The Canadian Investment Regulatory Organization (CIRO) has sanctioned Francesco (Frank) Mauro, fining Mauro $30,000 and assessing costs for not using due diligence with one client who ultimately lost money trading in his options trading program.

Mauro admitted that he failed to use due diligence to ensure his investment recommendations were suitable after the client, dubbed RA in Mauro’s settlement agreement, complained to Wellington-Altus Private Wealth Inc. where Mauro worked in the West Vancouver, British Columbia branch as a registered representative.

“For some of his clients, the respondent operated an options trading program which, among other things, involved writing uncovered put option contracts for shares of blue-chip stocks,” the settlement agreement states. “The writing of put option contracts generally entails a high degree of risk.”

RA opened investment accounts with Mauro after being told about the program by her brother, who encouraged RA to participate. “Between October 2017 and March 2020, in 16 instances RA wrote put option contracts. Most of the put option contracts were profitable. Overall, however, RA incurred significant losses,” the agreement states. “The writing of put option contracts was not suitable for RA due to, among other things, her financial situation, investment objectives, time horizon and risk level.” 

The owner of a leadership consulting business, RA opened five different accounts, including margin accounts, indicating to Mauro that the funds she was going to deposit comprised most of her savings, including the proceeds from the sale of her house and other property sold in the settlement of her divorce. “RA also informed the respondent that she planned on withdrawing some of the assets from the RA accounts to use as a down payment on a home.” All told, RA lost approximately $176,799 in USD from participating in the program. 

In addition to the $30,000 fine, Mauro agreed to pay costs in the amount of $5,000. Notably, CIRO did not order any remedial training in the case. “The respondent personally paid an insurance deductible of $49,240 to ensure that RA was fully compensated for the losses she sustained in relation to the writing of the Tesla puts,” the settlement agreement concludes. “The RA accounts were fee-based accounts. Therefore, RA was not charged commissions for individual transactions and there was no additional benefit to the respondent from RA’s involvement in the options trading program.”