A Winnipeg financial adviser who was previously reprimanded by the Manitoba Securities Commission (MSC) has been refused permission to sell mutual funds for the local branch of an Ontario-based company.
The decision by the MSC found Kenneth Wayne Muzik “not suitable for registration” in refusing to allow his application to become a representative with Sterling Mutuals Inc.
Muzik has not been registered under the Securities Act for the past year since his previous company, National Bank Financial Ltd., terminated his sponsorship.
In a written decision, MSC director Doug Brown said Muzik continued to advise people about investments even after his loss of registration a year ago.
“This continued conduct by Muzik following the loss of his registration calls into question his suitability for registration,” Brown wrote.
Reprimanded in 2011
In December 2011, the securities commission reprimanded Muzik for recommending investments that were outside the risk tolerance of clients.
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In a settlement, Muzik was ordered to pay $5,000 toward the costs of the investigation and to make a $15,000 payment to the minister of finance.
He acknowledged that he acted "contrary to the public interest" by recommending investments that were outside the risk tolerance of clients.
In this month’s ruling, the MSC said Muzik had a history of failing to comply with the terms and conditions of registrations, and called his decision to remain in contact with clients of his former firm “self-serving.”
Muzik said he would not comment because the decision is under appeal.
Conditions imposed on registration
The written decision said Muzik’s registration history with the securities commission began in 1990.
It said in 2004, the MSC imposed conditions on Muzik’s registration as a result of complaints by clients as well as concerns raised by a former sponsoring company, Assante Financial Management Ltd.
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Assante had terminated its sponsorship of Muzik in 2004 in part because he had clients sign blank forms, the MSC decision states.
After Assante, Muzik was registered as a representative with Wellington West Financial Services. The securities commission imposed conditions requiring Wellington to conduct increased supervision of his activities.
The decision document states most of the monthly supervision reports showed no concerns, but there were a few exceptions. In 2009, there were concerns that client files contained incomplete and undated documents.
After Wellington, Muzik was approved in 2012 as a representative with National Bank Financial, until National terminated its sponsorship of him related to an incomplete “Know Your Client” form.
“While not denying there was an incompleted form, Muzik took the position that a single piece of information on the form had been inadvertently missed and that the remainder of the form had been completed,” Brown wrote.
“In effect, Muzik took the position the missing piece of information on the form was not sufficient to justify his termination by National."
'More than a minor mistake'
Brown added, “What is clear is the omissions on this form represent more than a minor mistake or error. For a registrant with the experience and background of Muzik to allow a form to be signed which failed to disclose the most basic elements of investment objectives and risk tolerance is clearly unacceptable."
The MSC decision concluded, “When questioned of these repeated instances of what he acknowledged to be unacceptable conduct Muzik could provide no insight into his conduct except that it was a mistake and in some instances done for some perceived benefit to the client.”
The commission's decision also raised the issue of whether Sterling Mutuals conducted proper due diligence before sponsoring Muzik’s application.
Brown wrote, “Much of the information that had been provided in written materials assembled by staff, as well as during the review by the Director, was not known to Sterling.
"Whether this lack of knowledge was caused by a lack of due diligence on the part of Sterling, or by a failure of Muzik to fully disclose all of the information related to his registration does not need to be decided."
Nelson Cheng, chief executive officer of Sterling, told CBC News he was unaware of some of the issues raised during the hearing.
However, Cheng added that it is difficult to do thorough due diligence on a prospective employee because some information is not readily available from regulators.