The Investment Industry Regulatory Organization of Canada (IIROC) has fined and will suspend current Canaccord Genuity Corp. registered representative, Brian Anthony Peters, after Peters admitted that he made unsuitable recommendations to a client and accepted trading instructions from the client’s husband, without written authorization.

IIROC initiated the investigation into the Vancouver, British Columbia representative’s conduct in July 2016. It found that his unsuitable recommendations resulted in his client having an undue concentration of shares in a single, high-risk, junior coal exploration company in her accounts. During the time that the client had her accounts with Peters, the client and her husband took out several loans to purchase more shares. Ultimately, the price of the shares declined significantly.

Orders in the account were generally directed by the client’s husband, who had verbal authority to give instructions. Peters did not obtain written trading authorization for the husband to give instructions.

In the client’s new client application form, it was stated that the client had no experience in venture situations, new issues or margin. She had moderate experience investing in common shares. The account forms also stated that no person other than herself had any trading authority or financial interest in her accounts. The husband also opened accounts in his name (and the couple opened several joint accounts), stating that he had a sophisticated level of knowledge of the junior mining and oil and gas sectors.

Although Peters initially made conservative recommendations to the client and her husband, the couple decided that they wished to engage in a more aggressive trading strategy to meet their objectives. Ultimately one large investment in a resource company turned out to be profitable. Over time, however, repeated investments (again, the clients borrowed to invest) in a second company, this time a coal exploration company, lead to almost 97 per cent of the client’s assets being concentrated in the coal company.

At one point the client lost her job, but still continued to borrow to invest. She also transferred the full value of her pension from her employer to her account. These funds were also used to purchase shares in the coal company.

“In total, between October 2010 and November 2012, JG’s accounts purchased approximately 974,300 shares of Colonial Coal, which cost approximately $1,098,598,” IIROC writes in its settlement agreement with Peters. “As of December 31, 2012, the shares of Colonial Coal compromised approximately 97 per cent of the market value of the holding in JG’s accounts. The market value of Colonial Coal shares continued to steadily decline.” 

All told, IIROC says the high concentration, combined with the use of borrowed funds to purchase shares, resulted in a high level or risk that was not suitable given the client’s financial circumstances. In making its decision, IIROC notes that Peters did not at any time recommend that the couple borrow money from the bank to invest.

A registered representative since 2005 with Canaccord, Peters remains employed with the IIROC-regulated firm still today. IIROC staff have agreed to a delay Peters’ 30-day suspension to give the representative time to make arrangements for servicing his clients while he serves his suspension. In addition to the suspension, Peters’ contributed $135,500 towards a settlement Canaccord entered into with the couple for approximately $275,000. Peters will also pay a fine to IIROC in the amount of $50,000, plus costs totaling $2,500.