Your group has been assigned a disciplinary case that either has been or is currently being dealt with by the IIROC. Carefully read all the relevant details of your case.

Refer to all the material that we have studied so far in the CPH course, as well as other relevant information that you learned in previous securities related courses at the college.

Discuss what caused the events described in this case to lead to this disciplinary process.

Identify the IIROC rules that have been violated.

Be sure to discuss how the (alleged) offender should have acted/behaved in their particular situation to avoid the action being taken by the IIROC.

The IIROC disciplinary case that you have been assigned is as follows:

The Respondent has been in the securities industry since 2000 and was employed at the Vancouver branch of the Investment Dealer ABC Securities Inc. as a Registered Representative.

The Client, SF, opened several accounts in April 2010 at ABC Securities Inc. with the Respondent as her investment advisor. The accounts included a corporate account, TFSA, RRSP and a margin account. Over 90% of the average balance of all her accounts were in the RRSP and margin accounts.

SFs account documents for her margin and RRSP accounts allowed for 010% and 020% respectively in aggressive investments and strategies. The remainder of her accounts designated a balanced investment strategy with low to moderate risk.

The RRSP account documentation noted that SF may require income from her portfolio and preferred a low degree of price volatility. It also noted that SF had limited/average investment knowledge, an annual income of $150,000 and approximate net worth of over $13,000,000 in fixed and liquid assets for both her personal and corporate interests.

As of January 31, 2011 the market value of SFs RRSP account was approximately $1,440,000. As at March 31, 2017, after taking into account additions of approximately $1,580,000 and withdrawals of approximately $1,565,000, the market value of the RRSP account was approximately $1,150,000. This represented an approximate 20% loss on the initial investment. During this same period the S&P/TSX Composite Index had a return of 15.7%.

As of January 31, 2011, a market value of SFs margin account was approximately $645,000. After taking into account additions of $530,000 and withdrawals of approximately $1,000,000, the market value of S Fs margin account was approximately $180,000. This represented less than 1% gain on the initial investment. During the same period the S&P/TSX Composite Index had a return of 15.7%.

The turnover ratio for SFs RRSP account for the years 2012 to 2016 was 4.13, 4.5, 2.76, 4.45 and 5.21 respectively. The turnover ratio for SFs margin account for the years 2012 to 2014 was 4.77, 3.04 and 4.06 respectively. The Respondent earned $396,542 in fees from the excessive trading and from new issues in SFs RRSP and margin accounts during this period. The shortterm and frequent trading with an emphasis on new issues, which was recommended by the Respondent, was not suitable for SF given her personal and financial circumstances.

From February 1, 2014 to March 31, 2017 there were 315 trades identified in SFs RRSP and margin accounts. For 281 of these trades, there was no evidence of the Respondent contacting SF to obtain instructions regarding which security would be purchased, the quantity and price of the security to be purchased or the timing of the purchase prior to executing these trades. None of SFs accounts were designated as managed accounts or approved for any discretionary trading.

The clients SR and WR were husbandandwife who opened a joint account at ABC Securities Inc. in 2004 with the Respondent as their investment advisor. The clients were an elderly retired couple. The only client account documents were from February 2014 which indicated a low to moderate risk tolerance and a balanced investment strategy with 020% aggressive investments and strategies. The account documents indicated an annual income of $8,378, liquid assets of $600,000, fixed assets of $780,000 and minimal to no investment knowledge.

As of January 31, 2011, the market value of SR and WRs account was approximately $290,000. After taking into account withdrawals of approximately $37,000, the market value of their account on March 31, 2016 was approximately $165,000. This represented an approximate loss of 35% on the initial investment. During the same period the S&P/TSX Composite Index had a return of 0.42%.

The turnover ratio for SR and WRs account in 2014 was 3.45 which was indicative of excessive trading. This was a feebased account based on the market value of the account, accordingly, the clients were not charged commissions for individual transactions. During the period from January 31, 2011 to March 31, 2016, the account was charged fees of approximately $20,500. In addition to these account fees, the account was also charged fees related to new issues of over $36,000 during this period.

SR and WRs account did not contain sufficient low to medium income producing securities to meet their investment objectives and risk tolerance. In addition, the emphasis on new issues, all which was recommended by the Respondent, was not a suitable investment strategy given the personal and financial circumstances of the clients.

From February 1, 2014 to March 31, 2016, there were 34 trades identified in SR and WRs account. There was no evidence of the Respondent contacting SR or WR to obtain instructions regarding any of these trades. In particular, no instructions were obtained as to which security would be purchased, the quantity of the security to be purchased, the price of the security to be purchased or the timing of the purchase price prior to the Respondent executing the trades.