In two separate incidents, advisor made false statements to his dealer and hid an error from his client
IIROC has fined an ex-advisor $30,000 for hiding his relationship with a client subject to a securities regulatory proceeding and, separately, hiding an error from a different client.
Michael Alexander McKee was an advisor with Scotia Capital in Toronto until he was terminated in May 2017. In March of 2017, McKee opened an account in the name of a new client, the wife of an individual whose personal and corporate accounts were subject to a securities regulatory proceeding. According to the IIROC settlement agreement, McKee took instruction directly from the individual, not his wife in whose name he was opening the account.
McKee was asked by his branch manager if the wife was related to the individual. The branch manager, though, used the wrong first name when asking about the individual. McKee replied that he “was not aware of any connection” and the client “had nothing to do with [the Corporation]” subject to the securities regulatory proceeding. Both of these statements, according to the settlement agreement, were false representations.
“[McKee] ought to have known that his Branch Manager had misspelled the spouse’s name,” the agreement reads.
Scotia eventually uncovered the misrepresentation and closed the account in early May 2017.
In a separate incident, McKee made an error executing an order on two margin accounts, one personal and one corporate, he’d managed since June 2016. The accounts held shares of Intertain Group Ltd. In August 2016 Intertain announced a restructuring wherein shareholders could elect to keep their Intertain shares or convert them to shares of Jackpotjoy plc. Without other instruction by January 20, 2017, all Intertain shares would automatically convert to Jackpotjoy.
The client instructed McKee to keep the Intertain shares in his personal and corporate accounts, converting only the Intertain convertible debentures in the corporate account. McKee entered instructions to convert the debentures but did not enter instructions to keep the Intertain shares. In January of 2017 the Intertain shares were converted to Jackpotjoy.
Because Jackpotjoy was not margin eligible, McKee was handed a margin call for the corporate account in the amount of $657,556. Once he received the call, he did not contact his client or receive instructions on how to proceed. Scotia then told McKee that all the shares would be sold by March of 2017. Without instruction from the client, the shares were sold.
McKee did not inform the client of the sale until April, almost one month after the sale and two and a half months after the margin call.
The client was compensated by Scotia.
For making false statements to his dealer member and failing to inform his client about the error and subsequent margin call, McKee was terminated by Scotia.
In addition to his $30,000 fine from IIROC, McKee must pay costs of $5,000 and will have to re-write the conduct and practices handbook course if he ever re-registers with IIROC.