A Mutual Fund Dealers Association of Canada (MFDA) hearing panel has fined and suspended former dealing representative, Gurmeet Singh Bagga after he obtained his mortgage broker license and began selling syndicated mortgage investments without disclosing his outside business activity to his firm.
Employed with Sterling Mutuals Inc. at the time, Bagga’s conduct came to light when he was later registered with Shah Financial Planning Inc. and the MFDA was conducting a compliance review. “The respondent at that time told the reviewer about his earlier involvement with syndicated mortgage investments,” the MFDA writes. “Moreover, the respondent claims that he did not know that syndicated mortgages were securities.”
The Brampton, Ontario-area representative completed his certification as a mortgage agent in April 2014 and became licensed as a mortgage agent without obtaining prior approval from his firm. That same month he recommended, sold or facilitated the sale of a syndicated mortgage investment to one client. The following day he informed Sterling Mutuals that he had completed his certification and submitted a request for approval to engage in outside business activity working as a mortgage agent.
While he was waiting for that approval, Bagga went on to sell additional syndicated mortgage investments to three more clients and received fees from T1CM Principal Secured Mortgages Inc., while registered with Sterling. The project related to the securities Bagga was selling ultimately failed and ceased all payments of distributions to investors. (The four clients did not complain about Bagga’s conduct.) The mortgage brokerage Bagga worked for was assessed an administrative penalty by the Superintendent of Financial Services which also revoked the brokerage’s license.
“Conducting securities-related business or outside business activity without the approval or knowledge of the member is serious misconduct,” the MFDA writes in it decision and reasons. “The member loses its ability to supervise the transactions and to assess the suitability of the transactions for investors. The misconduct can have dire consequences for the investors involved as the off-book investment may not be suitable for the investors or even legitimate investments. The misconduct may bring the member or the mutual fund industry into disrepute.”
In addition to fining Bagga $20,000 plus costs in the amount of $5,000, the MFDA has banned him for one year from conducting securities related business in any capacity with any MFDA member firm.
