In a scathing decision released last week, the Mutual Fund Dealers Association (MFDA) has ruled that Gabriel Richard Frank should be permanently banned from the industry and pay a fine of $400,000 as well as costs of $10,000.
In reasons published on Aug. 28, the MFDA describes the former Investors Group advisor from Guelph, Ontario as "ungovernable" and "untrustworthy", finding that Frank lied to his employer and showed a "callous disregard for the public" when he borrowed funds from a client to use for his own personal business and benefit.
Between 2006 and 2011, Frank recommended and implemented leveraged investments for ten clients without obtaining approval. In the course of its internal investigation into the matter, Investors Group came across information which led it to believe that Frank had also been borrowing money from clients. When questioned, Frank denied that he had taken loans from clients, but he was unwilling to respond to the company's requests for more detailed information. As a result, Investors Group terminated his contract in February 2012.
Later in 2012, after Frank had been let go, Investors Group discovered that he had indeed borrowed money from clients, including about $245,000 from one client, but that he had only repaid $73,100; Investors Group compensated the client for the remaining amount owing.
When the regulator was conducting its own investigation in early 2013, Frank failed to answer numerous voicemail messages and emails from the MFDA. For months, Frank repeatedly promised and then failed to deliver the documents that investigators required. When he did appear in front of the MFDA hearing panel in February 2015, Frank did not call any witnesses and did not submit any evidence of his own. The regulator described his comments as "rambling and difficult to follow" and "unhelpful", and refused to grant his request for adjournment.
MFDA panel chair Paul Moore said that while it was difficult to put a monetary value on the damage caused by Frank's activities, he indicated that the $400,000 fine was appropriate since it needed to be large enough to have a deterrent effect and reflect the seriousness of his misconduct.
"The conduct in the case before us is one of the most egregious that we have dealt with," reads the decision. "The word ‘egregious’ has sometimes been used in overkill in other MFDA cases to refer to less seriously abusive and unacceptable conduct than that of the Respondent’s in our case. In this case, we are not using the word in overkill."