Respondent banned by MFDA and fined $25,000 after unauthorised loan of $40,000
A former advisor has been banned and fined $25,000 after borrowing money from a client to invest in marijuana stocks.
Rafal Mark Rosicki was registered in Ontario with TD Investment Services from August 12, 2015, to September 16, 2016, when he was sacked.
An MFDA hearing concluded that on August 15, 2016, Rosicki obtained a loan of $40,000 from a client for personal use, which he did not repay or account for, thereby giving rise to a conflict of interest. The association also found that the respondent made false or misleading statements about his conduct during the MFDA investigation.
The hearing found that Rosicki used the money to leverage trades using his TD Waterhouse Discount Brokerage account, apparently agreeing with the client that the $40,000 would be returned and he would keep the interest. The MFDA admitted to being mystified as to the true meaning of the interest agreement between the pair, with it being unclear whether it was limited to interest payable on the loan or who would receive the capital gains or dividends.
The client redeemed mutual funds from his account – 40% of its market value at the time – in order to fund the loan. Rosicki told the MFDA in an interview that the client had owed him a favour, adding: “The whole reason is because he’s Polish. Also, basically, I’m Polish, I’m young and he’s just like, he always wants to see another, like, Polish kid do well.”
Central to the case was whether the respondent’s branch manager had authorised the movement and investment of the money. Rosicki told investigators they had a “full-out conversation” about the details. However, when questioned, the branch manager stated that the first time she noticed the loan was in a third-party mortgage file, something Rosicki disputed.
The hearing stated that they found the branch manager’s evidence more credible. The respondent later said the reason for the conflicting evidence he gave was the time between the interviews, a lack of legal advice and because he was using drugs at the time.
The ruling stated: “The respondent benefitted in that he received an interest-free loan from [the client] and thereby saved the interest he would have had to pay to a financial institution or another lender if he had otherwise been able to qualify for loan. In addition, the evidence showed that the respondent made a return on the investment of the $40,000, which allowed him to withdraw at least $26,218.72 from the TFSA.”
It added: “The fact that the respondent appeared unwilling to provide additional information on his TFSA up to the date of the repayment suggested to us that the respondent likely received returns in excess of $26,218.72 from the investments.”
Rosicki repayed the $40,000 to the client the day before the hearing. He was also ordered to pay $7,000 in costs.
