The investment dealer division of the Canadian Investment Regulatory Organization (CIRO) has sanctioned former Leede Jones Gable Inc. registered representative, Catherine Elizabeth Green for failing to ensure that the investments she recommended were suitable for her client.

Although the regulator also contends that Green failed to learn and remain informed about the essential facts relative to her client as well, the hearing panel later said the evidence presented was not credible or convincing.

After assuming responsibility for the complaining client’s accounts when the client’s former representative retired, Green and the client filled out two additional new client account application forms (NCAF) in August 2017 and April 2018. By November 2019 the client submitted a complaint to Leede regarding Green’s handling of his accounts.

At one point in early August 2019, Green executed a trade in the client’s account without his approval. “The complainant admitted that he would have given his approval if he had spoken to her, since he relied on her expertise,” the regulator’s decision states.

The complainant then initiated a face-to-face meeting, during which he learned his portfolio lost what he initially thought was approximately $13,000. A second opinion from his previous representative told him that the losses were worse than he thought, and he should contact Leede to address the issue. Eventually the client settled for a portion of the losses “as he felt it was the settlement or nothing. Another representative at Leede suggested that he liquidate the remnant of his portfolio, and he did.” 

Green contends that the portfolio, worth $62,297 in July 2017, would have traded well over $100,000 during and following the COVID pandemic, had his account not been cashed out by Leede. She also contends that the steps she took were not evidence of negligence, but were part of a well thought out analysis of the global capital markets and the economy. 

A suitability assessment of the client’s accounts revealed that the stated risk tolerance of 100 per cent and investment objectives of 100 per cent aggressive growth, both updated after Green took charge of the accounts, did not accurately reflect the complainants’ actual wishes. Evidence also shows that the assets in the client’s accounts were often concentrated in the information technology sector. By the end of her being the client’s representative, the sector made up 91 per cent of the client’s portfolio.

In her own submission, Green stated that she recommended an investment strategy that she thought would most likely rebound in the timeliest manner post correction, rather than those following a traditional safe investment thesis. Documenting the client as high risk in 2017 and 2018 NCAFs, she says was her way of documenting her disclosure of the higher risk growth strategy with his account, not to document that he was a high-risk client.

“The value of the securities in the complainant’s accounts declined by approximately 51 per cent including commissions), representing a $31,622 loss. During that same period, the S&P/TSX Composite Index increased by 9.5 per cent. The trading activity in the complainant’s accounts was frequent and excessive,” they state. (In her submission, Green further said that excessive trading being the cause of account losses is a bias held by the regulator.) “The investments recommended for the complainant’s accounts by Ms. Green were not suitable for him due to his, among other things, financial situation, actual investment objectives, time horizon and actual risk tolerance level.” 

Green later acknowledged that the client was clear he wanted to keep 70 per cent of his portfolio in safe investments and he was willing to risk the remaining 30 per cent.

Despite this, Green maintains that sanctions are not warranted for her actions. According to Green, the decision states, quoting the former representative: “A mature client that listens to an advisor’s rationale and makes a choice based on the advisor’s recommendation, is patient during market downturns and accepts responsibility for their decisions. A client who claims losses after they have been advised of the risks as has the complainant, is simply playing both side of the Canadian IIROC (Investment Industry Regulatory Organization of Canada – one of CIRO’s predecessor organizations) compliance model, knowing full well if the portfolio does well, he can reap the reward for taking the risk and if not, he simply files a complaint with the regulators claiming investor naivety.” 

In addition to a $30,000 global fine, Green was also ordered to disgorge $14,954 in commissions earned by trading in the client’s accounts. Prior to becoming re-registered with any CIRO-regulated firm, she must also pay costs in the amount of $5,000, complete remedial coursework and be closely supervised for at least six months on re-registration.