MFDA concludes failure to execute purchases in a timely manner added to respondent's compensation to clients' detriment
The Mutual Fund Dealers Association of Canada (MFDA) has confirmed sanctions on a former dealing representative for processing dozens of client transactions in a way that increased his own compensation, exposed clients to unnecessary risk, and resulted in losses to several clients’ accounts.
In its Reasons for Decision document, the MFDA said Jamie Lee Leonard engaged in conflicts of interest from December 2015 to February 2017. During that time, he was registered in Ontario and Quebec as a dealing representative with Scotia Securities, where he was also designated as an assistant branch compliance officer.
The document outlined how Leonard processed 43 transactions in respect of 38 clients as redemptions and purchases, rather than as switches. In doing so, the MFDA said, he exposed clients to the risk of a change in the value of the funds as the clients’ assets were not invested while the trades settled.
In conducting the transactions as redemptions and purchases, the MFDA said Leonard increased his compensation as they counted toward sales targets that were in place at the member firm.
“[Leonard] states that he did not conduct the transactions as redemptions and repurchases instead of as switches, in order to increase his compensation,” the MFDA said, though Leonard reportedly acknowledged that conducting the transactions as switches would have made them ineligible to be counted toward sales targets or awards that were available to him at the time.
His decision also led to client losses as he failed to execute numerous transactions in a timely fashion, as required by the policies and procedures at his member firm.
In 18 out of the 43 transactions, he did not repurchase funds promptly after executing redemptions. The delays, which ranged from approximately seven days to 10 months, resulted in losses from the mutual fund accounts of 21 clients.
“The Respondent’s conduct … resulted in client losses to a maximum of $3,100 per client and $13,000 total,” the MFDA said, adding that the member firm reimbursed the clients for their losses.
The decision documented noted several mitigating factors in the case. Among others, they included the fact that Leonard had not previously been the subject of an MFDA disciplinary proceeding, he has provided proof that he has limited financial means and is currently earning just above minimum wage, and has cooperated fully with MFDA staff.
He has been prohibited from engaging in securities-related business in any capacity while employed or associated with any MFDA members for a period of two years. He has also paid a fine of $2,500 and costs of $2,500.