The Investment Industry Regulatory Organization of Canada (IIROC) has fined an advisor $90,000 after he failed to address a potential conflict of interest between himself and his clients, and failed to escalate a client’s written complaint to his employer.
An IIROC hearing panel on Jan. 4 accepted a settlement between IIROC staff and advisor Graeme Robert Kirkland, who admitted to recommending new issues to clients, partly to boost his own earnings while working at BMO Nesbitt Burns Inc. in 2014.
Kirkland earned approximately $477,000 in net commissions in 2013 and 2014 solely due to his trading in new issues, according to the settlement agreement, and Nesbitt Burns earned more than $1.9 million in commissions on his trading activity.
The trading in new issues, “roughly doubled his earnings,” the IIROC panel says in the settlement, but a number of these trades didn’t perform that well for clients. “In 2014 new issues accounted for approximately half of the purchases across his book of business. In some cases, there was ultimately a limited or no gain for his clients from this trading,” the panel adds.
In the settlement, Kirkland “admits he placed himself in a potential material conflict of interest when he engaged in numerous purchases of new issues influenced, at least in part, by the fact that he received a percentage of the commissions paid to BMO by the issuer on such purchases.”
In addition, both Kirkland and Nesbitt Burns failed to identify or address the conflict, the panel says.
Monetary sanctions would have been higher in the case, the panel adds, but Kirkland had already paid approximately $26,400 to help compensate a pair of clients who complained to Ombudsman for Banking Services and Investments about his handling of their accounts.
Kirkland also agreed to pay $10,000 in costs.
The settlement indicates that a period of close supervision would have been imposed as part of the disciplinary proceeding, however Kirkland has been working under close supervision at a new dealer, Argosy Securities Inc., since February 2017.