Ruling Disciplinary Committee | DSI 2007-02

Mixing private and business interests by investment adviser

DSI Disciplinary Committee ruling dated June 30, 2007.

The DSI Disciplinary Committee has ruled in a case against a senior investment adviser. The complaint concerned serious conflicts of interest in the relationship with three senior advisory clients. The adviser was authorized on their accounts, regularly withdrew cash, performed private services for a fee, accepted cash and gifts for a private trip and purchased a client’s home at a substantial discount. The committee found that the adviser enjoyed substantial private benefit and was guilty of a very serious blending of private and business interests.

Disciplinary Committee ruling

The Disciplinary Committee ruled that this conduct constituted a very serious violation of the standards of competence and integrity contained in the Code of Conduct. The committee imposed the measure of expulsion.

Articles DSI Code of Conduct applicable: 7.1.1, 7.1.2, 7.1.4, 7.1.5, 7.3.1, 7.3.5

Linkage to DSI Core Principles:

• Core principle 1: Take responsibility.
  The advisor had a responsibility to act with integrity and strictly separate private benefits from his professional role.
• Core principle 3: Act carefully
  Performing private services and accepting money and gifts from clients is contrary to diligence and professionalism.
• Core principle 7: Be clear about interests
  Not reporting proxies and accepting private benefits creates a serious appearance of conflict of interest.
• Core principle 10: Act honestly
  Honesty and transparency are essential; taking advantage of clients damages trust in the industry.