An old-school case of an unlicensed player allegedly doctoring client files to cover losses is highlighting the merits of a one-stop-shop national registration that includes all licensed advisors no matter their specialty.
The observation comes on the heels of an OSC announcement this week that its Joint Serious Offences Team has moved to lay two charges under the Criminal Code of Canada against Michael Lee Hughes and Rivertree Financial Services Corporation. The first alleges fraud over $5,000 contrary to section 380 of the code, with the second asserting forged document contrary to section 368.
Here’s where things get interesting.
Although Hughes isn’t registered by the OSC to advise or trade in securities, he managed a portfolio for an Ontario resident between 2008 and 2013. That’s problem number one.
The second fly in the ointment? Hughes lost a bunch of money on behalf of his client.
To make matters worse he’s alleged to have hidden this fact by forging his client’s statements to reflect a much healthier financial picture. Worse still, Hughes and Rivertree are also alleged to have continued charging investment management fees on this healthier, much higher dollar amount, resulting in a double whammy to the unsuspecting client.
Hughes, who now lives in Alberta, operates a website that touts Rivertree’s slogan, “Making your Financial Needs our #1 Priority.” Services offered according to Rivertree’s website include tax management, accounting services, financial planning, insurance, and investment management.
Hughes’ profile says he’s a CMA in Alberta; a quick search of the Certified Management Accountants of Alberta directory confirms he is indeed a member. However, a search of the CSA’s national registration search shows no record of a Michael Lee Hughes or Rivertree.
Financial advisors operating in Canada would be well advised to recommend to potential clients that they first do a search of the CSA registry to provide peace of mind about their advisor’s registration status.
But the case may also recommend the kind of one-stop-shop national registration Advocis is calling for where all licensed advisors, no matter their specialty, are recorded.
Right now the protection provided clients by the big firms doesn’t necessarily protect investors across the board.
Harley Lockhart, an Advocis director, points out that “the CSA has no authority over life insurance. A life insurance license is required to sell segregated funds. It is possible to legally help clients with investments without being on the CSA list.”
As this case makes its way through the courts perhaps we’ll learn more about how investors can be protected when it comes to licensing, or the lack thereof.