OBSI has announced the refusal of FundEX Investments Inc. to compensate investors in the amount of $106,123.
Read: OBSI defies common sense
FundEX is a national mutual fund dealer that manages approximately $95 billion in assets. The complainants, Mr. and Mrs. S, had recently sold their home in Alberta and moved to Saskatchewan, investing extra proceeds from the sale of their house. They had limited investment knowledge and experience, and relied heavily, if not entirely, on their FundEX advisor, Mr. H.
Mr. H placed the complainants in an exempt market product called Certified Medallion Executive Business Centre Project (Medallion Mortgage). The Medallion Mortgage investment was a second mortgage on the above-named property that offered 10% annual returns. The investments were made off the books (“off-book”) of FundEX, though Mr. and Mrs. S had reason to believe they were properly dealing with a FundEX representative selling a FundEX-approved product. When a court-appointed receiver took over the building on which the second mortgage was placed, the complainants lost all of their investment in Medallion Mortgage.
In May 2013 the MFDA announced it had commenced disciplinary proceedings in respect of Mr. H. In its Reasons and Decision dated August 12, 2014, an MFDA Hearing Panel determined that Mr. H sold exempt market products without FundEX’s knowledge and approval, and knowingly concealed the activities. The Panel said that “[t]he seriousness of the conduct is at the very high end of the scale”. It issued a permanent prohibition on Mr. H to conduct securities related business with any MFDA Member, a global fine of $225,000 and an award of costs of $7,500.
OBSI’s investigation report for Mr. and Mrs. S’s complaint is available on OBSI’s website. The ombudsman says FundEX is responsible for the financial harm incurred by the complainants as a result of the off-book investment they were placed in by their FundEX advisor.