The Toronto-based Mutual Fund Dealers Association of Canada (MFDA) has released its decisions for the suspension of Markham-based W.H Stuart in May 2013. (See Investment Executive, W.H. Stuart ordered to halt all public transactions, May 22, 2013.)
According to the MFDA documents, Marilyn Dianne Stuart, in her role as part owner and controlling mind of W.H Stuart operations, redeemed mutual funds held in “inactive” accounts without the knowledge or consent of clients or their advisors. The funds were then placed in an affiliate company of W.H Stuart, W.H Stuart Insurance Agency Ltd. When a client complained about the unauthorized transaction, Stuart would claim the redemption had been made in error and would repurchase the mutual funds.
During their investigation, MFDA staff discovered that many if not all records relating to the unauthorized transaction had been removed from the firm’s back office system, which was designed by S21C, an affiliate of W.H Stuart. This proprietary software gave Stuart the ability to manipulate records of client accounts and transactions, according to the MFDA.
In addition to the unauthorized transactions, Stuart also solicited clients to invest in “guaranteed investment notes” of W.H Stuart Insurance, which offered investors 7% interest per annum. At least once client did invest in 2009.
The case has been adjourned indefinitely as MFDA staff require time to receive certain documentation and to review it before deciding whether any further relief will be sought against either Marilyn Stuart or W.H. Stuart. As well, Marilyn Stuart’s registration with the Ontario Securities Commission (OSC) was terminated in May.
Furthermore, in May 2013, W.H. Stuart, and all of its affiliates, were sold to Keybase Financial Group Inc., according to MFDA documents.