The Investment Industry Regulatory Organization of Canada (IIROC) has fined a financial advisor with CIBC World Markets Inc. $25,000 for failing to properly know his client and executing trades without proper authorization.
According to IIROC documents, in 2003, David Hayes, who works at the Mississauga, Ont. branch of CIBC World Markets, became the primary advisor for two registered retirement savings plans (RRSP) held by a husband and wife. The clients had originally opened the account with CIBC Wood Gundy in 1995 with a different advisor.
Upon taking over the accounts, Hayes communicated solely with the husband regarding both RRSPs. From 2003 to 2010, Hayes updated the wife’s new account application form (NAAF) form, took trading instructions and made withdrawals from the RRSP based on instructions from the husband. Hayes never received any written trading authorization from the wife and did not meet with her to discuss her account until 2010.
Between 2008 and 2010, 39 withdrawals totaling roughly $342,000, were made from the wife’s RRSP without her knowledge, with the exception of one transaction. Letters of authorization (LOA) were sent to Hayes regarding the withdrawals, however, the wife told IIROC she did not sign the forms.
Statements detailing the withdrawals were sent to the wife’s home address, however, she told IIROC that her husband collected the mail and handled the investments, although he was supposed to discuss them with her.
IIROC’s investigation found that the couple’s automotive business was facing financial hardship prior to 2008. As such, the husband was using funds from both RRSPs to help the company.
Mitigating factors regarding the settlement include a fine of $10,000 levied against Hayes by his dealer firm, as well, the financial advisor has no previous disciplinary history with the regulator and he cooperated fully with IIROC’s investigation.
In addition to the fine, Hayes must complete the Conduct and Practices Handbook exam within 12 months and pay $3,000 in costs.