A pair of South Surrey investment advisers have been fined nearly $100,000, after admitting to taking payments from clients for a security sale that was never approved for sale by, nor recorded in the books of, their firm.
According to a news release issued Thursday by the Investment Industry Regulatory Organization of Canada, the penalty was levied against Martin Wendall Matthews and Arnold Ward Francis as part of a settlement agreement reached May 1.
“Between March 2012 and July 2012, Matthews and Francis each accepted remuneration for securities related activities from someone other than their Dealer Member firm, contrary to Dealer Member Rules,” the release states.
Formal investigation into the advisers’ conduct was initiated in November 2014; the violation occurred while they were registered representatives with the office of Raymond James Ltd., and the pair are currently partners at IIROC-regulated Peak Securities Inc. in Surrey.
According to the settlement agreement, Matthews and Francis approached their head of business development at Raymond James in May 2009 regarding an offering memorandum from WIP Investment Properties Limited Partnership.
WIP was “in the business of acquiring and operating a portfolio of working class residential apartment buildings in the greater Vancouver area of British Columbia,” the agreement explains.
The memorandum stated that WIP would pay a nine per cent commission to any selling agents who introduced purchasers of “Class A Limited Partnership Units” to WIP.
The WIP units “were never approved for sale by Raymond James and were never approved to be held in Raymond James accounts,” the agreement states. “The Respondents knew this by at least, October 2009.
“Despite knowing that WIP Units were not approved for sale by Raymond James and could not be held in Raymond James accounts, the Respondents continued to introduce their Raymond James clients to WIP and the Units.”
A total of 22 Raymond James clients purchased a combined $940,000 worth of WIP units, from which the respondents received $84,600 in finder’s fees, the agreement states.
“None of the money received by the Respondents was ever reported to Raymond James.”
In responding to a July 30, 2012 request from the BC (Securities) Commission regarding the respondents’ securities-related activity, “Matthews replied in writing… and advised that they had not provided any services to WIP.”
Mitigating factors considered included that there were no client complaints and that the units produced a positive return.
Matthews and Francis were each ordered to pay a fine of $49,800 plus costs of $2,500.
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