A former rep has been fined and banned for two years, after an Investment Industry Regulatory Organization of Canada (IIROC) hearing panel found that he violated rules by churning the account of an elderly, mentally-infirm client.
An IIROC hearing panel ordered that Alfred Drose, a former rep with Chippingham Financial Group in Toronto, is banned for two years, fined $137,171 (including $112,171 in disgorgement) and ordered to pay $35,000 in costs. He’d also face 12 months of strict supervision if he returns to the industry.
The sanctions follow a disciplinary hearing, which found that, between February 2014 and June 2015, Drose failed to know a client, and engaged in excessive trading in that client’s account.
According to the decision, the client in question was a 66-year-old former lawyer who was suffering from Alzheimer’s disease.
Following a five-minute meeting with the client, an account was opened with KYC information that recorded him as having good investment knowledge, a 100% speculative investment objective and high risk tolerance.
Drose then “engaged in high-risk, speculative and short-term trading” that resulted in $1.3 million in trading losses while generating gross commissions of $232,000.
“The respondent executed 168 trades over the life of the account” compared with just seven trades for his other accounts combined, the panel noted.
It ordered the sanctions sought by IIROC staff in the case, concluding that “the sanctions proposed by staff appropriately reflect the totality of the respondent’s misconduct.”