vague and inconsistent statements” to regulatory staff concerning the identity theft incident. It also noted that, while he was apparently not was complicit in the transaction, “… if Desai had been more compliance focused, the transaction would likely not have occurred.”
The decision also indicates that Desai was given a shorter suspension than sought by OSC staff because he was “somewhat ‘duped’ by the individuals involved in the transaction,” and because one of his colleagues at Investors Group convincingly vouched for his character.