The Mutual Fund Dealers Association (MFDA) claims that an advisor who recommended illiquid investments failed to conduct due diligence and learn the essential facts of a client's situation and risk tolerance.
Last week, the MFDA announced that it had begun a disciplinary proceeding in respect of Christopher J. Singer. While working as an advisor with FundEX Investments in White Rock, British Columbia, the regulator alleges that Singer recommended that a 62-year-old client who had sold her home take the proceeds and put more than $1 million into two of ROI Capital's private placement funds.
Unable to withdraw funds
The MFDA says that while the ROI funds were meant for sophisticated, long-term investors, the client was a novice who planned to use the funds buy real estate in the near future.
Less than a year after the client had purchased the funds, ROI halted redemptions and the client was unable withdraw the money she needed to purchase a property. When the client was eventually able to redeem her investments several months later, the regulator says she suffered a loss of approximately $92,657.
Investment time horizon
Although the client stated her investment time horizon was 3 to 5 years, the MFDA says Singer ought to have known that this was incompatible with her plans to buy a new home.
"If the Respondent had exercised due diligence to ensure that he learned and accurately recorded KYC information for the open account of client AO, he would have known or ought to have known that the KYC information that he recorded for the open account of client AO in July 2011 was false," reads the MFDA's notice of hearing.
None of the MFDA's allegations against Singer have been proven, and the first appearance in this proceeding is scheduled to take place on August 17, 2016.