The advisor used an active trading strategy to produce more than $1 million in commissions from trading for three senior clients over five years
A hearing panel of the Investment Industry Regulatory Organization of Canada (IIROC) has approved a settlement with Toronto-based TD Waterhouse Canada Inc. in which the firm admitted failing to adequately supervise former advisor David Gary Durno, the self-regulatory organization announced Wednesday.
TD Waterhouse agreed to pay a $140,000 fine and $10,000 in costs.
In the agreement, the firm acknowledged that it failed to properly oversee Durno’s trading activity, which generated commissions that “frequently exceeded the commission thresholds for selecting accounts for monthly review” under IIROC rules.
IIROC fines advisor $150,000 for failing to prioritize clients’ interests
Durno generated gross commissions of slightly less than $1.2 million from trading for three senior clients between 2010 and 2015, according to the settlement, with about half of that going to TD Waterhouse. The clients’ costs, “would have been significantly lower in fee-based accounts. The commissions paid by the clients reduced the returns of their investment portfolios,” the agreement states.
TD Waterhouse “failed to identify, query or prevent Durno’s trading and accordingly did not adequately supervise its employee …” it adds.
Ultimately, the firm launched an investigation in response to a client complaint, which led to TD Waterhouse paying approximately $550,000 in compensation to three clients, the settlement notes.
In addition, TD Waterhouse has improved its oversight of commissions generated by its advisors by implementing a new electronic trade surveillance system in its head office, which facilitates the “detection of trading that generates excessive commissions,” the agreement states.
Durno settled with IIROC in July; he admitted that he violated IIROC rules by implementing an active trading strategy for two senior clients, which “generated large commissions for himself and his firm but reduced client profits.” In settling his case, he agreed to a fine of $150,000 and to pay costs of $5,000.