A Canadian Investment Regulatory Organization (CIRO) hearing panel has imposed $386,492 in sanctions and has suspended Desjardins Securities Inc. registered representative Michel Bédard for two months, after the representative engaged in discretionary trading and failed to use due diligence to ensure the trading was appropriate for his clients.

Broken down, the representative was ordered to pay a fine in the amount of $150,000, costs in the amount of $10,000 and was ordered to disgorge $226,492, representing the commissions he earned trading options in the two client accounts in question.

Placed under strict supervision 

Prior to the settlement with CIRO, Desjardins in October 2022 ordered Bédard to re-write and pass the Conduct and Practices Handbook exam and placed him under strict supervision for 12 months. The firm also imposed a monetary penalty of $150,000 which it later agreed to lift in light of the penalties imposed in the regulator’s settlement agreement.

Bédard is being sanctioned for making discretionary trades in two client accounts and for falsely representing to his firm, through his written notes, that he had previously discussed the trades with his clients. In reality, for the first client only 24 of 379 option transactions carried out were discussed in advance; for his second client, only eight of 101 option trades carried out were discussed in advance.

Failed to use due diligence 

The representative is also being sanctioned for failing to use due diligence to ensure that the options being traded were suitable and within the bounds of good business practice, and for failing to disclose charges before executing trades in the client’s accounts. (Although the client’s portfolios had previously consisted of relatively conservative investments, and although the clients in question had no knowledge of options trading, in the summer of 2020, Bédard undertook an active option trading strategy in two client accounts, even opening a margin account in one case and altering that client’s file so that it aligned with her portfolio.)

“This strategy was not guided by any target return objective, and resulted in significant losses for these clients,” the settlement agreement states.