A Mutual Fund Dealers Association of Canada (MFDA) hearing panel has accepted a settlement agreement with former IPC Investment Corporation representative, Collin John Spithoff, wherein Spithoff admits to selling promissory notes worth nearly $1.3-million to 14 different clients, that were not approved by IPC.

Under the terms of the agreement, Spithoff, who retired from the industry in October 2018, is banned for five years from conducting securities-related business in any capacity with any MFDA member firm. He will also pay a fine totalling $25,000 and costs in the amount of $5,000.

Although IPC’s policies and procedures prohibited the practice, between September 2015 and April 2018, the Mississauga, Ontario-based rep recommended and facilitated the sale of at least $1.27-million of promissory notes issued by EBF Group Ltd., and Bancorp Commercial Finance Inc. to at least 14 different clients. According to the settlement agreement, EBF and Bancorp are affiliated companies engaged in the business of factoring and asset-based lending. Both companies offer 12-month promissory notes which pay a fixed rate of return of nine per cent and 15 per cent, respectively.

Among other activities, Spithoff reportedly introduced the notes to clients, discussed the investment’s risks, advised clients when new offerings were available from the companies, had clients sign documentation and facilitated the transfer of payments. When he was interviewed by a branch review officer as part of a routine branch audit in December 2017, he stated that he offered no products or services outside of the member. “In response to a question about what the respondent does when he receives a request to purchase securities that he is not registered to trade, the respondent answered ‘I don’t deal in them and have so advised my clients,’” the MFDA writes in its settlement agreement. “He misled the member by making false statements to a branch review officer and not disclosing that he recommended and facilitated the sale of investments outside the member.” 

The MFDA adds that there is no evidence of client complaints arising from the investments.