A Hearing Panel of the Investment Dealers Association of Canada has ruled that branch manager of RBC Dominion Securities failed to supervise a broker.
The IDA said Frank Youden, branch manager of RBC DS in Halifax, failed to supervise the trading activity in approved person Hugh Bagnell’s accounts, in particular, to ensure recommendations made by Bagnell were appropriate for his clients and in keeping with their investment objectives.
The main issue at the hearing was the reasonableness of the supervisory steps taken by Youden with respect to Bagnell’s client accounts.
Between 2000 and 2002, Bagnell was the approved person for a number of client accounts, and Youden was the branch manager responsible for the supervision of Bagnell.
In December 2003, the IDA’s Nova Scotia District Council disciplined Bagnell for failing to attend and give information in respect of an investigation being conducted by the IDA. Bagnell was permanently prohibited from approval to act in any registered capacity with an IDA member firm and fined costs of $61,700.
Following a disciplinary hearing held on April 5-8, 2005, and April 12-15, 2005, in Halifax, the Hearing Panel released its decision on January 3, 2006. The panel found that Youden failed to:
- reasonably supervise Bagnell’s client accounts;
- adequately address the high turnover ratios in many of Bagnell’s client accounts, in spite of numerous red flags that called for action;
- adequately review a number of monthly statements that generated more than $1,000 commission per month; and
- contact Bagnell’s clients himself to confirm the suitability of the trading activity in the face of repeatedly high turnover ratios, high commissions, significant losses and trading activity that was inconsistent with the client objectives on file.
The IDA said a date will be set for a penalty hearing on the above charges.