Advisor fined for KYC failings over 92-year-old client

Advisor fined for KYC failings over 92-year-old client

Advisor fined for KYC failings over 92-year-old client

A “remorseful” Toronto advisor has been fined $20,000, plus costs, for failing to ensure his investment recommendations were suitable for a 92-year-old client in deteriorating health.

Patrick Hugh Lumbers, who worked for Investors Group during the time the misconduct took place, invested about $340,000 of the woman’s money into mutual funds that were deemed not in line with her investment objectives at an MFDA hearing.

Between May 2013 and March 2014, Lumbers failed to learn, or update material changes to, the essential Know-Your-Client information. He recommended the funds were suitable despite being subject to a seven-year deferred sales charge schedule and not being in line with the relevant KYC factors, including age, health condition, investment time horizon, and investment objectives.

The KYC updated form, which Investors Group did not receive, stated that the client had a time horizon of 10+ years, had a medium risk tolerance, and had an investment objective to “leave an estate”. The only change from the previous KYC was downgrading the risk tolerance on her non-registered account from high to medium.

The settlement agreement said: “The Respondent knew or ought to have known that client did not have an investment time horizon of 10+ years given that she was 92 years old, and her investment objective should have reflected that she required income to fund her stay in a retirement residence.”

Lumbers also ignored his branch manager’s advice that DSC mutual funds were not appropriate for a client of this age, going ahead and investing $200,000 in the Investors Dividend A Fund and $140,000 in the Investors Premium Money Market Fund. On May 15, 2013, the advisor switched the $140,000 investment to the Investors Real Property Fund A (DSC). Both the Investors Dividend A Fund and the Investors Real Property Fund A were subject to seven-year DSC redemption schedules.

In early 2014, the client’s mental health deteriorated rapidly, moving into a more expensive assisted living facility. Despite being aware of this, Lumbers saw no need to update the client’s KYC information or reassess the suitability of her investments.

On December 31, 2014, the client passed away. At that time, the investments held in her Investors Group accounts would have triggered $18,195 in DSCs had they been redeemed. Investors Group agreed to reimburse the client’s estate for any DSCs incurred on the redemption of her investments.

Investors Group no longer permits its Approved Persons to sell mutual funds subject to DSC fees.

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