Another KYC meltdown

Another KYC meltdown

Another KYC meltdown Shoddy paperwork leads MFDA to lay big fine against former advisor
 
Mutual Fund Dealers Association of Canada (MFDA) fines former WFG Securities of Canada advisor Toula Adeola $250,000 as well as $10,000 in costs for several infractions between December 2007 and July 2008 at the Mississauga, Ontario, branch of WFG.
 
More importantly, Adeola’s been banned for life from conducting securities-related business with any MFDA firm.  
 
The crux of the matter has to do with the original KYC documentation Adeola filled out for new clients. Items such as RRSPs, residences, income, and other things of a monetary nature were either inflated in value or simply didn’t exist.
 
In addition, the advisor exaggerated clients’ investment knowledge and risk tolerance, many of whom were new to Canada and trusted the advisor.
 
Worse still, Adeola sold clients on a leveraged investment strategy that wouldn’t decrease in value or result in any out-of-pocket expenses. The strategy backfired; by 2010, some clients were unable to keep up with the monthly payments.
 
A year later one of the client’s went to the MFDA leading to this ruling.  
1 Comments
  • C. Edwin Chung CFP 2015-02-03 7:27:18 PM
    I made a complaint to the MFDA about a successful IA advisor who inappropriately qualified a client in a 2/1 leverage deal. He came back the next year, trying to get her spouse to invest but he refused. He told her he could qualify her for a $30,000 loan on her net $5,000 annual income, which he did.
    In 2008 she had a margin call, which she knew nothing about and sole her assets. Checking out her paperwork I saw two different KYC's that were not signed by the client. One increased her income and net worth in able to qualify her. I notified the MFDA and gave them the paperwork. After over two years a reply came back saying that there was not enough evidence to punish the advisor.
    I gave them the smoking gun with the bullets; the Ombudsman of Financial services made the company pay back the original purchase, but without interest. This was a minimal knowledge client, what else do they need? There is much more to this story supporting the negligence of this advisor.
    I have stopped my practice of selling mutual funds due to this ruling. I have lost all respect for the governing forces. As a person of honour, I feel embarrassed!
    Post a reply