A Canadian Investment Regulatory Organization (CIRO) hearing panel has accepted a settlement agreement with Lifan Song, after Song admitted he failed to report client complaints to his dealer, and paid close to $20,000 in compensation to clients without his firm’s knowledge.
In addition to a fine of $20,000 and costs in the amount of $5,000, Song is also prohibited from conducting securities related business with any CIRO member firm for six months.
Registered with Investors Group Financial Services Inc., from January 2017 until he was terminated in March 2020, the Winnipeg, Manitoba-area dealing representative had 13 clients redeem their investments in a real estate mutual fund that Song recommended, incurring a two per cent liquidity fee and in some cases triggering tax obligations, as well.
Several clients complained
In May and June 2019 several of the clients complained about the liquidity fees paid, complaints which Song did not report to the firm. Beginning in May 2019 he paid compensation directly to five of the 13 clients for the liquidity fees incurred. All told, Song paid $19,662.94 by personal check, deposits to client investment accounts and, in one instance, he paid $2,025.56 using gift cards. The gift card client was later reimbursed by the firm, as well.
After receiving another complaint, Song also paid $10,336.84 to another client for income taxes incurred as a result of the redemptions made from their account. When he provided a statement to Investors Group, Song told the firm that he had compensated all of the clients for the fees and taxes paid. This was misleading, the settlement agreement states, as he, at that time, had only paid compensation to five of the 13 clients in question.
In response to audit letters sent to Song’s clients following his termination, two additional clients complained about the liquidity fees and were reimbursed by the firm. “The remaining six clients incurred a loss of $1,897.57 but did not complain to the dealer member or seek compensation,” they write.
