The Canadian Investment Regulatory Organization (CIRO) announced September 22 that it is sanctioning Louis Desprès, ordering the Raymond James Ltd. advisor to pay a fine of $18,000 and costs in the amount of $2,000 after a longstanding client proceeded with an unsolicited liquidation of her assets, mid-pandemic, revealing suitability issues with the client’s portfolio.
Specifically, between March 2017 and December 2019, Desprès is being sanctioned for failing to ensure that the recommendations he made to one client were suitable – between June 2017 and April 2019 he recommended and purchased securities in the energy and mines sector for his client, LB.
LB did not suffer any capital loss, indeed she ultimately generated a profit of nearly $125,000, but ultimately just broke even because by cashing in her investments during the unsolicited liquidation of her portfolio in December 2020, many of the other stocks in her portfolio had lost value.
A registered representative with National Bank Financial Inc. from January 1990 until October 2016, and a registered representative with Raymond James since then, Desprès began his business relationship with LB while he was with National Bank. When her portfolio was transferred in full to Raymond James, Desprès filled out an initial client agreement saying her investment knowledge was generally good and that her experience with stocks, mutual funds and bonds was excellent. Her account documentation was later revised two more times, increasing her risk tolerance to reflect the appreciation of the mining sector shares purchased, which made up a substantial part of her portfolio by this time. (Between March 2017 and December 2019, the energy sector weighting in LB’s portfolio went from 2.63 per cent to 27.51 per cent.)
With the stock appreciation raising the risk level beyond the client’s stated risk tolerance, Desprès had LB sign two updates indicating that she was aware that her portfolio exposed her to higher risk than she was prepared to assume, and that she agreed to this higher level of risk in order to keep her assets as they were. Another document indicated that LB was a long-standing client used to investing in natural resources and small-cap securities. When Desprès first began his business relationship with LB in 2007 she had no previous experience in the investment field, had a high school diploma and was not employed.
In addition to the $18,000 fine and costs, Desprès must also successfully complete the CIRO Conduct and Practices Handbook exam within 60 days of the settlement agreement’s acceptance.
