Failure to disclose bequest ends in eight-year ban

A Mutual Fund Dealers Association of Canada (MFDA) hearing panel has levied $70,000 in fines plus costs in the amount of $7,500 and has banned veteran representative, Roger Eldred Gebhardt from conducting securities related business in any capacity with any MFDA member firm for eight years after Gebhardt admitted he failed to disclose potential conflicts of interest to his firm.

Specifically, beginning in September 2018 he failed to disclose to his firm that one of his clients had named his spouse as sole estate trustee and sole beneficiary in their will. In November 2018 he also failed to disclose that another client named him as the recipient of a $25,000 bequest. In both cases the MFDA says there is no evidence that Gebhardt or his spouse were in any way involved in the preparation of the client’s wills.

Registered in the mutual fund industry since 1980 and registered in Ontario with IPC Investment Council from 2001 until January 2019 when he resigned, the Hanover, Ontario dealing representative began servicing the first client’s accounts in the mid 2000s. In 2012 he informed that client that he would be unable to accept a nomination as estate trustee. In November 2017 the client then executed his will naming the respondent’s spouse as sole estate trustee and sole beneficiary. Gebhardt says he was informed of this for the first time after the client had died.

Despite the conflict, he continued to service the client’s accounts while he assisted his partner in preparing and submitting letters of direction to mutual fund companies. He also telephoned one of the fund companies to inform the firm that it would receive one of the letters. The MFDA says when he became aware that the client had named his spouse as the sole trustee and beneficiary, the circumstances gave rise to a conflict of interest that he was required to immediately disclose, but did not.

The firm was not aware that the first client had died or that the redemptions were being directed to Gebhardt’s spouse until a branch manager conducting supervisory reviews, discovered some of the redemption transactions.

In the second client’s case, it was discovered in 2018 that a 93-year-old client had named Gebhardt joint power of attorney and estate trustee with the client’s son. Although he immediately recommended that someone else be appointed, and the role was given to the son alone in revised power of attorney and estate documents, the newly executed will also bequeathed $25,000 to Gebhardt. Because he was also the representative of record for the son, the MFDA says Gebhardt should’ve immediately disclosed the bequest to his firm, but did not. He also made misleading statements to his firm when expressly asked if he’d ever been named as executor or beneficiary in any other client accounts while being investigated in the first case. In January 2019, Gebhardt then resigned from the firm.