An Investment Industry Regulatory Organization of Canada (IIROC) panel has accepted a settlement agreement with Toronto-based investment dealer CIBC World Markets Inc. and branch manager Robert Trickey after finding they failed to properly supervise an advisor, IIROC announced Tuesday.
Specifically, CIBC and Trickey admitted that between 2003 and 2009 they failed to properly supervise Geraldine Mannings, a former registered representative with CIBCWM’s Nelson, B.C. branch, who later admitted to making unsuitable recommendations to clients.
Under the settlement, the dealer agreed to pay a $125,000 fine and $10,000 in costs, and Trickey agreed to pay a $40,000 fine and $5,000 in costs.
According to the settlement agreement, Trickey investigated concerns about risk changes in some of the accounts of Mannings’ clients, some of whom were seniors on fixed incomes. He resolved many of those concerns by increasing the risk tolerance in their know-your-client (KYC) documents, relying on Mannings to “verify that the client understood and accepted the consequences of the risk tolerance update.”
As a result, IIROC staff alleged he didn’t take adequate steps to ensure that the changes were suitable, and that CIBCWM’s head office didn’t do enough to resolve the concerns about Manning’s accounts either.
“It was Trickey’s responsibility to independently verify KYC updates and particularly KYC updates that contained no material changes except an increase in clients’ risk tolerances to resolve an outstanding suitability query. This was a concern that required detailed investigation, including a discussion with Mannings about the suitability of the increase in risk,” the IIROC panel states in the settlement agreement.
“The results of the discussion should have been documented along with the reason why the increase in risk was suitable for the particular client having regard to the clients’ circumstances including income, time horizon, age, assets, investment experience and other individual factors.”
Alongside the monetary sanctions, the settlement notes that CIBCWM has made changes to its compliance policies and procedures and its management structure, including adopting new sustainability testing to ensure that compliance action plans are properly implemented, and implementing a new regional supervision model on a pilot project basis.
The dealer will be undertaking a full review of the new model this fall, the settlement notes, and plans to implement it more fully in 2019.
Mannings left the securities industry in 2013 after more than 45 years as a broker. In her 2015 settlement with IIROC, Mannings admitted she made unsuitable recommendations to three clients. She agreed to pay a $35,000 fine and $5,000 in costs.