Former rep admits he misappropriated $210,000 from margin accounts of dad’s spouse, then tried to hide it with risky trades
The Investment Industry Regulatory Organization of Canada (IIROC) has ordered Philip Bélisle, a former representative with National Bank Financial (NBF), to pay $100,000 in fines, a $12,600 disgorgement, and $10,000 in costs for misappropriating over $200,000 from a client’s margin accounts.
In a written liability decision dated July 5, IIROC said that in May 2014, the client – a 62-year-old woman who was married to Bélisle’s father – opened three managed accounts with cash and investments valued at net $850,000, to be managed at Bélisle’s discretion.
That November, she opened one Canadian-dollar and one U.S.-dollar margin account with NBF. The account opening documents the client signed included an options trading agreement, which stated that Bélisle would provide management on a non-discretionary basis.
But according to IIROC, Bélisle claimed the client signed the margin account opening documents without fully understanding them. In reality, he said, it was agreed with his father that the accounts would be opened in her name only, and that it would be used as a vehicle to borrow funds – without her knowledge or consent – that Bélisle would use to pay for renovations at his own residence.
“According to [Bélisle], despite the fact that the margin accounts were not discretionary by nature, it was agreed with [Bélisle’s father] that these accounts would be managed as such, that is, without obtaining the client’s prior authorization to execute transactions or trades in the accounts,” the document said.
Bélisle never filed any written document authorizing him to exercise any control over the margin accounts, but IIROC said he claimed his father had gotten a verbal authorization from the spouse that would allow him to give instructions relating to her accounts.
On February 16, 2015, Bélisle transferred $150,000 from the client’s margin accounts to his father’s bank account; because NBF’s internal policies require a signed transfer request for transfers exceeding $25,000, he instructed his assistant to forge the client’s signature on a request form. In the following weeks, he effected three additional transfers of $20,000 each from the margin accounts, and transferred the entire $210,000 from his father’s account to his own account.
To keep his father’s spouse in the dark, Bélisle had his assistant make changes to ensure documents relating to activity within the margin accounts went to his father’s email address, and that she was not notified when documents were available.
In an attempt to cover the $210,000 deficit he left behind, Bélisle executed options trades according to a risky leveraging strategy that the client had not approved. Between February 2015 and November 2016, he executed approximately 1,250 trades involving the options and shares in the margin accounts; over that time, the average debit balance in the accounts was nearly $360,000, and a net commission of $12,600 was paid to Bélisle.
“In late October 2016, … the debit side of the client’s margin accounts hit close to $543,000 CAD, including the $210,000 CAD initially appropriated by the Respondent,” IIROC said. “[T]he options trading carried out … was not within the bounds of good business practice, given the large number of trades, the excessive amount of margin used in the accounts, and the speculative nature of the applied strategy, which went against the client’s interests.”
IIROC has also imposed a temporary ban of 10 years less 14 months on Bélisle, to be followed by two years of strict supervision.
