Ruling Disciplinary Committee | DSI 2018-02

Investment adviser reprimanded for breach of conduct rules – I

On Jan. 4, 2019, the DSI Disciplinary Committee issued its decision in a case against an investment adviser working at Bank X. The case involved conduct that DSI believed violated several articles of the Code of Conduct, including failure to adhere to internal policies, independently executing transactions without client instructions, and inadequate record keeping.

Disciplinary Committee ruling

The Disciplinary Committee ruled that the investment adviser had acted in a number of areas of disciplinary culpability. For example, the adviser accepted an order for an AEX weekly option via his cell phone, which was contrary to the bank’s policy. The adviser also transferred a sum of money between accounts without explicit instructions from a client, which was not permitted. In addition, it was found that the reporting of client conversations was not always accurate or complete.

However, the committee took into account that the bank’s policy was not clear on some points and that the adviser was allowed to operate independently for many years. Partly for this reason, the complaint was upheld only in part.

Articles 7.1.2, 7.1.4 and 7.1.5 Code of Conduct: DSI Core principle 3: Act carefully & DSI Core principle 5: Comply with rules

The Disciplinary Committee imposed a reprimand on the investment adviser, taking into account that the proceedings lasted more than two years. No litigation costs order was imposed.

Linkage to DSI Core Principles:

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