A mutual fund rep has been fined $20,000 after he admitted “facilitating stealth advising” by hiring an unregistered individual.
James Michael Lewis has also been prohibited from conducting securities-related business while working for an Mutual Fund Dealers Association (MFDA) firm for a period of 30 months, expiring December 7, 2024, as well as being assessed $5,000 in costs.
Editor’s note: The Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association of Canada have officially amalgamated to become New Self-Regulatory Organization of Canada (New SRO), announced the regulator Jan. 3. The MFDA Investor Protection Fund (MFDA IPC) and the former Canadian Investor Protection Fund (CIPF) have merged into a single investor protection fund and will be known as CIPF.
Advisor did not use due diligence
In its reasons for the decision released Dec. 28, the hearing panel said that between November 2017 and July 2018, Lewis signed or submitted account documents obtained by an unregistered individual to conduct securities-related business and update Know-Your Client (KYC) information of Lewis’ clients “without using due diligence to learn the essential facts relative to the clients, ensuring that transactions processed for their accounts were suitable, or ensuring that the transactions were authorized, thereby facilitating stealth advising….”
The panel said the unregistered person, Trevor Rosborough, is a former approved person but had been terminated. Rosborough subsequently sold his book of business to Lewis.
“The Respondent [Lewis] signed and submitted the resulting account forms under his representative code to the Member for processing with respect to 31 clients when he knew or ought to have known that Rosborough had provided the investment advice and gathered the KYC information from the clients.”
