Ruling Disciplinary Committee | DSI 2018-01

Investment adviser reprimanded for breach of conduct of business rules – II

DSI Disciplinary Committee ruling 2018-01 dated January 4, 2019

On Jan. 4, 2019, the DSI Disciplinary Committee ruled in a case against an investment adviser at Bank X. The complaint involved, among other things, inadequate educating clients about the risks of options trading, failure to adhere to internal policies, independently executing transactions without client instructions, and inadequate record keeping.

Disciplinary Committee ruling

The Disciplinary Committee ruled that it could not be established that the adviser had failed to adequately inform clients about the operation and risks of option transactions. It did find that the adviser had executed a securities transaction without the client’s specific consent, and that relevant client conversations were not always correctly recorded in the bank’s CRM system. Also, the policy around AEX weekly options was not always strictly followed, but the committee took into account that the policy was not clear in some respects and that the adviser was allowed to operate independently for many years.

Articles DSI Code of Conduct applicable: Articles 7.1.2, 7.1.4 and 7.1.5

The Disciplinary Committee considered the complaint to be partly founded and imposed a reprimand on the investment adviser. No order for costs of proceedings was imposed.

Linkage to DSI Core Principles.

• Core Principle 3: Act carefully:
  The advisor should have acted more carefully when conducting transactions and recording customer conversations to better safeguard the interests of the customer and the organization.
• Core Principle 5: Comply with rules:
  Failure to strictly adhere to internal policies and conducting transactions independently without an explicit order violate professional standards and regulations within the financial industry.