ASC sanctions exempt market rep for suitability, KYC failures

A former exempt market dealer rep has been fined and banned by the Alberta Securities Commission (ASC) for failing to fulfill his suitability and KYC obligations to clients.

An ASC hearing panel has banned Kenton Roy Rustulka, a former rep with WealthTerra Capital Management Inc., and ordered him to pay a fine of $100,000, almost $100,000 in disgorgement and $55,000 in costs.

The sanctions followed a June 2020 disciplinary hearing, which found that Rustulka breached his obligations to clients “by making misrepresentations to his investor clients that exempt market securities were inherently low-risk, safe and secure, when in fact they were inherently high-risk, unsafe and not secure.”

The panel found that Rustulka treated the risk acknowledgement he gave to clients as procedural, rather than a genuine warning.

The panel noted that Rustulka “completely failed to execute his KYC and suitability obligations” and exacerbated that failure by encouraging clients “to leverage and liquidate their other assets in order to make additional investments.”

Rustulka did not participate in the ASC’s hearing to adjudicate the disciplinary allegations against him, but he did appear at the sanctions hearing.

According to the panel’s decision, ASC staff sought a $250,000 penalty, along with disgorgement and a market ban. However, the panel ruled that a smaller penalty was warranted in this case, given the need for “moderate” specific deterrence.

The panel noted that Rustulka expressed remorse and confirmed that he “is now unemployed, has few assets left, is 61 years old and without prospects for another job or career, and is facing bankruptcy.”

The panel found that the $250,000 administrative penalty suggested by ASC staff was “higher than necessary to achieve specific and general deterrence, and disproportionate to Rustulka’s circumstances.”

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.