A former futures trading advisor at RBC Dominion Securities Inc. is being sanctioned in a settlement with regulators for engaging in extensive discretionary trading in clients’ accounts. While most clients were highly profitable, a few suffered losses and the trading generated large commissions.
A hearing panel of the Canadian Investment Regulatory Organization (CIRO) approved a proposed settlement with Regan Donald Eric Espeseth, a former representative with RBC DS in Saskatoon, who admitted breaching securities rules by engaging in a high volume of risky discretionary trading in futures.
According to the settlement, most clients were large farming operations familiar with hedging commodities and sought Espeseth for his futures trading expertise. While most clients enjoyed significant gains, the regulator noted that Espeseth generated large commissions regardless of trading outcomes. By not obtaining advance approval for every trade, he engaged in discretionary trading, even though he discussed strategies with clients.
“Sometimes contact took place with the clients at the end of a trading day. Often there was no contact with certain clients for days. However, the clients did receive daily trade confirmations by email, which detailed all activity in their accounts,” the settlement said.
Collectively, clients recorded over $15.2 million in net gains, although two clients suffered losses. One was a small account, while another contributed over $1 million and lost 86% of it, including $260,000 in gross commissions from loss-making trades. The client who lost about $850,000 was the only one to complain about the discretionary trading.
Overall, the trading generated almost $4.5 million in gross commissions, about half of which went to Espeseth. Between July 2020 and March 2022, he entered approximately 23,458 orders for clients, though it is difficult to estimate how many were discretionary.
The trading was first uncovered in an internal investigation by DS in March 2022. Espeseth admitted to discretionary trading and self-reported his conduct to CIRO.
Under the settlement, Espeseth agreed to disgorge $600,000 in commissions, pay a $75,000 fine and cover $20,000 in costs.