“All 88 of the Transferred Accounts had, at [the advisor’s] advice, applied a leveraged funding technique whereby purchasers obtained funding loans and used among the proceeds of the funding loans to buy return of capital (“ROC”) mutual funds,” CIRO stated. “The ROC mutual funds have been topic to deferred gross sales prices.”
The advisor submitted new account paperwork to GP Wealth – together with signed KYC varieties, new account utility varieties, leverage approval varieties, and leverage disclosure varieties – between June and August 2013 to course of the switch of the accounts into the agency.
Inside that point, compliance personnel on the agency reviewed and subsequently permitted the account transfers. The varieties mirrored practically similar KYC info for the accounts on the time, together with however not restricted to:
- The identical funding time horizon (“10 to twenty years”);
- “75% to 85% medium-high” and “15% to twenty% excessive” threat tolerance; and
- Funding aims of “80%” or “85%” progress / “15%” or “20%” hypothesis” for 79 of the accounts.
Compliance workers at GP Wealth additionally decided that among the transferred accounts had a market worth beneath the excellent quantity of the funding loans purchasers obtained to buy the investments on the time their accounts have been transferred in.
From August 2013 to November 2016, the advisor opened and have become the servicing dealing consultant for 23 new leveraged accounts – which have been additionally invested in ROC funds, amongst different mutual funds – which GP Wealth permitted. Almost all the brand new leveraged accounts mirrored the identical KYC info as that used for the beforehand transferred-in accounts.