A former Haywood Securities registered representative has been fined $40,000 by the Investment Industry Regulatory Organization of Canada for failing to use due diligence and effecting trades in client accounts without written authorization.

On February 9, an IIROC hearing panel accepted a settlement agreement with Darcy Alan Higgs, who was a registered rep at Haywood Securities Inc. in Vancouver from 1996 to May 2009.

IIROC found that Higgs failed to properly perform his role as gatekeeper to the capital markets by failing to use due diligence to learn and remain informed of the essential facts relative to the transactions of a particular issuer in a group of client accounts. As a breach of the “know your client” rule, the settlement agreement identifies this as the most serious contravention by Higgs.

In addition, between 2003 and 2005, IIROC found that Higgs effected trades in the accounts of clients based on the instructions of a third party without the existence of a duly executed trading authorization.

Specifically, IIROC found that an individual who did not have any accounts at Haywood, nor any trading authorization over any account at Haywood, placed trading orders for the accounts of Higgs’ clients. Higgs had received oral authorization from the account holders to accept trade instructions from the outside individual, but Higgs failed to advise supervisory or managerial personnel at Haywood about the individual’s involvement with the accounts.

“The problem was that he did not have the written authorization from the holders of the accounts,” the settlement agreement says. “This was not a case of unauthorized trading.”

IIROC noted that there was no indication that any of the account holders suffered any loss or harm as a result of the trades. The regulator said nothing was concealed from the clients, as they received monthly statements and confirmation slips with respect to the transactions in their accounts.

Higgs has been fined $40,000, which comprises both a fine and a proceeding costs. He also faces a suspension of registration for a period of 15 months. The suspension will commence on May 1, 2009 — the date Higgs resigned from his position in the industry — and will end on July 31, 2010.

IE