MFDA details how former Ontario fund representative enabled banned person to continue servicing clients
The Mutual Fund Dealers Association of Canada (MFDA) is holding a disciplinary hearing against a former dealing representative for his role in helping a banned advisor who provided stealth advice to his ex-clients.
According to the MFDA, James Michael Lewis entered into an agreement with Trevor Rosborough, who was registered as a dealing representative with Quadrus Investment Services in Ontario until he was fired on October 31, 2017.
The following day, Lewis agreed to buy Rosborough’s book of business. A few weeks later, on or about November 20, 2017, Quadrus assigned responsibility for Rosborough’s clients to Lewis, who did not schedule meetings with or otherwise notify the clients about the change.
“Rosborough continued to have contact with Transferred Clients following the termination of his registration,” the MFDA said. “Rosborough’s communications … minimized the significance of the fact that the Respondent was now the Approved Person of the Member responsible for servicing their accounts and informed [clients] that he would continue to provide investment advice to them and accept trading instructions from them as he had prior to his termination.”
Following their agreement, Lewis would regularly conduct business from Rosborough’s office, according to the MFDA. To help service the transferred clients, Lewis also took on one of Rosborough’s long-standing unlicensed assistants; he obtained approval from Quadrus to let the assistant its back-office system and account forms.
The MFDA went on to say that Rosborough continued to pay the assistant’s salary, provide advice to his former clients, and accept instructions from them about specific mutual fund transactions. He also collected KYC information from them to update records concerning their investment accounts at Quadrus. All resulting transactions and KYC updates were attributed to Lewis’s representative code.
“[Lewis] did not meet with or communicate with Transferred Clients about the content or purpose of the account forms before signing or submitting the account forms to facilitate the processing of transactions and KYC updates in their accounts,” the MFDA said.
The scheme was ultimately revealed on April 29, 2020, when Rosborough entered into a settlement agreement with the Ontario Securities Commission (OSC). Pursuant to that agreement, he admitted that between October 31, 2017 and July 29, 2018, during which time he was unregistered, he colluded with Lewis to provide advice to his former clients on the sly.
“[Quadrus] was not aware that the Respondent was facilitating the processing of transactions and KYC information updates on behalf of clients on the basis of instructions and information obtained from the clients by an unregistered individual,” the MFDA said. Just recently, Quadrus settled with the MFDA over failures to ensure its compensation and sales incentive practices complied with securities legislation.
The MFDA is charging Lewis with failure to exercise due diligence relative to the clients, and facilitated securities-related business by an unregistered individual.
