A former mutual fund salesperson with Worldsource Financial Management Inc. has been fined $50,000 by the Mutual Fund Dealers Association for engaging in inappropriate investment referral arrangements, among other regulatory violations.



At a settlement hearing in Toronto on Friday, an MFDA hearing panel imposed penalties against Michael Johns. The panel found that while Johns was registered with Worldsource Financial Management Inc. between 2003 and 2006, he engaged in “securities related business that was not carried on for the account of the member and through the facilities of the member.”

In particular, Johns admitted that he had entered oral referral arrangements with an entity called the Jaymor Group with respect to two limited partnerships: Lighthouse Pointe Limited Partnership units and Ashton Oaks Limited Partnership units. During this period, he made referrals in respect of the sale of nearly US$500,000 of the Lighthouse units to 11 clients, and approximately US$580,000 of the Ashton Oaks units to 14 clients.

The Lighthouse LPs and Ashton LPs were not investments that had been approved for sale by Worldsource, and Johns failed to disclose to Worldsource that he had made these referrals. He also failed to provide his clients with written disclosure of the referral arrangement.

He received nearly US$240,000 in compensation for these referrals.

The hearing panel found that Johns violated MFDA rules, and failed to comply with Worldsource’s policies and procedures.

Johns resigned from Worldsource in 2006. He is currently registered in Ontario with Becksley Capital Inc., a limited market dealer. His registration was granted approval by the Ontario Securities Commission in 2006 based on the condition that he was placed under close supervision for a period of one year, which Johns said was completed without incident.

The MFDA panel has prohibited Johns from conducting securities related business in association with any MFDA member for a period of six years, excluding business with Becksley Capital or any entity which is not an MFDA member.

He has been ordered to bay $1,000 in costs, as well as the $50,000 fine in four installments.

If he fails to pay the fine, Johns will be permanently prohibited from conducting securities related business with or through any MFDA Member.

IE