IIROC hearing panel fines former advisor $250,000 for various infractions

Li was employed with TD Waterhouse Canada Inc. in Richmond, B.C., when the violations took place. Li, who is fluent in Chinese and Mandarin, was one of several advisors TD Waterhouse employed within that community to provide services to clients who spoke those languages. The former advisor had clients who were based in British Columbia and in China.

Li’s first infraction is connected to actions taken on the account of a client in B.C. referred to as “YX.” Li engaged in 11 trades in YX’s account that were unauthorized and contradicted the client’s express instructions that YX be notified in advance of details concerning trades. After a trade that incurred a loss in October 2011, YX complained to Li’s branch manager and Li was terminated following an internal investigation by the firm.

The second contravention involved 181 unauthorized discretionary trades that the former advisor made in a two-hour period in October 2011. Many of these trades were conducted through the accounts of clients who lived in China.

“The [IIROC hearing] panel accepted evidence that the trades took place at a rapid pace, every minute or so (with the exception of two breaks), within a period of approximately two hours,” the IIROC hearing panel’s decision states. “In the circumstances, there was no credible evidence that the respondent complied with his obligation to obtain instructions. … Indeed, it was not physically possible for him to do so.”

Li also misrepresented the orders made within that time period as the trade tickets used for the transactions were marked as “unsolicited,” which would indicate that the clients initiated the actions, although that was not the case.

Li’s final infraction involves his multiple attempts to avoid co-operating with IIROC in the course of its investigation into his conduct, which began in in November 2012. These attempts included evading contact by telephone, email and mail and personal service as well as leaving the country and refusing to provide contact information for his new residence in Beijing.

The SRO became aware in 2015 that Li had applied to the B.C. Securities Commission to re-activate his registration. When IIROC staff then contacted the former advisor to advise him that a hearing was still to be held, Li terminated the phone call and further efforts to get in touch were unsuccessful.

“It is prejudicial to the public interest and brings the investment industry into disrepute where registered representatives strenuously avoid and successfully frustrate such investigations while leaving open the possibility that they may try to return to the industry some years later only to resume the complained-of conduct,” the IIROC hearing panel decision states.

Li’s actions had an adverse effect on clients and their belief in the integrity of registrants; IIROC’s ability to conduct investigations; and a hit to TD Waterhouse’s reputation, the IIROC hearing panel notes.

“The harm to the respondent’s employer, the dealer member, included the economic damage to it of having to compensate clients for his misconduct,” the decision states, “and the harm to its reputation and the integrity of its compliance systems, particularly in the Chinese-speaking community that it sought to [serve] by offering registered representatives such as the respondent who purported to meet their particular needs.”

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