(October 11 – 17:30 ET) – The Pacific District Council of the Investment Dealers Association of Canada has imposed discipline penalties on Robert William Stevenson Beaty. Beatty was a rep at the Vancouver offices of Burns Fry Ltd., Nesbitt Thomson Inc. and Nesbitt Burns Inc.
As part of the settlement agreement, Beaty acknowledged that he failed to use due diligence to ensure that recommendations he made for the account of a client were appropriate and in keeping with her investment objectives. Beaty also acknowledged that he traded in a security on behalf of a client without receiving a prospectus for the security, failed to comply with his firm’s internal policies and relevant industry standards, failed to record the transaction on the firm’s books, and failed to notify the client of the transaction.
From December 1990 until January 1995, Beaty was responsible for the investment account of a client whose initial investment objectives comprised 50% income and 50% mutual funds. The cash account was converted to a margin account in April 1994, and, when Beaty moved from Burns Fry to Nesbitt Thomson in July 1994, the new account objectives were changed to 20% income, 65% moderate growth and 15% aggressive trading.
From May 1993 until January 1995, Beaty failed to recommend sufficient income-generating securities to meet his client’s investment objective for income. Debit interest charged to the account following its conversion to a margin account exceeded the amount of income generated in the account.
In November 1994, Beaty invited his client to invest $25,000 in the World Shopping Network Inc. (WSN) in return for a right to participate in a percentage of the annual gross sales of WSN. He told his client that this opportunity was being presented to her outside the context of his firm, but the funds used to buy the security were withdrawn from her account. Beaty supplied all communications and documents between his client and WSN.
The IDA said this investment carried a high degree of risk and was extremely speculative. The client lost the full amount of her investment in WSN, though she realized an overall profit from the trading in her account.
The IDA said Beaty admits the investment in WSN was a security, but says he did not believe it was a security at the time of the trade. He was unaware of whether the security was properly qualified for sale in accordance with the British Columbia Securities Act, and made no inquiries in that regard.
Beaty was fined $19,000, and told he must rewrite and pass the Conduct and Practices Handbook for Securities Industry Professionals exam. In addition, he must pay $3,000 toward the costs of the investigation.
-IE Staff