The New Self-Regulatory Organization of Canada (New SRO) has sanctioned a former Scotia Capital Inc. representative, branch manager, director and executive vice president after the representative, now with BMO Nesbitt Burns Inc., admitted he conducted off-book business for various clients after being denied authorization.
Lee Fraser Harwood was first approached by the CEO of a cannabis company in May 2018 to see if Scotia would participate in an initial public offering (IPO) and reverse takeover. After asking if the firm could participate, Harwood was told on a number of occasions that internal policies did not allow the firm to participate in cannabis sector investing. Advisors were not permitted to receive commissions from unsolicited trades in non-managed accounts and neither brokered private placements nor IPOs were permitted.
Multiple requests for an exemption to the rule were also rebuffed by the firm before Harwood threatened to have his clients open accounts at another dealer member firm to facilitate their purchases. “On or about June 29, 2018, GP confirmed via email to the respondent that the Scotia cannabis policy had not been changed and that the respondent should assist his clients with his alternative plan,” the settlement agreement states.
When he went ahead and invested close to $11.7-million in client funds and facilitated the purchase of another 83,000 shares of the private placement in his spouse’s family trust at Scotia (coded as a PRO account), both receipts and certificates were delivered to Scotia – in error, according to Harwood.
Harwood was suspended December 2018 until January 2019 when he resigned. He has been under close supervision since then when he became a registrant with BMO. “The respondent received no compensation for his dealings,” the settlement agreement states.
In addition to completing the Conduct and Practices Handbook exam within six months, Harwood also agreed to a fine of $40,000 and agreed to pay costs totalling $5,000.
