Lucillia Sok Cheng Tan solicited her mutual fund clients and didn’t cooperate with investigators, according to Mutual Fund Dealers Association panel
A former Vancouver mutual funds dealer at WFG Securities has been permanently banned from the industry and fined a whopping $125,000 for conducting unauthorized real estate business involving a tax avoidance scheme.
Lucillia Sok Cheng Tan had worked for WFG from 2005 to 201,9 but from 2012 to 2019, she conducted “outside business activities” with her family company A.T. Property Investors Hub Inc. by selling investment properties in the United States to her securities clients.
As a licensed dealer, she was required to disclose such activity; however, she failed to do so and then was found to have been uncooperative with the Mutual Fund Dealers Association investigators.
The association issued the significant fine on October 5 following a hearing. Tan was also assessed costs of $10,000 with her permanent ban from all MFDA members.
In response to initial inquiries from WFG, Tan advised that her husband’s company was set up “so that he can invest in USA real estate himself without triggering estate taxes in the USA in the event he passed on. My role is to act as one of the authorized signatory in the bank. I can transfer funds from Canada to the USA for him if he is not in Canada physically.”
There is no suggestion the company committed wrongdoing.
Tan also did similar work for another U.S. real estate firm called Fairlock Partners when she engaged in capital raising. The association also named two other such firms she was named in corporate filings for.
At least four clients of WFG invested in real estate investments through or along with Fairflock Partners, which was a conflict of interest, or potential conflict of interest, stated the ruling from the association’s independent panel.
Tan was subsequently uncooperative with the association, the ruling concluded.
The association is the self-regulatory organization for Canadian mutual fund dealers, regulating the operations, standards of practice and business conduct of its member companies, such as WFG, and their approximately 80,000 dealers, such as Tan.
Tan joins 12 other WFG dealers who were banned in November 2018 for falsifying records to secure investments. They were fined, on average, $72,000.
Whether Tan, who left WFG in 2019, pays the fine is another matter.
New legislated collection powers were bestowed upon the association in June 2018.
Before 2018, the association had only collected 14% of issued fines across Canada. In 2018 collection rates rose to 48% then 17% in 2019 and 25% in 2020.
Last year, during the height of the coronavirus pandemic, there was a sharp drop in hearings — just 77 compared with 120 and 132 in each of the prior two years, respectively. Those 77 hearings resulted in an average fine of $43,514.
Association vice-president, Pacific region Jeff Mount said dealers who do not pay their fines cannot return to the industry. In Tan’s case, she is not allowed back whether she pays the fine or not.
Since the commencement of MFDA disciplinary activity in 2004, MFDA hearing panels have imposed total fines of just over $100 million.
Over the past five years, the association has levied $48.3 million in fines. The majority of those fines are assessed against individuals, not the firms they work for, which only received $3.9 million in fines since 2016 (all of which have been paid).