MFDA fines and permanently bans a dozen former repsBy Kate McCaffery | December 03 2018 11:30AM
The Mutual Fund Dealers Association of Canada (MFDA) issued its Decisions and Reasons statement, Nov. 27, in connection with its investigation of several former sales representatives who were registered with WFG Securities Inc. in Mississauga, Ontario.
Those named in the matter of Mahmoud Rihawi et, al. were Approved Persons at the branch when they operated a branch-wide scheme to falsify documents to enable them to sell leveraged investments to clients who did not meet suitability requirements. The group also conspired to cover up their misconduct by agreeing to mislead WFG and the MFDA in its investigations.
Contemptible and an embarrassment
In its decision, the MFDA says “the Respondents’ misconduct was contemptible and an embarrassment to the entire investment industry. The Respondents have demonstrated that they have no concern or thought for the clients or the regulatory regime. They are ungovernable and should not be involved in the securities business. The misconduct was not an isolated incident but part of a larger pattern of conduct involving multiple clients.”
Collectively, they say the Respondents engaged in conduct that affected at least 50 clients who obtained investment loans totaling approximately $4.2 million. The loans were used to purchase leveraged return of capital mutual funds.
Between 2008 and August 2014, the group falsified, altered or fabricated Know-Your-Client (KYC) information and information on loan applications submitted to lenders to obtain at least 51 investment loans to purchase mutual funds on behalf of clients. The Respondents inflated the market value of clients’ residences on loan applications, reported that clients owned cash, liquid assets, investments and properties which the clients did not own, failed to report the true nature and extent of the client’s liabilities, and reported that clients had “good” investment knowledge and a “high” tolerance for risk when the majority had limited to no investment knowledge, no prior investing experience and had never previously borrowed money to invest.
Scheme operated six years
The scheme operated over a period of six years. The MFDA estimates that shared commissions paid to the group possibly amounted to $100,000 to $150,000, not including trailing commissions. Total fines recommended by MFDA staff amount to $1,295,000, plus costs of $32,000, for a total of $1,360,000.
The Respondents – Mahmoud Rihawi, Attal Golzay, Ajmal Golzay, Roomal Golzay, Mustafa Sayed Hashimi, Zobair Hashimi, Sama Tabesh, Saadet Kolgekaya, Rhea Galias Fortes, Shameel Rawani, Anjum Pathan, and Mohammad Yunas Masood, along with Hammond Lieu who is covered in separate settlement – are not currently registered in the securities industry in any capacity.