IIROC fines CIBC World Markets and former branch manager for inadequate supervision

CIBC World Markets Inc. was fined $125,000 by IIROC for failing to ensure increases to clients’ risk tolerances were suitable.

A branch manager, Robert Trickey, also kept inadequate supervision records for the advisor, Geraldine Mannings, a Sept. 25 settlement agreement said.

Trickey, the branch manager for CIBC Wood Gundy in Nelson, B.C. from 2003 to 2017, was fined $40,000. Mannings was fined $35,000 by IIROC in 2015 for making unsuitable recommendations.

From 2009 to 2013, Trickey raised concerns about the suitability of trades by Mannings, which were outside her clients’ stated investment objectives and risk tolerance, the agreement said. He resolved most of the concerns by approving updates to the KYC forms to increase clients’ risk tolerance. Trickey “largely relied” on Mannings to verify that the clients understood and accepted the consequences of the risk tolerance updates, the agreement said.

In some cases, Trickey approved the KYC updates “where the only change was to increase the risk tolerance, sometimes to 100% high risk,” the settlement agreement said. Some of the updates were for retired clients on fixed incomes.

The changes to the risk tolerances were always made in response to a suitability query after the purchase of a high-risk security that didn’t correspond to the clients’ previously stated risk tolerances, the agreement said.

“In approving increases to the risk tolerance for some of Mannings’ clients to resolve suitability queries, [Trickey] took inadequate steps to independently assess whether the increases in risk tolerance were suitable for the clients,” the settlement agreement said. “In addition, he failed to adequately document all of his supervision activities.”

Inadequate supervision by CIBC’s compliance department

CIBC’s head office compliance department was aware of the suitability questions regarding Mannings’ clients, and that many were resolved by increasing the clients’ risk tolerance without any other change to the client’s circumstances on the KYC update, the settlement agreement said. The compliance department notified branch management of their concerns and relied on Trickey to verify the updates were suitable.

In 2009, the compliance department created an action plan that required branch managers to receive more detail from investment advisors in response to suitability queries and not just accept updated KYCs, the settlement agreement said. The plan was approved and given to Trickey’s supervisor. But the head office compliance department didn’t have a testing plan to ensure action plans were implemented until 2015.

Supervisory changes by CIBC

CIBC has made changes to its compliance policies and procedures along with its management structure, the agreement said, including testing to ensure action plans are implemented. CIBC is also piloting a new regional supervision model with dedicated supervisors and support staff carrying out supervisory functions previously performed by local branch management.

Trickey is no longer the branch manager in Nelson “as a result of a restructuring of management,” the agreement said. He is still with the branch. Mannings has left the securities industry.

In addition to the fines, Trickey agreed to pay costs of $5,000 and CIBC agreed to pay $10,000.

Read the settlement agreement here.