The Mutual Fund Dealers Association of Canada (MFDA) has permanently banned a former rep who borrowed $16,000 from a client.
According to an MFDA hearing panel’s reasons for decision, John David Elwood was a registered rep with FundEX Investments Inc. from October 2000 to September 2013.
While at FundEX, Elwood borrowed a total of $16,000 from a client (“RW”) in 2012. Elwood later switched firms in September 2013, joining Queensbury Strategies Inc. and transferring RW’s accounts to Queensbury.
Elwood failed to disclose to either FundEX or Queensbury that he had borrowed $16,000 from one of his clients. He also failed to repay the $16,000 — which he obtained without collateral or a promise to pay interest.
In September 2013, Elwood signed a promissory note indicating he owed RW $16,000. In that document, Elwood acknowledged himself as a “borrower,” although he later denied having borrowed money from RW.
Years later, Elwood still had not repaid the $16,000 and ended up in small claims court, where he signed a settlement with RW in February 2017 agreeing to a repayment schedule.
Elwood made the first three $500 monthly payments he had agreed to, but defaulted on the settlement terms after May 2017 and ceased making further payments.
RW had also obtained a garnishment order against Elwood. In March 2017, Queensbury was served with a notice of garnishment, which eventually led to an MFDA investigation.
RW died in November 2017.
Elwood did not inform Queensbury that he’d been sued by RW. In a due diligence questionnaire and annual questionnaires he completed for Queensbury, Elwood indicated he had not borrowed money from his client.
At his hearing, Elwood did not deny the majority of allegations against him — although he did deny that he “borrowed” money from RW.
Elwood testified that the $16,000 was a gift that would allow him to accompany RW to Mexico — something Elwood said he would otherwise have been unable to do, due to a large debt owing to the Canada Revenue Agency and his exorbitant monthly condo fee of $1,500.
But the MFDA hearing panel wasn’t buying it.
“Based on the oral and documentary evidence […] and the absence of contrary evidence prior to commencement of these proceedings, it is the panel’s conclusion that [Elwood] borrowed $16,000 from client RW as alleged,” the MFDA wrote in its reasons for decision.
In addition to the permanent ban, the MFDA fined Elwood $25,000 and ordered him to pay costs of $12,500.