MFDA fines, permanently bans 2 advisors for ‘wide range of misconduct’

Two former MFDA advisors have been fined and permanently banned, and their firm’s MFDA membership terminated, for business conduct breaches and failure to cooperate with MFDA investigations.

Former dealing representatives—and brothers—John Paul Sanchez and Javier Andreas Sanchez were fined $100,000 and $50,000, respectively, after admitting to seven allegations detailed in a June 29 settlement agreement. The brothers are the owners of International Capital Management (ICM), formerly registered as a mutual fund dealer in Ontario and Alberta, and an exempt market dealer in Ontario.

Between 2006 and 2016, the brothers admitted to engaging in securities-related business not carried out through ICM or recorded on its books, says an MFDA hearing panel’s reasons for decision, dated July 13. The activity included selling or facilitating the sale of at least $25.8 million of investments in a non-arm’s length company to at least 170 ICM clients, and another $1.64 million of investments to another 21 clients.

Soliciting the money from ICM clients for the non-arm’s length companies created a conflict of interest, the document says, and the brothers recommended the investments without conducting due diligence on the products or complying with KYC obligations.

They also repeatedly failed to cooperate with the MFDA’s investigation into their conduct, the release says.

The reasons for decision noted that the conduct in the case was “very serious.”

“The distribution in the present case involved a wide range of misconduct. A textbook could be written for the industry about what not to do based on the facts of this case,” the document says, also noting the case’s complexity.

“This was not a single slip-up by one person, but a decade and a half of deceit, deception, non-cooperation, selling potentially unsuitable products, conflicts of interests, breach of undertakings, failure to implement procedures to record trade supervision, failure to cooperate, attempts to destroy incriminating evidence, and more.”

Both former reps are permanently banned, and the hearing panel confirmed the following sanctions:

• for John Sanchez, a fine of $100,000, of which $30,00 has already been paid; and
• for Javier Sanchez, a fine of $50,000, of which $20,000 has already been paid.

They have also already paid costs of $25,000, and their firm’s MFDA membership was terminated.

Read the full reasons for decision and settlement agreement.

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.