The MFDA has permanently banned and fined a former mutual fund salesperson $75,000 for an unapproved referral arrangement involving the purchase of syndicated mortgages, the MFDA said Wednesday in a release.
Between October 2006 and April 2017, Yuk Hang Sam Cheung was registered as a mutual fund salesperson with Investia Financial Services Inc. in Richmond Hill, Ont., says the decision document, dated Jan. 28. From May 2011 to August 2016, Cheung was an alternate branch manager.
The decision says that, between 2012 and 2015, Cheung sold, facilitated the sale of, and/or made referrals in respect of the sale of syndicated mortgages to at least five clients, who invested a total of $244,300. These investments were offered by Titan Equity Group Ltd., a real estate investment company with which the branch manager, who has also been disciplined, had a referral arrangement.
For the referrals, Cheung received at least $12,305 in fees, the decision says.
Cheung also personally invested $49,910 in the syndicated mortgages plus an additional $50,000 in the name of a company through which he and the branch manager conducted their insurance business.
These transactions weren’t disclosed to the firm.
When the firm discovered the misconduct (in the course of a related investigation) and questioned Cheung, his written responses were “false and misleading,” the decision says. He also failed to cooperate with the MFDA in later hearings.
At all times, Investia’s policies and procedures required advisors to offer only products approved by and sold through the firm, the decision says. It also required that referral arrangements be approved and that all fees or commissions flow through the firm’s books and records.
Cheung admitted his involvement in the misconduct, which the decision describes as “egregious,” especially considering Cheung’s supervisory position as an alternate branch manager.
Several factors were considered to determine the fine, including a client bankruptcy that resulted from the syndicated mortgages, the decision says. Cheung and his family also appeared to have suffered financially from the investments, and Cheung’s misconduct wasn’t as serious as the branch manager’s, who was the “ringleader,” the decision says.
The case is the last of four involving the sale of syndicated mortgages at the firm’s Richmond Hill branch. In November, the branch manager was banned and fined $250,000.
In addition to the fine, Cheung must pay costs of $6,000. He is no longer securities-registered.
For full details, see the decision and reasons.