An Investment Industry Regulatory Organization of Canada (IIROC) hearing panel has permanently banned an advisor and ordered him to pay $280,000 for infractions connected with failure to ensure that investment recommendations were suitable and the act of unauthorized trading.
Specifically, Jeremy Nicholas Drew Austin, a former advisor London, Ont., has been fined $120,000 for the rule violations connected to his clients’ investments, $50,000 for failure to co-operate with IIROC’s investigation into his conduct, disgorgement of commissions in the amount of $60,000 and costs in the amount of $50,000.
The actions that led to Austin’s removal from the securities industry took place between 2009 and 2013 when he was an advisor with Mississauga, Ont.-based Edward Jones and then Oakville, Ont.-based Manulife Securities Inc. He was an advisor to a couple referred to as “AG” and “EG” and AG’s sister, “IZ.” He was also responsible for the management of the portfolio belonging to “D Ltd.,” AG’s incorporated firm.
AG and EG are immigrants whose first language is not English. AG’s knowledge of investments was limited and EG was unable to read in English. IZ had opened an RRSP while she was a student in Canada but mainly resides in Cyprus and had given formal trading authority to AG.
The family relied heavily on Austin’s guidance for the investment decisions related to their RRSPs. AG’s investment instruction to Austin was that he wanted to keep his family’s savings safe and make money.
Austin would go on to make a total of 35 changes to his clients’ know-your-client (KYC) information between May 2008 and October 2009. The changes over time stated increasingly ambitious investment objectives and he adjusted his clients’ risk tolerance, investment knowledge and experience ratings to higher levels. There was no evidence to suggest that the clients understood the changes in question, the hearing panel’s decision notes.
“The only conclusion we could draw from the evidence was that Austin manipulated the KYC information retroactively to validate trades falling outside of the applicable KYC parameters, probably in response to internal compliance notifications,” the decision states.
Austin was also taken to task for unauthorized trading, specifically in EG’s account. Austin accepted trading instructions from AG on behalf of his wife even though he had no formal trading authority for the account.
However, the decision notes that the trading conducted in each individual’s account was excessive and that the family was unable to explain the reasons for the trades as they relied on Austin’s advice. For example, Austin made 130 trades in EG’s account between May 2009 and January 2011, which resulted in a net profit of $16,000 and fees and commissions of $35,095. Within IZ’s account, he conducted 111 trades between May 2009 and February 2012 that resulted in a net loss of $9,707 and fees and commissions of $26,731.
In addition, Austin made heavy use of mutual funds that had deferred sales charges attached to them. All three family members would pay penalties upon the early redemption of these funds.
Austin was also found to have been unco-operative with IIROC staff during the investigation into his conduct as he resisted most attempts at communication in 2015 and 2016. He did not show up for IIROC’s scheduled interview although he had spoken with IIROC staff regarding the interview.
Austin is no longer employed in the securities industry. He left Manulife Securities in 2014 to join Burlington, Ont.-based Mandeville Private Client Inc., from which he was terminated later that year for failing to meet performance targets.
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