A former CIBC Securities Inc. mutual fund seller in Vancouver has been fined $100,000 and banned from further work in the industry after being found to have broken a number of trading rules.
But whether Meng Xi Li – who is no longer registered in the securities industry in any capacity – actually pays the fine will be a significant test of new, legislated collection powers bestowed upon the Mutual Fund Dealers Association (MFDA) in June 2018.
“Given that this is a recent development it is too early to tell what effect the new collection power is having on collection rates,” MFDA Pacific Region vice-president Jeff Mount told Glacier Media.
MFDA’s latest annual enforcement report is for 2018. It states how under provincial statutes in Alberta, Ontario and Prince Edward Island, the association has the power to collect fines from former dealers who have left the industry. But in 2018, the association was also given such collection powers in Manitoba, British Columbia and Nova Scotia.
“Successful collection of outstanding fines using these powers depends on several factors including but not limited to the availability of assets to collect against and the Respondent’s status with respect to any bankruptcy or similar proceedings,” said Mount.
2018 collection statistics indicate the powers may be working, however it is a small sample size.
The annual report claims in 2018, “the Enforcement Department concluded 132 hearings. In those 132 hearings, MFDA Hearing Panels imposed fines of $6,080,031 of which $2,942,096 has been collected.”
Yet, “since the commencement of MFDA disciplinary activity in 2004, MFDA Hearing Panels have imposed total fines of $88,147,242 of which $12,186,233 (approximately 14%) has been collected.”
Li’s actions and subsequent punishment is significant relative to recent MFDA hearings. Typical fines for infractions range from about $2,500 to $10,000 and, in rare instances, up to $30,000. In 2019 the largest MFDA Pacific Region fine issued was $25,000. Earlier this month mutual fund dealer Kindle Blythe was fined $30,000.
According to MFDA hearing panel findings, Li, who was fired by CIBC, did the following in 2016:
• She allowed a client to open and trade in an investment account at CIBC using the identity and contact information of a different individual, thereby concealing the identity of the true account holder
•She recorded notes in CIBC’s client management system which falsely described trade instructions for trades submitted in a client account, thereby misleading the bank and circumventing the its account and trade supervision processes.
•She transferred $100,000 from a client investment account to her personal bank account, thereby engaging in personal financial dealings with the client, which gave rise to a conflict or potential conflict of interest that Li failed to disclose to the bank.
•She made false or misleading statements to the bank and/or staff of the MFDA during the course of investigations.
•She falsified a client’s signature on an account form and submitted it to the bank for processing.