Former IIROC rep fined over unauthorized discretionary trading

By Staff | July 23, 2018 | Last updated on July 23, 2018
3 min read

A former registered rep has been fined $50,000, including disgorgement, and banned for two years by IIROC for allegedly engaging in discretionary trading that wasn’t preauthorized.

The SRO alleges that Jean-Louis Trudeau’s misconduct occurred between January 2013 and October 2014, when he was registered at Mackie Research Capital Corporation in Montreal. Trudeau is no longer registered with an IIROC firm, a press release says, and he is prohibited from applying to re-register for two years.

The misconduct began, IIROC says in its penalty decision document, after Trudeau started serving a long-time Mackie client whose previous rep had left the firm.

The client, who’d been with the firm since 1990, was assigned to Trudeau in October 2012, the document says, but the previous rep was still involved in the client’s affairs through a formal power of attorney that authorized the previous rep to, in the client’s name and via Trudeau, order the purchase and sale of securities.

IIROC launched an investigation when the client sent a letter to both Trudeau and the firm in November 2014, following a meeting between Trudeau, the previous rep and the client, the penalty document says. That letter, reproduced in the document, shows the client wanted Trudeau to reimburse her $81,826 due to alleged losses her investment account incurred from October 2012 to November 2014.

The alleged losses, the client said, were a result of Trudeau’s “carelessness in that [he] did not respect the fundamental rule which applies to all facets of the relationship between a broker and their client namely: KNOW YOUR CLIENT WELL.”

The letter also stated that Trudeau allegedly “purchased stakes without first communicating with me or [the previous advisor],” and sold investments that the client and previous rep would have kept. “In addition, my account should have been managed conservatively,” the client wrote.

Days after the letter arrived, Trudeau left his job at Mackie, IIROC says in the penalty document, and he’s “no longer active in the securities industry.”

The decision document shows that the client also alleged Trudeau “executed unauthorized trades.” However, since neither the client nor the previous advisor appeared at the hearing on the merits or the penalty hearing to testify, that count was dropped, IIROC says.

Following a hearing in November 2017, Trudeau was unanimously found guilty of discretionary trading that wasn’t preauthorized. At an April 2018 penalty hearing, IIROC imposed the $50,000 fine, including disgorgement of commissions earned on 30 trades, the penalty document says, along with the two-year ban and costs of $5,000.

Further, Trudeau’s reapproval as an IIROC rep would require him to take “the exam based on the Conduct and Practices Handbook,” after which he’d be strictly supervised for 12 months and closely supervised for six, IIROC says.

In his argument against what started as a recommended fine of between $50,000 and $60,000, the SRO says Trudeau “declared that he was in very precarious financial circumstances. He is 65 years old and has been unemployed since 2014.”

Trudeau also cited a previous complaint brought against him by the IDA (a predecessor of IIROC) in January 2006, IIROC says, which he said caused him to lose his house. He told the SRO that he paid the past IDA fine, and requested that the current fine be lower than the recommended range.

“He did not have a lot to say about the other elements of the penalty recommended […],” the penalty document says. The fine was kept on the lower end, but the ban was extended in the final decision, the document shows.

Read the penalty decision and decision on liability.

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The staff of have been covering news for financial advisors since 1998.