A Winnipeg investment advisor has been fined $25,000 and suspended after a regulatory body found he made investments that were not appropriate for two clients.
The clients suffered ‘substantial’ losses, the decision says, while investment advisor Thomas William Dunn received significant commissions for the investments.
The Investment Industry Regulatory Organization of Canada accepted a settlement agreement with Dunn, who admitted he failed to adequately know the two clients and engaged in trading not suitable for them.
The alleged violations happened between 2010 and 2015, when Dunn was a registered representative and a portfolio manager with the Winnipeg branch of CIBC World Markets Inc., IIROC said in an April 2 release.
That included engaging in excessive trading in the clients’ accounts and failing to use due diligence to learn, and remain informed of, the essential facts about the two clients’ personal and financial circumstances, IIROC said.
In addition to the fine, Dunn is to serve a five-month suspension starting May 31, 2020, and pay $5,000 in costs for the disciplinary action.
He also has to successfully rewrite the exam for conduct and practices before returning to work, and will be subject to a period of close supervision for six months upon return.
Dunn is registered to work at the Winnipeg branch of PI Financial Corp. but declined to comment on the settlement when contacted by CBC News.
One client was a 49-year-old working in a physiotherapy office, saving for her retirement. During the five-year period in question, the value of her account decreased by 56 per cent, from $56,207 to $24,550, according to the agreed statement of facts.
$15,280 in commissions, fees
It said Dunn generated about $15,280 in commissions and fees, of which he “personally received $2,424 of the gross new issue commissions, as well as approximately $3,941 of the trading commissions.”
The trading commissions were charged directly to the client’s account, which the decision says resulted in an 18 per cent drop in her account value.
In many instances, Dunn “conducted trades that were inconsistent with good business practices, making short-term trades where any economic benefit to (the client) was offset or outweighed by the trading commissions,” the settlement said.
The client’s account contained information that her income was $20,000, that she did not want excessive risk, and had limited investment knowledge. She was relying on Dunn for investment advice, the settlement said.
“The trading activity resulted in substantial losses for the client. The respondent (Dunn) generated significant commissions,” it said.
The second client was a 46-year-old self-employed aesthetician saving for her retirement.
During the relevant five-year period ending in 2015, the value of her investment account decreased by 58 per cent, from $61,913 to $26,109, the settlement said.
Dunn generated about $39,766 in commissions and fees relative to that client, of which he “personally received $14,849 of the gross new issue commissions, as well as $3,663 of the trading commissions.”
This second client also had limited annual income of $20,000, the settlement agreement said, and she did not want excessive risk in her accounts.
It’s not the first time Dunn has been disciplined by IIROC, an organization that aims to protect investors and set standards for Canada’s investment industry.
In 2015 Dunn reached a settlement agreement in a case in which he admitted violations related to inappropriate trading for two clients, for which he was fined $65,000 and required to undergo six months of close supervision.
The current settlement agreement said there have been no complaints about Dunn since he moved to PI Financial in 2016, where he was under strict supervision from the previous disciplinary case.
