The Mutual Fund Dealers Association of Canada (MFDA) announced it has permanently banned former FundEx Investments Inc. and Queensbury Strategies Inc. advisor, John Elwood, after Elwood borrowed $16,000 from a late client.
According to the MFDA’s decision, Elwood denies the amount was a loan, despite the fact that he signed a promissory note listing himself as a borrower, and despite the fact that he agreed to a settlement of a small claims court action that was commenced against him by the client who loaned Elwood the money.
The MFDAs allegations: That Elwood borrowed $16,000 from a client, giving rise to a conflict of interest, that his mislead Queensbury by falsely declaring that he had not borrowed money from clients on due diligence questionnaires and four annual questionnaires, and that he failed to report that he’d been named a defendant in a civil claim, were all disputed by Elwood’s lawyers. (Elwood claims that he did not know he needed to report the civil action against him because he settled before the case went to court.)
In the minutes of settlement he signed to settle the small claims court action his client had brought against him, Elwood agreed to repay $500 per month until the loan was repaid in full. He made only three payments before defaulting on the agreement’s terms. Queensbury and the MFDA began investigating Elwood when the client obtained a garnishment order against Elwood for the remaining amount owing. Elwood’s client passed away in November 2017. The executor of the client’s estate continues to seek recovery of the outstanding loan.
“This panel finds it significant that the respondent did not deny that the advances were a loan until these proceedings commenced,” the MFDA writes in its decision. “In his own testimony, when describing his conversations with client RW in the fall of 2012 and January 2013, when signing the promissory note and when signing the minutes of settlement, the respondent never said to client RW that he did not consider the advances to be a loan. Based on the oral and documentary evidence outlined and the absence of contrary evidence prior to the commencement of these proceedings, it is the panel’s conclusion that the respondent borrowed $16,000 from client RW as alleged.” (Elwood’s position was that there was no conflict of interest because the amount was a gift, not a loan.)
In addition to permanently banning Elwood from conducting securities-related business in any capacity with any MFDA member firm, the MFDA also fined Elwood $25,000 plus costs in the amount of $12,500.
