A Sun Life financial advisor has been suspended for two months and fined $35,000 after he admitted to processing switches on behalf of his clients without obtaining specific instructions from them.

The Mutual Fund Dealers Association of Canada (MFDA) said that between June 2016 and May 2018, Stefano Arena processed 1,062 switches from money market to equity mutual funds on behalf of 36 clients without obtaining specific instructions from them.

Advisor did not keep sufficient notes

Arena said he discussed with the clients which equity mutual funds were to be purchased as part of their portfolio of equity mutual funds, and that the total amount the clients invested in money market mutual funds would be invested in the equity mutual funds the clients had chosen, periodically, through a series of switches Arena. He said his clients instructed him to go ahead, but the MFDA said Arena did not maintain sufficient notes of these discussions.

He said he made the switches to achieve a lower average cost for the equity mutual fund units purchased on behalf of the clients by buying the equity mutual funds at times when the market price for the mutual funds had decreased.

The Sun Life compliance department conducted trade reviews of the switches and began an investigation, sending out letters to the clients to verify that the transactions within the account had been authorized by the client. It also provided clients with the chance to raise any concerns regarding their accounts – but Sun Life didn’t receive any responses.

He was put under enhanced supervision and Arena paid Sun Life $17,786 for costs related to that.

No evidence clients lost money

The MFDA said there was no evidence that the advisor received any financial benefit from engaging in the misconduct and there was no evidence of client loss.

Arena said he mistakenly believed that the Limited Trading Authorization provided by clients let him exercise discretion to process the switches and has since expressed remorse for his actions.

But an MFDA hearing panel called Arena’s actions “serious in nature, duration, and frequency,” noting that discretionary trading was contrary to Sun Life’s policies and procedures.  It said Arena lacked the education, skills and experience to engage in discretionary trading.  

The MFDA panel said it was satisfied with the two-month suspension, levied a $35,000 fine plus $5,000 for costs.