Clients told they could double their money, but lose about half a million
The Mutual Fund Dealers Association (MFDA) has ordered Jeffrey Mushaluk to pay a $25,000 fine and $5,000 in costs for selling or facilitating the sale of shares in a junior mining company. He is also banned from conducting any kind of securities-related business until July.
In a decision released on Friday the MFDA found that Mushaluk acted outside his registration as a mutual fund salesperson by selling, recommending, facilitating the sale, or making referrals in respect of the sale of shares of Pacific Booker Minerals (PBM), a junior mining company listed on the Toronto Venture Exchange.
Mushaluk, who does business in Salmon Arm, British Columbia, was an advisor with IPC Investment Corporation. IPC had a referral arrangement that allowed clients to buy or sell stocks through IPC Securities Corporation, but advisors were forbidden from discussing the features, terms and advantages of purchasing specific stocks. Despite this rule, Mushaluk sent an e-mail to clients recommending they buy shares of PBM .
"A clear conflict of interest"
In the end 29 of Mushaluk’s clients purchased $519,502.80 of shares in the mining company, which subsequently saw its share price plummet from $13 when the recommendation was made in August of 2012 to approximately $0.82 by 2016.
"It is clear from the facts of this case that the Respondent was in a clear conflict of interest as he had already invested in PBM. Further, the Respondent was recommending PBM, which was in breach of his registration. Further, he made serious representations about the short term opportunity including the ability to possibly double their money which no doubt persuaded many of his clients to purchase PBM," reads the MFDA’s decision. "The end result was almost a total loss of his clients’ investments in this non-mutual fund entity."