Desjardins Financial Security Services Inc. has been fined $200,000 and costs of $25,000 in a settlement agreement related to its failure to conduct a reasonable supervisory investigation into misconduct by former representative, Conrad Eagan.
Last year, the MFDA handed out its maximum penalty to Eagan who the MFDA found had misappropriated more than $3.7 million from a number of clients, including the elderly. In addition to Desjardins Financial Security Services Inc., Eagan had also worked with Worldsource Financial.
Unauthorized outside business activities
After discovering that Eagan “had engaged in unauthorized outside business activities preparing wills (including a will for client JK) and accepted an appointment as estate trustee for client JK,” Desjardins Financial Security Services Inc. failed to to investigate “the full nature and extent of Eagan's misconduct, or take other supervisory and disciplinary measures warranted by the results of its investigation…” said the MFDA in a statement issued June 21.
Failed to address conflict of interest
After becoming aware that an actual or potential conflict of interest had arisen as a result of Conrad Eagan's appointment as estate trustee, Desjardins Financial Security Services Inc. “failed to take steps to ensure that the resulting conflict was addressed by the exercise of responsible business judgment influenced only by the best interests of the client and failed to take steps to prevent Conrad Eagan from exercising discretionary authority over the account,” added the MFDA.
Between August 5, 2008 and April 2010, the company also failed to conduct adequate trade supervision or implement sufficient internal controls to detect or prevent the processing of potentially unauthorized and/or unsuitable trades in the accounts of some of Eagan’s clients, said the MFDA.
Did not respond fairly to a complaint
The regulator also found that Desjardins Financial Security Services Inc. did not respond fairly to a complaint from a beneficiary of the estate of a deceased client related to proceeds from investment accounts that Eagan had not distributed or accounted for.