MFDA fines, suspends reps for mishandling client transfers

The MFDA has fined and suspended two dealing representatives for breaking rules related to KYC forms and account transfers during the sale of one rep’s book.

Edward Clairmont, formerly a registered MFDA rep at Worldsource Financial Management in Tecumseh, Ont., was fined $50,000 and suspended for 18 months. Darragh Pender, a rep at Olympian Financial Inc. before he was terminated in September 2017, was fined $25,000 and suspended for three months.

Neither is currently registered in the securities industry, the settlement agreements say.

In early 2016, Clairmont entered into an arrangement to sell his book of business to Pender, who was working for Quadrus Investment Services and planned to register with Olympian Financial. The arrangement was for Clairmont to also register with Olympian and serve as Pender’s assistant to help with clients transferred following the sale, the agreement says.

However, Clairmont never became an approved person with Olympian. Pender gave Clairmont the password to Olympian’s back office system for transferring Clairmont’s clients to the firm, where Clairmont (and an unlicensed assistant for whom he was responsible) generated KYC forms, transfer authorizations and other documents, the agreement says.

Clairmont met with more than 300 clients in person or by phone and had them execute pre-populated new account and KYC forms and transfer authorizations to move their accounts to Pender at Olympian, the agreement says. The clients signed the forms undated.

Pender did not attend the meetings, but the forms “falsely indicated that he had,” the agreement says. The forms were later dated with his and the clients’ signatures, “creating the false appearance that the clients and [Pender] had met and signed the forms on the same date.” (The agreement regarding Clairmont makes the same statement about Clairmont.)

Pender didn’t “take any steps to learn the essential facts relative to each account he accepted or ensure the suitability of the investments within each of those client accounts,” the agreement says. He also didn’t verify the clients’ identities, as required by federal legislation.

Clairmont resigned from the industry in December 2016. In 2017, Pender started meeting with the clients who had been transferred, updating their KYC information or facilitating their transfer to another member. He met with roughly 164 of the 344 clients before he was terminated, the agreement says.

There’s no indication that any clients suffered losses as a result of the misconduct, and neither respondent had been previously disciplined, the agreements say. Both cooperated with the MFDA’s investigation, and both expressed remorse for their actions.

In addition to the fines and suspensions, Clairmont and Pender were also ordered to each pay costs of $5,000.

Read Clairmont’s settlement agreement here and Pender’s here.

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