Adviser fined $1 million for unfair practices

The Nova Scotia Securities Commission approved a settlement today with John Alexander Allen. Allen admitted to violating the Securities Act and engaging in unfair practices. Mr. Allen was a mutual fund salesperson. While employed with Keybase Financial Group Inc., Allen advised his clients to take out significant loans to fund their investment strategies, in a process known as leveraging. He forged client loan applications by inflating clients’ net worth and fabricated information about clients’ employment. Mr. Allen also forged clients’ new account opening forms, exaggerating the extent of their investment knowledge. His clients were not provided copies of any of this documentation. Under today’s order and settlement agreement, Allen will pay an administrative penalty of $1.05 million to the commission, as well as $7,000 in investigation and proceedings costs. Allen will also be reprimanded and permanently prohibited from becoming a registrant, investment fund manager or promoter, or from acting as a director or officer of any public company. He will be ineligible for any exemptions under Nova Scotia securities laws. Leveraging itself is not an inappropriate investment strategy, but borrowing money to invest does increase the risk you take. If you invest $10,000 in Company A, and the value of your investment later drops to $7500, you have lost $2500. If you borrowed the $10,000, you are also out the cost of the loan: interest and other fees you may have been charged. Allen’s clients did not receive copies of their account documentation, or prospectuses for the mutual funds they invested in. Remember, as an investor, you have the right to: • Receive complete information about the risks, obligations, and costs of any investment before investing. • Receive recommendations consistent with your financial needs and investment objectives. • Receive a copy of all completed account forms and agreements. • Receive account statements that are accurate and understandable. • Understand the terms and conditions of transactions you undertake. To read more about your rights, see the Investor Bill of Rights [link]. Help protect yourself by becoming familiar with the Red Flags of Investment Fraud. [link] The Nova Scotia Securities Commission approved a settlement today with John Alexander Allen. Allen admitted to violating the Securities Act and engaging in unfair practices. Mr. Allen was a mutual fund salesperson. While employed with Keybase Financial Group Inc., Allen advised his clients to take out significant loans to fund their investment strategies, in a process known as leveraging. He forged client loan applications by inflating clients’ net worth and fabricated information about clients’ employment. Mr. Allen also forged clients’ new account opening forms, exaggerating the extent of their investment knowledge. His clients were not provided copies of any of this documentation. Under today’s order and settlement agreement, Allen will pay an administrative penalty of $1.05 million to the commission, as well as $7,000 in investigation and proceedings costs. Allen will also be reprimanded and permanently prohibited from becoming a registrant, investment fund manager or promoter, or from acting as a director or officer of any public company. He will be ineligible for any exemptions under Nova Scotia securities laws. Leveraging itself is not an inappropriate investment strategy, but borrowing money to invest does increase the risk you take. If you invest $10,000 in Company A, and the value of your investment later drops to $7500, you have lost $2500. If you borrowed the $10,000, you are also out the cost of the loan: interest and other fees you may have been charged. Allen’s clients did not receive copies of their account documentation, or prospectuses for the mutual funds they invested in. Remember, as an investor, you have the right to: Receive complete information about the risks, obligations, and costs of any investment before investing. Receive recommendations consistent with your financial needs and investment objectives. Receive a copy of all completed account forms and agreements. Receive account statements that are accurate and understandable. Understand the terms and conditions of transactions you undertake. To read more about your rights, see the Investor Bill of Rights. Help protect yourself by becoming familiar with the Red Flags of Investment Fraud. 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