Fund rep sanctioned over fake account scheme

A former mutual fund rep has been fined and banned after admitting to opening dozens of fake bank and mutual fund accounts in order to collect new account incentives being offered by his employer, TD Bank.

A Mutual Fund Dealers Association of Canada (MFDA) hearing panel ordered that the former rep with TD Investment Services Inc., Libin Shen, be fined $35,000 and permanently banned for opening fake accounts to dupe the bank out of incentives it was offering for new clients, and failing to cooperate with the MFDA’s investigation.

According to an agreed statement of facts, Shen, who conducted business in the area of Markham, Ont., admitted to opening accounts and processing trades for fictitious clients to collect promotional payouts from the bank, which was offering $300 to new clients who opened a chequing account and made an online transaction.

After opening the fake chequing accounts, Shen, who was also an employee of the bank, opened fake mutual fund accounts “and processed transactions in the fictitious bank and mutual fund accounts that were necessary to qualify for the ‘welcome offer,'” the statement said. The misconduct occurred between January 2017 and May 2018.

The bank’s investigation found that Shen opened approximately 46 fake chequing accounts and 40 fake mutual fund accounts, and collected $2,700 in promotional payments from the bank before the scheme was discovered.

In addition to duping the bank out of the promo payments, the MFDA noted that Shen accumulated credit toward his mutual fund sales targets with the transactions in the fake mutual fund accounts.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.