Advisor used client’s money to pay own debts

An advisor in Nova Scotia has been banned from the securities business after he misappropriated $20,000 from his client and used the funds to pay his personal debts.

In a decision released on January 5, the Mutual Fund Dealers Association (MFDA) permanently prohibited Gerard Campbell MacKinnon from conducting securities-related business and ordered him to pay a $15,000 fine as well as costs in the amount of $7,500.

While he was an advisor with Quadrus Investment Services, MacKinnon convinced a client to redeem $20,000 from his RRSP and put the funds into an investment which he proposed to manage. MacKinnon told the client that he could provide better returns than the mutual funds he held with Quadrus. In fact, MacKinnon did not invest any of the money; without the client's knowledge or authorization he used the funds to pay his personal debts.

Complaint from another client

A complaint from another client alerted Quadrus to irregularities in MacKinnon's files, and following an investigation he was terminated in August of 2013. In December of that year, the client contacted Quadrus to ask what had happened to his $20,000 investment, and in February MacKinnon gave his former client a personal cheque for $23,400, including a purported interest payment of $3,400. When the MFDA began its own investigation into the matter in late 2014, MacKinnon refused to attend an interview with the regulator’s staff.

While MacKinnon's repayment of the misappropriated funds was a mitigating element, as was the fact that he showed remorse for his misconduct by entering into a settlement agreement, the MFDA panel found that "it does not dispel the fact that the Respondent breached his position of trust and took advantage of his client". The panel said the sanctions imposed on MacKinnon should demonstrate to other advisors that they will face serious consequences should they engage in these kinds of activities.

"We believe that by imposing the ultimate penalty of a permanent prohibition from conducting securities related business while in the employ of, or associated with, a Member of the MFDA, the appropriate message will have been conveyed," reads the decision. "Were it not for the mitigating factors listed above, in our view, the fine imposed would have been substantially more significant."