A fund rep who advised a 95-year old client to switch almost $500,000 from a no-load fund into a deferred sales charge (DSC) fund with a seven-year redemption schedule has been sanctioned in a settlement with the Mutual Fund Dealers Association of Canada (MFDA).
An MFDA hearing panel approved a settlement with Sergio Salina that resulted in a $30,000 fine and a $5,000 order for costs.
In settling the case, Salina, who was a rep with Investors Group Financial Services Inc. in Victoria, B.C. at the time, admitted to violating several MFDA rules, including rules on conflicts of interest.
In July 2014 he recommended that a 95-year old client switch approximately $498,511 from a no-load fund to a DSC fund with a seven-year redemption schedule, which generated a commission for him of approximately $18,943.
According to the settlement, Salina made the recommendation based on the client’s desire to encourage beneficiaries of her estate to keep any money they inherited from her with Investors Group after she died. The move resulted in a conflict of interest that was not resolved in the best interests of the client.
Ultimately, the client passed away about 18 months later, and the estate redeemed the DSC funds, incurring $24,380 in DSC fees.
Additionally, the settlement noted that Salina failed to disclose to his dealer that he was named a beneficiary in the same deceased client’s will, which also violated MFDA conflict of interest rules, and, that he obtained 24 pre-signed account forms.