The Mutual Fund Dealers Association (MFDA) has suspended Francis Dwight Zachary Dorrington, a former Sun Life advisor, for two years and imposed a fine of $20,000 and costs of $10,000. He failed to place clients in a suitable investment, he made a prohibited personal undertaking, and he engaged in impermissible discretionary trading.
In October 2010 Dorrington placed $400,000 into a bond fund for two clients and personally guaranteed that they would not lose money on the investment. About a year later, the clients wanted their money back in order to complete a real estate transaction.
The balance of bond fund account had declined, however, and was now $366,664.60. Dorrington used correction fluid to fiddle the paperwork and processed an unauthorized redemption of $33,335.40 from one of the clients' other accounts at Sun Life to make up the shortfall. The clients eventually became aware of this unauthorised trading and complained to Sun Life, and the company terminated Dorrington’s contract as a result.
In Reasons for Decision published on July 13, the MFDA ruled that Dorrington's conduct was a violation of MFDA Rule 2.1.1.
"The dangers associated with such a personal undertaking [to guarantee an investment] are obvious. It places the Approved Person in a blatant and irreconcilable conflict of interest both in giving advice as to the suitability of an investment, and in giving ongoing advice as to what should be done with an existing investment. Such an undertaking might well give the investor client a false sense of security." reads the MFDA document. "Its enforceability would be problematic at best. For example, the Approved Person may be in no position to reimburse his clients for significant losses. The clients may realistically be unable or unwilling to enforce it – especially where, as was the case here, it was undocumented and unapproved by Sun Life. Moreover, the personal exposure of the person providing the undertaking invites the very kind of misconduct (falsification of documents and discretionary trading) that occurred here."