The Securities and Futures Commission (SEC) has revoked the licence of John David Lawrence, a representative of PFC International Company (PFC), and fined him $900,000 for failings relating to his sale of the EEA Life Settlements Fund to clients.
An SFC investigation revealed that from March 2009 to October 2011, Lawrence, who was the chairman and a responsible officer of PFC at the material time, sold the Fund to 31 client accounts involving transaction amount of approximately $28 million, although PFC had classified the Fund as "execution only" and should not be promoted to clients (Note 4).
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A significant number of clients who bought the Fund through Lawrence were elderly clients despite the liquidity risk of the Fund and the risk of deferral of redemption requests associated with the Fund (Note 5).
The SFC found that Lawrence had failed:
- to ensure the suitability of the Fund to his clients;
- to ensure that the risks associated with the Fund were fully disclosed to his clients;
- to document the investment advice given to his clients in respect of the Fund, and the rationale underlying the advice and to provide clients with a copy of the written advice; and
- as a member of PFC’s senior management, to set appropriate standards for his staff to follow to ensure the suitability of products recommended to clients.
Lawrence’s misconduct calls into question his fitness and properness to remain a licensed person. He blatantly disregarded the firm’s due diligence result and ignored his fundamental duty to ensure suitability of his investment recommendation and to present balanced views regarding the Fund.
Moreover, as the then Chairman of PFC and a member of senior management, Lawrence failed to set appropriate standards for his staff to follow and failed to ensure that PFC’s investment advisory functions were properly directed and managed to serve the best interests of his clients.
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By GlobalDataIn deciding on the penalty, the SFC took into account his financial position, his cooperation and his otherwise clean disciplinary record.
