Advisor banned for concentrating client assets in precious metals

Under the terms of a newly released settlement agreement between the Mutual Fund Dealers Association of Canada (MFDA) and Edmonton, Alberta-area former advisor, Deryl Emerson Francis Thompson, the representative is permanently banned from conducting securities related business in any capacity with any MFDA-member firm after he admitted to concentrating more than 98 per cent of his clients’ assets in precious metals sector mutual funds.

According to the settlement agreement, between 2008 and at least July 2016, while he worked at two different firms, Thompson failed to use adequate due diligence to ensure that investment recommendations he made to clients were suitable when he reccommended they concentrate all or substantially all of their investment holdings in precious metals sector mutual funds. He also admits to recording know your client (KYC) information for clients that would be consistent with his recommendations, to ensure the investments appeared to be suitable. The MFDA also says he failed to adequately explain to clients the risks of holding all of their investments concentrated in one sector.

“The respondent believed that, among other things, as a result of government monetary and debt policies, the precious metals strategy would provide clients with a long term, safe haven for their capital,” the MFDA writes in the agreement. “The respondent represented, among other things, (that) if a client invested in a mutual fund that held multiple types of precious metals such as gold, silver and platinum, the client’s portfolio would be sufficiently diversified because each type of precious metal would respond differently to economic conditions.” 

As of July 2016, while he worked for Portfolio Strategies Corporation, Thompson serviced 371 investment accounts owned by 174 clients. Approximately 98 per cent of the $7.19-million in assets under administration held in accounts serviced by Thompson were invested in precious metals sector mutual funds. Approximately 86 per cent were invested in one single fund, the BMG Bullion Fund. Only one client reportedly complained about Thompson’s conduct.

In addition to being banned from working in the industry, Thompson has agreed to pay the MFDA a $10,000 fine and $3,750 in costs.