Leveraged strategy for elderly client results in significant sanctions

The Insurance Council of British Columbia has fined Eunice Chew Hoon Gan $10,000, and imposed a series of conditions Gan must meet if she is to remain licensed in the province, after a client’s power of attorney (POA) complained that Gan’s investment recommendations were not in her client’s best interest and were generally not appropriate given the client’s overall age and financial situation.  

The council also assessed investigation costs of $2,887.50 and hearing costs of $15,722.35. To maintain her license, both the fine and the council’s costs must be paid by April 20, 2021. In addition, Gan must complete six different courses outlined in the council’s order before January 2022 and must be supervised by a life agent approved by council for a period of two years.  

Evidence provided by the client’s POA, along with testimony from the client’s long-time advisor before he transferred his business to Gan, describe the client, born in 1927, as an unsophisticated, inexperienced investor who relied on her advisors to act in her best interests. Gan placed the client in leveraged investments on at least two occasions without documenting any planning or needs analysis. The hearing found that the client, who had modest income and no beneficiaries, did not receive any estate planning benefit from the strategy.  

At some point during the relationship, the advisor also transferred the client’s assets from one insurer to another, claiming that she was concerned that the funds available to them would be restricted after one insurer was acquired by another. “The transfer of the investments,” the council writes, “was a move of convenience for the licensee. It provided the licensee with a windfall of up-front DSC commissions, free and clear in case the client died, while also maintaining the leveraged multiplied trailing commissions at half the former rate.” 

Prior to that date the council says the client’s products paid substantial, perpetual, monthly trailing commissions. “There was no legitimate need to move away from these past practices other than the licensee seeing an opportunity to capitalize some of the future trailing commission into significant lump sum commissions today on an elderly client with an uncertain servicing lifespan,” they add. “It was predatory behaviour and it raises significant concerns about the licensee’s honesty and integrity.”