Rep sanctioned for ignoring compliance and defying regulator’s orders

The Mutual Fund Dealers Association of Canada has fined Antony Kin San Chau, $20,000, plus costs, and has banned the former dealing representative from being an officer, director, supervisor, Ultimate Designated Person, chief compliance officer, compliance officer or branch manager for any MFDA member firm for five years.

The sanctions were handed down after Chau admitted he failed to fulfill his responsibilities as Ultimate Designated Person when an approved person at his firm was not accurately recording know your client (KYC) information for clients. He is also being sanctioned for failing to take adequate steps to ensure that his firm was in compliance with an earlier order issued by the MFDA, ordering the firm to better supervise leveraged accounts.

Specifically, a 2014 MFDA order required Chau’s firm to conduct and provide to the MFDA, a historical review of all non-registered leveraged accounts and take remedial action as directed by the regulator to address concerns raised by the review. It also prohibited the firm from opening any new non-registered leveraged client accounts, making any new leveraged trade recommendations, or processing any leveraged trades in existing non-registered client accounts. “The 2014 order also prevented the respondent from being registered as the members chief compliance officer,” they write.

According to the MFDA’s reasons for decision in the present-day case, Chau, registered since 1995, was the majority and controlling shareholder, officer and sole director of MFDA member firm, TeamMax Investments Corp. from September 2009 until January 2021. He was also registered as a dealing representative with the firm until March 2021. In January 2021 he transferred ownership of the firm to another individual and is not currently registered in the securities industry in any capacity. 

From January 2010 until April 2014 Chau was also registered as the firm’s chief compliance officer (COO). Despite the MFDA’s order, he also served as interim COO again in 2018 and again in 2019.

In a settlement agreement entered into in January 2017, the firm admitted that it failed to respond to MFDA staff and failed to maintain adequate supervision policies and procedures. It also says the firm failed to adequate detect and query patterns in the KYC information collected by three approved persons, including one who is involved in the misconduct being considered in the most recent MFDA hearings concerning the firm.

When the firm’s new COO attempted to address the KYC issues with the approved person in question, she found him to be unresponsive. On reporting her concerns to Chau in various reports and in reports to the firms’ board of directors – the COO recommended the approved person be terminated – Chau did not follow her recommendations but simply said that he would speak with the individual. Similar concerns about approved persons continuing to make leveraged trade recommendations were also met with similar assurances that he would speak with the approved persons in question.

“She discovered several instances where large dollar amount trades were made shortly after a line of credit or home equity loans from another organization had been approved for the client,” they write. “The respondent, however, directed the COO not to speak with any of the approved persons and stated that he wanted to speak with the approved persons personally.” They add that no records of any such conversations were kept.

“By failing to adequately address the issues identified by the COO, the respondent engaged in business conduct or practice that is unbecoming or detrimental to the public interest,” the MFDA’s reasons for decision states.

In addition to the prohibition from acting as a supervisor and the $20,000 fine, Chau has also paid MDA costs totalling $7,500.