A hearing panel of the Investment Industry Regulatory Organization of Canada (IIROC) has found that Ravindra Suppal of Winnipeg did not meet his “know your client” obligation, failed to recommend suitable investments and engaged in unauthorized trading.
According to documents released by Toronto-based regulator on Friday, in June 2005 Suppal, a registered representative with First Financial Securities Inc., opened an account for the Chemawawin First Nation Development Trust.
The trust consists of roughly $10 million and stipulates, through its Trust Indenture documents, that any and all trading decisions must be made by four trust members, consisting of three band council members and the corporate trustee – Peace Hills Trust Company. All decisions require a majority from the trustees with the corporate trustee being in the majority.
However, despite this stipulation the new account application form (NAAF) listed the Chemawawin Band as a corporation, according to IIROC, and the three trustees signed the application as officers of the corporation. Suppal also signed the NAAF.
In not naming Peace Hills as the corporate trustee and failing to mention the trading authority of the trust company, the IIROC hearing panel ruled that Suppal did not do proper due diligence in knowing his client because the NAAF did not list Peace Hills as the corporate trustee or mention the trust company’s trading authority.
Furthermore, Suppal failed to recommend suitable investments for the trust, according to IIROC, because in 2009 the risk factor described NAAF was from 50% low risk and 50% medium risk to 100% high risk. This high-risk assessment for the account runs contrary to the Trust Indenture, which states that the principal of the trust must be maintained in perpetuity. Furthermore, by the time of account’s closure in 2010, according to IIROC, the investments in the account consisted of 123 mutual funds, 90% of which were equity funds.
The IIROC hearing panel also found that Suppal engaged in unauthorized trading for the trust because in December 2009 he sold a coupon bond without providing notice or having the consent of the corporate trustee. Suppal also did not provide evidence of the sale to Peace Hills. Suppal continued to make trades in the account without the consent of the corporate trust until 2010.
The Trust was transferred to Scotia Trust in April 2010. Scotia now acts as the investment manager of the account.
At the time the violations occurred, Suppal was a registered rep and a branch manager for First Financial Securities Inc. Currently, Suppal is a registered rep and supervisor with Portfolio Strategies Securities Inc.
A penalty has yet to be determined.
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Correction: An earlier version of this article incorrectly stated the Suppal remains a registered rep with First Financial Securities and is currently a branch manager and vice-president of sales for the firm.