Clients suffered financial loss due to rep's activities outside of his firm
A former dealer rep from Vancouver Island has been permanently banned by the Canadian Investment Regulatory Organization and ordered to pay a $70,000 fine for conducting securities related activities outside of his firm’s facilities.
Lorne Stuart Allison was an employee of RBC’s Royal Mutual Funds Inc. subsidiary between January 2012 and February 22, 2021, having been in the industry since 2005. The beginning of the end of his career was when a Royal Mutual Funds manager and compliance officer was made aware that two elderly clients had been asked by Allison to sign consent forms to open online brokerage accounts.
The firm specifically prohibited its approved persons from engaging in securities related business outside the firm such as advising on securities other than mutual funds or GICs. Allison was not registered to trade or advise clients regarding non-mutual fund securities, such as equity securities, options, the foreign exchange market, or exchange-traded funds.
The clients’ concerns about the request to sign documents related to online brokerage accounts led to an internal investigation at Royal Mutual Funds, which then reported the matter to CIRO.
CIRO’s investigation determined that several retired clients had been advised by Allison to open online brokerage accounts and three of them had invested a total of more than $2.7 million in these accounts. Trades were conducted in these accounts by Allison who either met clients in person or used the account logins provided by the clients to do so. He charged a fee to the clients for conducting the trades.
Allison resigned from Royal Mutual Funds on February 22, 2021, but continued to access the online brokerage accounts to conduct trades. Two of the clients later transferred their assets out of the accounts with net gains, while one lost several thousand dollars.
Two further clients, aged 79 and 82 years, invested a combined $981,046 in online brokerage accounts set up by Allison, who had advised them to do this. However, neither were convinced by his attempts to obtain an agreement to pay him to execute trades on their behalf.
Several other clients also opened accounts on Allison’s recommendation and paid a fee to him to conduct trades. One incurred a net loss of more than $105,000 while another suffered a net loss of more than $56,000.
Deliberate and deceptive
CIRO alleged violations of several Mutual Fund Dealer Rules, including standards of conduct, compliance obligations, and conflict-of-interest provisions and its hearing panel found Allison’s actions were deliberate, deceptive, and in violation of rules designed to protect clients and ensure proper supervision.
The total fees he collected for his trading activities were approximately $18,798 and conducted transactions involving over $3.8 million.
As well as the fine and ban, Allison will pay costs of $10,000.
