Respondent agrees to $30,000 fine plus costs after admitting "know the product" failures
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An Ontario advisor has admitted facilitating and failing to properly record more than $2.2 million of investments in IPS Notes by about 28 clients, according to an MFDA hearing.
Jeffrey Beck, a registered mutual fund dealer with International Capital Management (ICM) between November 14, 1997 and May 29, 2018, also admitted to not doing due diligence when it comes to “know the product” and properly identifying, disclosing and explaining the risks of them to the client. He also admitted failing to ensure that the orders he received and recommendations he gave were suitable.
IPS (Invoice Payment Systems) is a factoring company that purchases the accounts receivable of other businesses at a discount with the intention of collecting the full value of the accounts receivable when the accounts come due, thereby earning a profit.
A total of 75% of the shares of IPS are owned by holding companies controlled by ICM owners John and Javier Sanchez. After the incorporation of IPS in 2003, IPS required capital in order to begin purchasing accounts receivable and John and Javier began soliciting money for investment in IPS Notes that typically offered investors a rate of return of about 7% per year.
In 2003, John and Javier relied on the accredited investor exemption to offer the promissory notes to investors and provided purchasers of the promissory notes with an offering memorandum.
Beck admitted that between January 2011 and December 2015, he knew or ought to have known that the solicitation of investments by clients of ICM in the IPS Notes gave rise to a conflict of interest that he failed to disclose to clients.
He also admitted that in December 2016, after the MFDA commenced disciplinary proceedings against ICM, John Sanchez and Javier Sanchez addressing investments in IPS Notes, he mislead clients over the gravity of the allegations.
Beck has agreed to a fine of $30,000 and costs of $5,000 ahead of the settlement hearing.
Meanwhile, two Vancouver advisors face a number of allegations, including falsifying signatures on 10 account forms, carrying out 197 unauthorized discretionary trades and failing to declare conflicts of interest.
Mohammad Movassaghi was registered with Investors Group Financial Services from May 22, 2014 to July 8, 2016 and Harbourfront Wealth Management from July 25, 2016 to September 2, 2016, while Kindle Briten Megan Blythe was registered with IG from October 6, 2014 to July 8, 2016 and has been with Harbourfront since July 22, 2016.
The first appearance in this matter will take place before a hearing panel of the MFDA's Pacific Regional Council on May 28.
