Brokerage firm Richardson GMP Ltd. (RGMP) is paying $500,000 over allegations that it violated industry rules in a series of supervisory failures.
An Investment Industry Regulatory Organization of Canada (IIROC) hearing panel approved a settlement with both the firm and a supervisor in the firm’s Calgary office, Blair Robert Pytak.
Under the settlement, the Toronto-based wealth management firm is paying a $500,000 fine and $50,000 in costs. For his part, Pytak has agreed to a $24,000 fine, a two-year ban on serving as a supervisor, and an order to rewrite the branch managers’ exam.
IIROC’s settlement with the firm stems from RGMP’s failure to supervise two former reps, Preston Henry Smith and Adam William Woodward. The agreement also says the firm failed to maintain adequate controls over options trading that resulted in misstated account values for two clients.
In 2018, IIROC permanently banned Woodward and fined him $450,000 for recommending unsuitable high-risk securities to clients and depleting their portfolios through unauthorized discretionary trading.
Today’s settlement found that both the firm’s head office in Toronto, and Pytak, his supervisor in Calgary, failed to properly supervise him.
“The supervisors had an insufficient understanding of their areas of responsibility and failed to identify and address red flags,” the settlement agreement said. Further, it noted, “The investment strategy employed by Woodward […] should have raised numerous red flags.”
As for Smith, he settled allegations from the regulator in 2019, agreeing to a $100,000 fine and a two-and-a-half year suspension.
In that settlement, he admitted to suitability and KYC failures that resulted in certain clients being exposed to too much investment risk, and suffering losses in those risky investments.
Today’s settlement addresses the firm’s oversight failures in Smith’s case.
For instance, IIROC noted, “Supervisors failed to identify that the Smith clients’ stated risk tolerances and investment objectives were inconsistent with the personal and financial information found in their NCAFs.”
And, the agreement said that supervisors failed to question clients’ increasing risk tolerances as they aged.
It also noted that RGMP has enhanced its compliance systems in the years since these incidents took place.
“[The firm] has implemented significant measures to address the compliance deficiencies that could have contributed to the failure to supervise Woodward and Smith,” the agreement said.
As for Smith and Woodward, IIROC noted both were terminated by the firm, in 2015 and 2017 respectively.