Re: Jones 2013 IIROC 58 (December 16, 2013) (Decision)

A Summary
Discretionary Trading and Unsuitable Use of Margin

Catherine Deborah Jones’ (“Jones”) was fined $22,500 and subject to a 6 month period of close supervision. Her client SW was a dentist in her early 30s who had sold her dental practice during the course of their relationship. She had executed various Know Your Client Forms which included high risk tolerances and venture speculation.

SW testified to IIROC that she wanted a return of “passive income and to maintain security of her capital” at 10% to 15% per month, accepted by IIROC to mean per annum. It was further admitted that SW “told Ms. Jones that she desired to keep her capital safe”. She was described as “having a closed mind despite her intelligence and other investments”. The Panel was perplexed by and acknowledged the lack of attention by SW to her investments at the early stages of her relationship with Jones.

Discretionary  Trading

Despite the various trades in SW’s account, there were no supporting phone records or documents to show that there had been any communication with Jones in support of those trades, which took place while SW was out of town or overseas.

Unsuitable Use of Margin

SW was able to withstand a certain amount of monetary risk in her portfolio.

SW had been adamant throughout that she was interested in maintaining her capital. The understanding between her and Jones was that her draws would come out of income despite an “illogical amount of return of 10% to 15% per month”.

Despite that SW signed various margin documents authorizing the use of a margin account and that a margin account was not necessarily inappropriate for her, the use of margin was admitted to be too excessive and not suitable for “stated objectives of SW to preserve capital”. [Preservation of capital was inconsistent with the KYC forms she signed.]

Jones also misled management concerning SW’s margin account by stating that she was in touch with SW with respect to covering margin calls which was not the case.

Misrepresentation of Solicited Orders

Jones was disciplined for misrepresenting certain orders as unsolicited, as did not do so out of neglect or inadvertence but rather as a deliberate act to mislead.

Use of Home Email Address

Jones was also disciplined by unauthorized use of her home email address in her communications with SW. Her conduct in this regard was classified as conduct unbecoming in breach of IIROC Dealer By Law 29.1.