Pressure on a client to manage his portfolio: two advisers to blame

On August 23, the Disciplinary Committee of the Financial Security Chamber found the guilt of two financial security advisers in a joint decision combining the two cases and counting three counts. Sanctions will be determined after an upcoming hearing.

Christian Boucher (certificate no. 104 298, BDNI no. 1432831) was convicted on both counts, while his colleague Martin Lachance (certificate n° 118 002, BDNI n° 1662021) is guilty of a crime similar to that of the first count of the complaint against the other respondent.

Complaints were filed on June 23, 2020 and evidence was heard over three days in January 2021.

For the similar charge in both files, the alleged offense is prohibited by section 16 of the Code of Ethics of the Chamber in the case of the respondent Boucher and by section 16 of the Act of respect to the distribution of financial products and services in the complaint against respondent Lachance.

The respondents are accused of having provided their client (LB) with false, incomplete or inaccurate information regarding the management rights applicable to their investments held with CI Investments. These gestures are made between May 2015 and December 2016.

The respondents do not deny the facts, but they believe that they inadvertently made a simple error, which, according to them, does not constitute an ethical violation. If the committee finds it to be such an offense, they will raise a due diligence defense.

On the second count of the complaint against the respondent Boucher, the latter is guilty of acting with a lack of professionalism and restraint, of disparaging another representative with the same client and of exerting pressure on the ‘last to transfer to him the management of his client. investments in CI Placements. These gestures were made between May and December 2016.

The context

The other consumer representative named in the second count of the complaint against respondent Boucher is the one who filed the complaint with theFinancial Markets Authority. At the material time, the client and this representative (LH) had a close friendship for over 30 years. LH is also the godfather of one of the consumer’s daughters.

In 2008, the client moved to the company Invest Financial Servicesin care of LH, all goods held by MD Management. The client’s portfolio amounts, during the period concerned by the complaint, to almost 5 million dollars (M$).

Both respondents work for the same company as LH. Respondent Boucher holds a mutual fund representative certificate until 2014 and has worked in the industry since 1995 with several companies. He has a certificate in financial planning from 2004 to 2019.

For his part, respondent Lachance holds a certificate in life insurance and financial planning from another firm, as well as as a mutual fund broker representative with the same firm as his colleague.

In 2012, respondent Boucher’s firm purchased the personal insurance clientele of another broker (CF). The clientele includes many professionals, including the client named in both complaints. The latter was received by the respondent Boucher in the CF company in March 2015.

LH encourages his client to meet with Respondent Boucher to discuss financial planning. In May 2015, the two respondents presented their service offer to manage the investment portfolio of LB

Deductible expenses

Respondents determined that only brokerage fees are eligible for tax deduction. They then assume that the deductions entered in LB’s income tax return correspond to LH’s brokerage commissions, hence their interest in comparing the commissions paid by the client to those entered in his tax return.

They then use data provided by CI Investments to prepare their service offer and offer management fees of 0.79%, including broker fees for the entire portfolio. Informed by the client of the discrepancy, the LH representative indicates that the management fee is 1.31%, taxes included.

In May 2015, the client informed respondent Boucher that he had to answer the questions of theCanada Revenue Agency (CRA) regarding his company’s statements for the years 2012 to 2014, regarding premium deductions for a life insurance policy. He asked with the same respondent about the possibility of a capital gain in case of transfer of his investment funds.

During the following months, the respondents continued their discussions with LB on the issue of costs. In April 2016, LH repeated to the client that there were no hidden charges on their accounts, contrary to what the respondents claimed.

In November 2016, LB complained in writing to the company of representatives LH where he deplored the fees imposed on him, but using the data provided by the respondent Boucher. A month later, the latter confirms that the calculations submitted by LH and his signature are correct. LB withdraws his complaint.

At the same time, LB’s wife, who had entrusted the management of his assets to the respondents, asked them not to intervene in their investments. The relationship between the customer and LH is affected by the complaint, and even if the consumer insists, the representative refuses to take the accounts.

In November 2017, dissatisfied with the discussions undertaken with the respondents with a view to an agreement, LH filed a request for investigation with the Autorité des marchés financiers and also a civil suit.

Certain gravity

Jurisprudence defines ethical misconduct, which must deviate significantly from acceptable behavior on the part of the representative. If this difference is not unacceptable, there is no ethical fault, explains the committee.

The offense with which respondents are charged in count 1 of their respective complaints is one of strict liability. It is not necessary to prove mens rea.

According to the evidence presented, the respondents have indeed provided false, incomplete or inaccurate information to LB regarding the management costs applicable to their investments held in Placements CI, the committee indicates.

His original premise, based on LB’s tax return, was flawed. The respondents did not even check Schedule 4 which provides details of costs. His estimate of management and brokerage fees is also wrong. The first assessment made by the respondents “is therefore insufficient and misleading”.

Respondent Lachance also considered reading the investment firm’s simplified prospectus too dry, even though he had a master’s degree in finance, which surprised the committee. The prospectus is the basic tool that every representative should use to properly advise their client. If he had consulted, respondent Lachance would have noticed that there were no management fees for the “I” series of CI Investments.

Since May 2016, after reading the clarifications provided by LH to the client, the respondents “continue to reject the proof and persist in producing erroneous assessments” of the brokerage rights of LH The numerous correspondence with Placements CI to determine the nature of the costs shows the same relentlessness on the part of the respondents.

While the initial mistake may have been made in good faith, “what followed reveals not only careless behavior, but negligence on his part, even willful blindness,” the committee wrote at paragraph 100 of the decision of 29 pages.

His way of acting goes beyond undesirable behavior on the part of a professional placed in the same circumstances.

The Panel also rejects Respondents’ due diligence defense in citing judgments associated with disciplinary decisions.

head 2

With respect to Count 2 of the Complaint against Respondent Boucher, the Committee finds that the voluminous documentary and testimonial evidence overwhelmingly demonstrates that Respondent disparaged LH during the period referred to. The client also filed a complaint against his representative after accepting the respondent’s statements, still on the issue of costs.

Through these repeated statements, their false insinuations and his erroneous and exorbitant fee schedule, Respondent Boucher was in effect putting excessive pressure on LB to transfer the management of its investments to his company. He also participated in the drafting of the complaint of LB made to the cabinet of LH

“In addition, with his corrections, Mr. Boucher applies more to delete or modify the passages that would probably harm him,” we read in paragraph 129.

The committee orders the conditional suspension of the procedure with respect to the other allegations in support of the complaints.

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