After an advisor has learned which funds their client wants to purchase and what percentage of that client’s total investment would be allocated to each fund, should the advisor still ask for permission before making specific transactions on the client’s account?
Yes, they should - at least, that’s the crux of the MFDA’s case against James Gerard Carney, an advisor and branch manager with Investors Group in Brampton, Ontario.
In an August 8 notice, the regulator reports that he processed approximately 188 transactions on behalf of 10 clients; the timing and amount of the trades were determined entirely by Carney.
Carney says the trades, which consisted of him moving funds out of a money market fund and into a previously-agreed-upon target portfolio, were processed simply as part of a dollar-cost averaging strategy.
However, the MFDA argues that since he decided the particulars of and conducted each transfer without obtaining prior authorization from clients, he effectively engaged in discretionary trading, thus violating MFDA Rules 2.3.1 and 2.1.1.
Carney also faces another allegation. The regulator claims there were several cases in which Carney processed redemptions when asked to do so by clients’ spouses, and not by the clients themselves.
Since there was no power of attorney or other similar authorization on file to empower the spouses to act on the client’s behalf, the MFDA asserts, Carney should not have acted on those requests.
Did the advisor go behind his clients’ backs, or was he taking the proper initiative to act in their interests? None of the allegations have been proven. The first appearance in this proceeding has been scheduled for September 13.
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