A veteran mutual fund rep has been fined $100,000 and permanently banned after a disciplinary panel found that he borrowed money from several senior clients and was working a second job as a telemarketer without his firm’s approval.
A Mutual Fund Dealers Association of Canada (MFDA) hearing panel has fined and banned Stuart Michael Gibson, who worked as a rep with Investors Group Financial Services, Inc., in Toronto from 1982 to 2016. Gibson was terminated by the firm after it uncovered his misconduct.
After a hearing in August, the panel found that Gibson violated MFDA rules by borrowing over $100,000 from four senior clients, and engaging in a dual occupation — as a telemarketer in a call centre — without dealer approval.
According to the panel’s decision, Gibson didn’t dispute the allegations, but claimed that there were mitigating factors.
“The respondent had been in the securities industry since 1982 and this is the first time he has been disciplined. The conduct, however, is very serious. It took place over an eight year period, involving multiple clients,” the hearing panel stated. “The conduct is particularly serious because the loans involved vulnerable clients.”
The panel noted that there was no evidence that Gibson sought to defraud his clients. He aimed to repay them, and did payback about $10,000. The firm repaid the other $90,000 to the clients.
The main issue for the panel was determining the size of the fine.
MFDA staff sought a penalty of $175,000, but the panel ruled that was too severe, noting that Gibson cooperated with the regulator and expressed remorse for his conduct.
“Should we take into account the fact, as argued by the respondent, that the member reimbursed the clients for the unpaid sums? This is not an easy question to answer. There was still a loss of about $90,000, but it was borne by the member, not the vulnerable clients,” the panel said in its decision. It added, “The important point is that the respondent profited by about $90,000.”
The panel also noted that any fine is unlikely to be collected, given Gibson’s financial circumstances.
As a result, it set the fine at $100,000. The panel also ordered $7,500 in costs, along with the permanent prohibition.