IIROC reaches settlement with three former All Group reps
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A former investment rep will face a penalty hearing next week after a regulatory hearing panel found that she carried out unauthorized transactions in the account of a recently deceased client. The advisor had a close personal relationship with client, who had left her nothing in his 40-year-old will.

An Investment Industry Regulatory Organization of Canada (IIROC) hearing panel has set June 29 for a hearing to consider a penalty against Denyse Giroux-Garneau, a former rep at Industrial Alliance Securities Inc. in Montreal.

The penalty hearing stems from a hearing panel decision handed down on May 12 that found Giroux-Garneau violated IIROC rules when she failed to tell her firm that one of her clients had died, and executed unauthorized trades in that client’s tax-free savings account (TFSA) four months after his death “for the purpose of appropriating the amount of $15,972.88.”

According to the panel decision, in February 2014, Giroux-Garneau carried out two unauthorized transactions in her deceased client’s account and misappropriated funds by using a blank cheque signed by the client before he died. It also ruled that she should have informed her employer of her client’s death by updating his new account application form and by changing the client account to an estate account.

According to the decision, Giroux-Garneau did not contest the basic facts of the case against her. Her defense was that she was effectively the client’s spouse, that she took care of him for a number of years, and that he wanted her to receive the funds after he died. However, the hearing panel found that the terms of his will, which was drawn up in 1974, did not name her as a beneficiary, and so she was not entitled to take the funds for herself.

“It is not surprising that she may have felt ‘burned’ when she learned from the notary who drew up the papers that the will left her nothing,” the decision says. Nevertheless, the panel found, Giroux-Garneau was not legally entitled to take the funds from the client’s TFSA, which should have gone to his estate.

“The fact that the client consented, even actively encouraged, the respondent to proceed in this manner when the time came, did not relieve her of her obligation to respect IIROC’s rules in her capacity as a registered securities representative and [a rep] acting on behalf of an IIROC-regulated firm,” the IIROC decision said.

The decision noted that the client had been a lawyer during his career and could have altered his will to make sure the assets went to the advisor, given her discretionary authority over the account or named her as the beneficiary on the account when it was opened. But he did none of those things.

“The fact that her conduct in respect of her client was to redress a situation which she made clear to us was unfair, or to seek justice for herself in the wake of a failure to respect the last wishes informally expressed by her spouse, in no way alters the fact that her actions after his death were inappropriate, since she did not have the authorizations required by the rules,” the panel said.

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