The Alberta Insurance Council (AIC) says Robert Vaughan, an agent formerly with RBC Insurance, acted in an untrustworthy and dishonest manner, contrary to sections of the Insurance Act, when he repeatedly induced business by providing false guarantees of performance and growth in two client accounts.
The AIC began investigating Vaughan after receiving an email from RBC Insurance, advising that the agent had been terminated with cause in March 2018. The insurer’s investigation found that Vaughan “significantly mislead these clients regarding their segregated fund policies,” they write. “First he had advised the clients that their initial funds and any growth of those funds he ‘crystallized/froze’ were completely guaranteed, which was inaccurate. Secondly, he advised them that given the investment activity he undertook on their behalf within their policies, the growth on their initial investment totaled $1,924,050.55 as of January 2018, when in fact it was approximately $581,000.”
Vaughan reportedly provided the clients with documents which purported to guarantee that their original investment and any returns on their original investment were secure. The documents were provided with an additional manager-stamped signature to incorrectly give the appearance that it had been endorsed by his superior.
Essentially acted as a day trader
Although Vaughan says he was being pressured by the client to execute the trades, the RBC Insurance investigation found he was “essentially acting as a day trader,” despite the fact that he acknowledged that this was not his role or his area of expertise. Vaughan told the two clients that he made no commissions and was strictly on salary, which was inaccurate. The clients also agreed to go into aggressive investments, without understanding the inherent risk to their principle investment, given Vaughan’s guarantee explanation.
“It is clear by the evidence presented in the report that the agent repeatedly induced business by providing false guarantees of performance and continued growth of the client’s segregated funds,” the AIC writes. “In addition, the agent, by his own admission was in no place to trade the segregated fund accounts as a day trader and had not received the adequate training to do so. “
More, they write that “the agent states he found himself in a situation of coercion presented by Client 1’s insistence, yet he continued his activity. The Council rejected the agent’s assertion of the extent of Client 1’s influence and control, especially considering the agent’s (28) years of involvement in the insurance industry. It is highly questionable that the agent would not be able to thwart attempts to direct unethical business practices by a client.”
In light of all the circumstances (this is Vaughan’s first disciplinary offence), the council ordered a civil penalty of $10,000 in total and ordered the agent’s certificates of authority be revoked for one year. To learn more, click here to consult the AIC’s decision.