A hearing panel of the Investment Industry Regulatory Organization of Canada has reprimanded a CIBC World Markets Inc. registered representative for executing trades without written authorization from clients, failing to give priority to clients when entering trades for himself, and other violations.

The Investment Dealers Association of Canada formally initiated the investigation into the conduct of David Harry Martin, a registered rep in a Calgary, Alberta branch of CIBC World Markets, in November 2007. The violations occurred in 2006 and 2007.

An IIROC hearing panel has accepted a settlement agreement with Martin, after he admitted to several findings:

• Martin failed to give priority to 25 of his clients when entering trades for himself and two of his clients

• After making an error, he allocated losses to 25 of his clients

• On several different occasions, Martin effected discretionary transactions in the accounts of clients without their prior written authorization, and without the accounts being specifically approved and accepted in writing as discretionary accounts

• He effected trades in the account of a client on the instructions of a third party, without a duly executed trading authorization

• Martin failed to exercise due diligence to learn and remain informed of the essential facts relative to his client

• Martin engaged in outside business activity by providing consulting services without disclosing the activity to his member firm employer

These violations displayed a failure by Martin to observe high standards of ethics and conduct and a failure to exercise due diligence, IIROC said.

The hearing panel reprimanded Martin for these violations, and ordered him to pay costs of $5,000.

The panel noted that CIBC World Markets had already imposed sanctions against Martin. The firm’s sanctions included a $30,000 fine, six months of close supervision with CIBC, successful completion of the Trader Training Course examination offered by the Canadian Securities Institute, successful completion – for a second time – of the Conduct and Practices Handbook examination offered by the Canadian Securities Institute, and a return of the consulting fees earned through the outside business activities.

CIBC also ordered Martin to pay $86,737.20 for the losses that resulted from errors he made in his clients’ accounts. In total, he incurred costs of roughly $140,000 as part of CIBC’s sanctions.

“Of significant weight in this case is the fact that the Respondent has to date, as a result of the penalties and the recovery of the client losses imposed on him by his employer, CIBC, incurred significant financial loss,” the IIROC hearing panel said. “He has also complied with all of the other requirements imposed on him by CIBC, including the successful completion of courses.”

The hearing panel added that the violations were isolated events that in most cases took place over a short period of time, and that Martin was sorry for his actions. He has cooperated fully with IIROC and his firm.

“He accepted responsibility for his actions,” the panel said.

IE