Life agent sanctioned for client service scheme, churning

A life agent had his licence pulled and was fined $100,000 after the Financial Services Regulatory Authority of Ontario (FSRA) alleged he violated a handful of industry rules, including running a scheme to enable a former agent to keep dealing with clients and churning many of those clients, among other violations.

FSRA ordered that the life licence of Yogender Jain be revoked, and imposed a $100,000 penalty against both Jain and his company, Gold Standard Group Inc. (its license expired in 2022).

In March, the regulator filed allegations and proposed penalties against Jain and Gold Standard. They did not request a hearing to contest its allegations, so the proposed sanctions have now been imposed against them.

At the same time, FSRA also made allegations and proposed penalties against another former agent, Daniel Tiffin. He has requested a hearing before the Financial Services Tribunal, and the allegations against him have not been proven.

The sanctions against Jain and Gold Standard stem from allegations that they violated insurance rules by enabling Tiffin to engage in unlicensed insurance business, and indirectly paid compensation to him. Further, FSRA alleged, Jain and Gold Standard churned those clients into new segregated funds.

According to the regulator’s original notice outlining the allegations, Tiffin’s life license was not renewed in 2019, following his conviction in the Ontario Superior Court of Justice for violating a cease-trade order imposed by the Ontario Securities Commission (OSC) against him in 2014.

After Tiffin was convicted and as his clients were being reassigned to other agents, the owner of Gold Standard encouraged Jain to get a licence and to work with Tiffin, FSRA alleged.

As a result, the regulator said, Jain took 41 of Tiffin’s former clients at Industrial Alliance (iA). FSRA alleged Jain began churning those clients by moving them into new funds from Canada Life Assurance Co.

The activity was spotted by Jain’s managing general agency, which noted that he generated more than $800,000 in commissions in 2019 and 2020 — a high amount for a new agent. The majority of this activity came from former Tiffin clients.

According to the regulator, Gold Standard allegedly split those commissions 50/50 with Tiffin and his company, Global Demographics, which had the same address as Gold Standard (an unnamed person owns 80% of the company; Jain had the other 20% and was its only officer).

FSRA also alleged that Tiffin continued providing clients with advice on seg funds.

“Clients generally reported that they saw Tiffin as their ‘insurance advisor’ and Jain as the licensed person who completed the transactions with the insurers,” FSRA alleged.

In early 2021, iA and Canada Life filed reports with FSRA alleging suspected misconduct by Jain and Gold Standard, including churning and suitability violations.

For example, between November 2019 and December 2020, Jain transferred 41 clients from iA to Canada Life, which triggered almost $200,000 in deferred sales charges for those clients, and generated more than $300,000 in commissions, FSRA reported.

“Jain could provide no satisfactory explanation for the mass transfer of clients from iA to Canada Life and incurring these substantial DSCs,” FSRA alleged in its notice.

Additionally, those clients were all put into the same three funds at Canada Life, FSRA noted.

“Canada Life determined that Jain investing his entire client base in just three funds indicated that he was not recommending funds that met clients’ individual needs. They determined that Jain appeared to be churning clients through funds with DSC schedules,” FSRA said.

FSRA added that “the director is satisfied that Jain and Gold Standard, acted, at minimum, recklessly in inducing clients to surrender their segregated funds at iA in order to enter into another contract at Canada Life.”

FSRA also found that Jain made “false or misleading statements or misrepresentations in the solicitation and registration of insurance” and that “he lied to FRSA both in writing and during his interview about his involvement with Tiffin.”