Desjardins Securities Inc. failed to supervise at least two of its registered representatives, allowing them to engage in improper trading activity, according to a settlement with the Canadian Investment Regulatory Organization (CIRO).
On Nov. 5, a regulatory hearing panel approved a settlement with Desjardins — which agreed to pay a $225,000 fine, almost $625,000 in disgorgement and $25,000 in costs — to resolve allegations that it violated the rules of the self-regulatory organization (SRO).
Specifically, the firm admitted that it failed to adequately oversee at least two reps — one rep who engaged in unsuitable options trading, and another rep who enabled clients in Quebec to participate in offerings that they weren’t eligible for by entering orders for a client in another province and reselling the securities to Quebec clients in over-the-counter transactions.
According to the settlement, the firm was aware of the improper trading by the rep who sought to get around restrictions on clients in Quebec, and allowed it.
The other rep engaged in an active options trading strategy that resulted in substantial losses for a couple of clients — totalling $520,000 — while generating more than $1.2 million in trading commissions.
The trading for one of the clients produced $1.1 million in trading commissions for the firm between June 2020 and February 2022, when the client ultimately complained to the firm. That complaint was settled for an undisclosed amount.
The trading for the other client generated commissions of $125,000 between August 2020 and November 2021 — before that client complained, and was also compensated by the firm.
The settlement noted that the rep who engaged in the active options trading also admitted to executing numerous discretionary trades in their clients’ accounts, which weren’t approved as discretionary accounts, and to falsifying their notes about these trades.
In October 2022, the firm disciplined the rep, requiring them to rewrite the Conduct and Practices Handbook exam, subjecting them to 12 months of strict supervision and imposing a fine of $150,000 — although it later agreed to waive the rep’s fine, after they also settled with the SRO.
In February of this year, CIRO settled with Desjardins’ rep, Michel Bédard, who agreed to a two-month suspension and to pay a $150,000-fine, along with $226,492 in disgorgement and $10,000 in costs, after he admitted to violating CIRO rules.