The Mutual Fund Dealers Association (MFDA) alleges that an advisor who implemented a dollar-cost averaging strategy for clients actually engaged in prohibited discretionary trading.
On August 8, the MFDA announced that it had commenced disciplinary proceedings against James Gerard Carney, an advisor and branch manager with Investors Group in Brampton, Ontario. The regulator claims he processed approximately 188 transactions for ten clients in which he determined both the amount and the timing of the trades. Carney says that he processed the trades as part of a dollar-cost averaging strategy, periodically moving funds out of a money market fund and into a previously-agreed-upon target portfolio.
he MFDA argues that it was Carney who decided the particulars of each transfer, including the date and the number of mutual fund units to be purchased. The MFDA says he did not obtain authorization from clients prior to conducting each transfer and as a result alleges that Carney engaged in discretionary trading, which is contrary to MFDA Rules 2.3.1 and 2.1.1.
The regulator also claims there were other instances in which Carney processed trades when asked to do so by clients’ spouses, and not by the clients themselves. The MFDA says Carney should not have redeemed investments when there was no power of attorney or similar authorization on file which would have authorised the spouse to act on the client's behalf.
None of these allegations have been proven. The first appearance in this proceeding is scheduled to take place on on September 13.