Desjardins Financial Security Services faces a fine of $200,000 and costs of $25,000 after the MFDA found it failed to investigate and prevent the dealings of a former advisor.
Starting in December 2008, the MFDA settlement says, mutual fund rep Conrad Eagan engaged in unauthorized outside business activities such as preparing wills and accepting an appointment as estate trustee.
Between February 2007 and December 2015, while registered as a mutual fund dealer at Desjardins and Worldsource, Eagan misappropriated millions of dollars from a number of clients. For instance, he engaged in personal financial dealings with a client by borrowing more than $173,000 without repaying it, among other breaches of the rules, MFDA says.
Desjardins says in the settlement document that Eagan did not reveal certain details to the financial institution. For instance, he did not report that he was appointed estate trustee for a client, and then proceeded to prepare the client’s will, designate himself as executor, and have the proceeds from insurance policies released to him in his capacity as trustee to the estate.
Desjardins “failed to conduct a reasonable supervisory investigation 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,” the MFDA says. It says the firm failed to take steps to address a resulting conflict of interest and to prevent Eagan from exercising discretionary authority over the account.
MFDA says Desjardins failed to conduct adequate trade supervision or implement sufficient internal controls that may have detected unsuitable and off-book trades. It adds that a complaint from an estate beneficiary for the account was not handled fairly.