Advisor fined after borrowing money from his mother-in-lawpar Andrew Rickard | September 06 2016 01:20PM
The Mutual Fund Dealers Association (MFDA) has ordered Edward Jonathan Okopny to pay a fine of $40,000 because he borrowed money from his mother-in-law (who was also a client). He has also been fined $25,000 for having an undisclosed and unapproved dual occupations and another $50,000 for failing to cooperate with the regulator's investigation.
Between late 2011 and early 2012 Okopny borrowed $40,000 from his mother-in-law to fund debts and expenses related to his child's health problems. Although the commitment was made in in writing and all the funds were repaid with interest by October 2013, the MFDA says Okopny still disregarded his responsibilities and fundamental obligations; by taking a loan from a client he obtained a personal benefit he should not have received by virtue of his obligations under MFDA Rules 2.1.4 and 2.1.1. The regulator maintains that borrowing from clients constitutes “very serious misconduct,” even if they are family members.
The MFDA also expressed concern that the client incurred deferred sales charges of approximately $1,314 when she redeemed funds for the loan. At the age of 82, the regulators believe it was "highly unlikely" that the client would have been able "to appreciate the conflict of interest, provide informed consent, or afford to incur losses associated with an unsecured loan to the Respondent."
In addition, the MFDA says Okopny held an undisclosed dual occupation as a land developer, and that he failed to co-operate during its investigation. Okopny denied these charges, and said that he did not intend to disregard the MFDA’s letters and voicemails, but rather was "overwhelmed and consumed with his son's continued health challenges."
While panel chair W. A. Derry Millar and industry representatives Guenther Kleberg and Colleen Waring expressed sympathy for Okopny and his former spouse with respect to their son's illness, they ruled that his conduct must attract the appropriate penalty, namely a total fine in the amount of $115,000.
"The proposed penalties will send a message to other Approved Persons that engaging in personal financial dealings with clients (particularly vulnerable or elderly clients), failing to disclose and obtain approval for outside business activities, and failing to cooperate with one's regulatory body will not be tolerated in the mutual fund industry," reads the decision.