A regulatory hearing panel ruled that it was necessary to ban a former mutual fund rep who admitted to improperly advising several clients to adopt a risky strategy of loading up on precious metals funds.
A Mutual Fund Dealers Association of Canada (MFDA) hearing panel issued its reasons for accepting a settlement earlier this year between MFDA staff and a former rep with FundEX Investments Inc. in Campbell River, B.C., David Michael Gordon.
That settlement saw Gordon permanently banned. He also agreed to a $25,000 fine and to pay $2,500 in costs.
In its reasons, the panel said the penalty proposed in the case is “necessary and sufficient” to serve as a deterrent.
“The penalty demonstrates that the respondent’s misconduct in all of the circumstances is serious and has significant consequences. The penalty will also deter others in the capital markets from engaging in similar activity,” it said.
According to the settlement, Gordon failed to ensure that a risky investment strategy involving a high concentration in precious metals funds was suitable, and failed to fully explain the risks involved with the strategy.
“This exposed clients to market risks and volatility that would not otherwise have occurred had the clients held a more diversified portfolio, and also resulted in total losses of $73,585.00 as a result of their concentrated positions,” the panel said in its reasons, noting that the firm compensated the clients for their losses.
In its reasons, the panel also said that Gordon “poses a risk to other investors and the market at large if he is allowed to return to the industry. The facts demonstrate that the respondent will circumvent the KYC process with his own practices, where such rules impeded his ability to recommend precious metals sectors funds to clients.”