A former MFDA rep has been banned and fined for, among other actions, recommending investments to hundreds of clients without adequate due diligence in assessing their suitability.
The MFDA released its reasons for decision Friday following a hearing in Saskatoon on Sept. 7 into the allegations against Boyd Yahn, a former branch manager in North Battleford, Sask. Yahn was a registered mutual fund salesperson, which is now known as dealing representative, from Dec. 18, 2001 to Dec. 13, 2015.
“Since September 2008, the respondent believed, based on his own studies, that due to a systemic failure of the financial markets, the value of gold was predictable year over year,” the MFDA said in its reasons for decision. As a result, Yahn had “formulated an investment strategy of his own design” for clients.
Yahn “contended that his belief that the financial system was broken entitled him to advise his clients that investing in the precious metals sector money markets was low or medium risk,” the MFDA statement said, and Yahn recommended his “gold strategy” to all his clients, “including those who were elderly, had limited annual incomes, and little knowledge of the financial markets.”
“There was no reliable evidence that the respondent’s belief that the financial system was broken was well founded, or in any event, entitled him to circumvent his obligation to perform the KYC and suitability obligations,” it said.
The panel said the lack of evidence of financial loss to clients was “irrelevant” and didn’t justify the breach of MFDA rules.
Yahn “recorded inaccurate investment objectives and investment knowledge on the client account forms so that they would conform to his gold strategy recommendations,” the reasons for decision said.
As a branch manager, Yahn supervised an approved person “who shared his perspective, and [who] also concentrated investments for clients’ holdings in precious metals sector funds,” the panel said.
The MFDA said Yahn told his previous mutual fund dealers about his gold strategy. Those dealers were HollisWealth Advisory Services Inc., with whom he worked until May 20, 2014, and Sterling Mutual Inc., with whom he worked until Dec. 31, 2015. The SRO “launched disciplinary proceedings against HollisWealth and Sterling, which concluded with settlement agreements […].”
The panel said Yahn breached due diligence standards of practice for approved persons, as set out in MFDA Rules 2.2.1 and 2.1.1 and 2.5.5.
Based on the panel’s findings, Yahn:
- is permanently prohibited from conducting securities related business in any capacity while in the employ of or associated with any MFDA member;
- shall pay a fine in the amount of $75,000; and
- shall pay costs in the amount of $10,000.
For more, read the full reasons for decision.