Rep sanctioned after ignoring clients’ red flags

A rep who failed to address signs of suspicious trading activity by some of her clients — and took trading instructions through apps, such as WhatsApp, that prevented her firms from supervising these communications — has been sanctioned in a settlement with the Investment Industry Regulatory Organization of Canada (IIROC).

A hearing panel approved a settlement with Tiffany Sweeney, a Vancouver-based rep at PI Financial Corp. and later at Research Capital Corp. The settlement included admissions that she violated IIROC rules by failing to “fulfill her gatekeeper responsibilities” and by communicating with clients through WhatsUp and Signal Messenger, which are unapproved apps.

Under the settlement, Sweeney was fined $50,000, ordered to disgorge $28,806 in commissions and pay $15,000 in costs. She also agreed to a one-month suspension that runs from Sept. 1 to Sept. 30.

According to the settlement, between December 2017 and October 2018, “Sweeney facilitated activity in seven accounts for five different clients which generated a number of indicators or red flags which suggested that the accounts may have been engaged in activity that was suspicious.”

Several of the accounts had links to a client who was the sole director of a couple of firms, and the accounts received large deposits of shares around the same time. Another red flag was that some of the accountholders had consulting relationships with the issuers. The shares were often sold quickly at a loss and the proceeds were often quickly withdrawn after the shares were sold.

“These red flags generated multiple inquiries from the compliance department,” the settlement said. These repeated questions “should have caused Sweeney to make further inquiries to ensure that the account activity was undertaken for legitimate purposes.”

While she complied with all of the requests from her compliance department, the settlement said, “further review and investigation was warranted by Sweeney in respect of the activity in the accounts. By failing to do so, she failed to fulfill her gatekeeper responsibilities.”

Additionally, the settlement said that Sweeney used WhatsApp Messenger and Signal Messenger for certain communications with clients in violation of her dealers’ policies. Using the apps prevented the firms from monitoring those interactions with clients.

“Sweeney’s use of WhatsApp Messenger and Signal Messenger to communicate with clients was not consistent with her obligations to observe high standards of conduct,” the settlement said.

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.