The Mutual Fund Dealers Association of Canada (MFDA) has fined Joel Henry Attis $50,000, imposed costs in the amount of $15,000 and had banned Attis from working in any capacity with any MFDA member firm for a period of two years after a hearing panel found he engaged in discretionary trading and kept inadequate records of client authorization.
Registered as a dealing representative in New Brunswick since January 2003, the former dealing representative with Investia Financial Services Inc., and IPC Investment Corporation, also registered as a dealing representative with exempt market dealer Louisburg Investments Inc., had at times over the years been registered in Alberta, Nova Scotia, Ontario and Prince Edward Island, as well.
Following the MFDA’s hearings, the regulator in its decision says a substantial portion of the evidence was not contested. “Each party, however, attached different nuances and interpretations,” they write in its decisions and reasons document. “The conclusions each party drew from the evidence, on the critical issues, were starkly different.”
To service his clients, Attis employed a series of model portfolios each containing the same six or seven mutual funds, but with different weightings to accommodate different risk profiles. “Apart from a small number of clients who might choose to select their own mutual funds, the vast majority of the respondent’s clients held the same mutual funds. As a consequence, when the respondent decided to change some aspects of his model portfolios, the change would need to be made across a large number of his clients. This became known as the bulk trades,” they write.
Attis also employed a tactical currency strategy, wherein he would switch clients in and out of currency denominated versions of the same mutual funds when he believed the Canadian dollar was at its outer limit relative to the U.S. dollar.
At all times, IPC’s policies and procedures stated that advisors do not have discretionary trading authority and are required to obtain specific client instructions for each and every trade made and retain good quality notes.
In total, Attis made four bulk trades – 1,782 trades in total for 407 clients, keeping only template notes that were silent on the matter of timing and did not discuss how information about delayed trading was conveyed to clients. The MFDA says there is also evidence that some of the notes were created after meeting with all clients. “These notes do not constitute a reliable record of the details of any of the discussions,” they write.
Attis also gave clients involved in one trade only 24 hours to opt out and did so, the MFDA says, while he was fully aware that his notes regarding his interactions with clients were not compliant.
When the trades were ultimately flagged by IPC’s compliance department the firm placed Attis under close supervision and commenced an in-depth investigation which ultimately found that he had engaged in discretionary trading – an activity expressly prohibited under MFDA rules.
The MFDA’s panel unanimously concluded that both allegations have been established.
