IIROC fines advisor $70K for due diligence failures, mishandling of client information

An IIROC hearing panel has fined an advisor $70,000, and suspended him for three months, for using predetermined investment profiles for clients, which represents a due diligence failure, and for handling clients’ information inappropriately.

Shafique Hirani was MFDA-registered and worked for Investors Group Financial Services Inc. (IG Financial) in Calgary from November 1995 to February 2015. He then became IIROC-registered and worked with Investors Group Securities (IG Securities) before being fired in April 2015.

While Hirani was MFDA-registered, he was previously warned twice by IG Financial about using blank, pre-signed client forms, the settlement agreement says.

Beginning in January 2014, Hirani and IG Securities began filling out client application forms to ease his move to IG Securities, before Hirani registered with IIROC, the settlement agreement says.

IG Securities stored the forms with the aim of using them to open accounts once Hirani became IIROC-registered. Various staff from the firms helped Hirani with this process. IG Financial and IG Securities had a key role in designing and implementing the process by which the clients would be transferred to the latter firm, the settlement agreement says.

Hirani allowed or directed his team to use predetermined investment profiles on many of his clients’ account application forms, the settlement agreement says. In some cases, the profiles were inserted into partially completed forms already signed by clients.

As a result, 364 of about 368 clients transferred to IG Securities contained an identical profile, which included high investment knowledge and risk tolerance, and investment objectives of 100% long-term growth, says the settlement agreement.

While there are no allegations of unsuitability of investments, “clients’ account forms set out personal and financial information that, on their face, raised issues about internal consistency with this stated investment profile,” says the settlement agreement.

Inappropriate handling of clients’ information

Hirani also failed to take appropriate care in handling clients’ personal information by having staff upload client documents to Dropbox, the settlement agreement says. Documents included account forms, account statements from financial institutions, tax assessments and mortgage details. Documents had personal information including account numbers, home addresses, social insurance numbers and income tax information.

More than 35,000 documents were uploaded to Hirani’s Dropbox account by April 2015. He continued to use Dropbox after becoming IIROC-registered with IG Securities, says the settlement agreement, and after being fired. A former IG Securities employee also had a portable storage device with the same client documents as on Dropbox, which was returned to IG Securities. Both the use of Dropbox and the device violated IG Securities’ security policies.

No clients complained nor were harmed by Hirani’s actions, the settlement agreement says. The advisor has been working with Aligned Capital Partners Inc. since May 2015 under close supervision with no complaints or concerns.

Along with the fine, Hirani is suspended for three months beginning on Nov. 2, 2018. Also, he must be closely supervised for six months, successfully rewrite the Conduct and Practices Handbook exam and pay costs of $15,000.

Read the settlement agreement here.

Staff

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