The Investment Industry Regulatory Organization of Canada (IIROC) has banned and fined a former rep $200,000 for misrepresentations made to his firm’s compliance staff and for falsely endorsing client signatures.

The violations occurred from August 2011 to April 2013 while Julian Ricci was a registered representative with the Burlington branch of Macquarie Private Wealth Inc. (now Richardson GMP).

During this period, Ricci worked with a senior partner. They used a leveraged investment strategy with several of their clients whereby the clients were able to borrow up to three times the amount of their respective net worth to buy securities.

Macquarie required Ricci to complete a leveraged investment strategy spreadsheet for each client. The information in the spreadsheet included the client’s net worth, assets and liabilities. Because the strategy increased the risk to the client, the information was used by the firm to determine whether it considered the strategy suitable for the client.

If the client was approved internally by Macquarie, Ricci would then submit the necessary documentation for the client to obtain the loan from one or two institutional lenders.

During an IIROC penalty hearing held on May 27-28, the hearing panel found that Ricci inflated the net worth of about 30% of his clients by about 30% on the spreadsheets in order to avoid the firm’s suitability requirements.

In doing so, he reaped a direct economic benefit in additional trailer fees earned on the mutual funds purchased as part of the leveraged investment strategy.

The panel found Ricci concealed his conduct, and there was no evidence that Macquarie became aware of his conduct until April 2013, when he was terminated for cause.

At the hearing, Ricci admitted he made misrepresentations to his firm’s compliance staff by inflating certain clients’ net worth.

He also admitted that he falsely endorsed the signatures of several clients on certain client account documentation and other forms.

In its decision, the hearing panel noted “Mr. Ricci’s conduct was deplorable and he deserves to be severely punished.” It imposed the following penalties:

  • a prohibition from reapplying for registration with IIROC for two years starting from June 9;
  • upon registration, a period of strict supervision for one year; and
  • a fine of $200,000.

He is also required to pay costs in the amount of $15,000.

IIROC formally initiated the investigation into Ricci’s conduct in May 2013. He is no longer a registrant with an IIROC-regulated firm.