A former investment firm branch manager was fined $17,500 by IIROC for inadequately supervising an employee’s frequent trading of mutual funds with deferred sales charges.
Alexander George Mitchell was a branch manager at BMO Nesbitt Burns where he supervised Nadir Janmohamed.
From 2009 to 2012, Janmohamed often sold mutual funds with deferred sales charges (DSC) and then repurchased similar funds, the settlement agreement says. This required clients to pay redemption fees and it reset the redemption period on the newly purchased funds. He triggered $125,402 in redemption fees, the agreement says.
Janmohamed also unnecessarily charged switch fees for the trades, which some clients said they weren’t told about. Clients were charged $367,459 in switch fees, the agreement says.
From a supervisory perspective, the trading activity should have raised red flags due to the amount and frequency of switch fees and redemption fees, the settlement agreement says. The switch and redemption fees were reported daily and amounted to several thousands of dollars on some days.
Mitchell didn’t “adequately review or query” the amount and frequency of the fees, the settlement agreement says, and “accepted Janmohamed’s response” that the clients were aware of the fees.
The settlement agreement says Mitchell supervised reps (including Janmohamed) through in-person queries and that he took handwritten notes of those queries. Mitchell, who retired as a branch manager in 2017 and is no longer registered with IIROC, said his former employer couldn’t find those notes.
Mitchell has no previous disciplinary history. In addition to the fine, he was ordered to pay $2,000 in costs.
Nadir Janmohamed was fined $25,000 and ordered to pay $22,000 in disgorgement by IIROC in 2016.
The Canadian Securities Administrators issued a proposal to ban DSCs, which is out for comment until Dec. 13. The Ontario government has said it doesn’t support the proposal.
Read the settlement agreement here.