The Investment Industry Regulatory Organization of Canada (IIROC) has imposed penalties on Edward Peter Bodnarchuk, a former Winnipeg advisor, for making unsuitable recommendations and causing significant losses to two clients through high-risk investments.
As reported in IIROC’s penalty decision, Bodnarchuk’s violations concerned two clients: one he worked with from July 2008 to November 2012 (referred to as “G.S.”), and the other from August 2010 to April 2016 (“T.B.”).
In both cases, investigators found that he moved both clients’ portfolios from mutual funds to make discretionary trades in junior exploration stocks, which were of the highest risk. Neither investor had an accurate grasp of the risk involved, including the possibility that they could be wiped out. Bodnarchuk had completed the NCAF for them and had them place their signature, indicating a more sophisticated knowledge of the stocks.
“Both clients were of relatively modest means and had no experience in the junior resource market,” the IIROC decision noted, adding that both were relying on their investments to build capital to finance their retirement. “Uncontroverted evidence was presented that the [Bodnarchuk] told the clients of the respective trades after the fact, not before.”
Other evidence presented to the IIROC decision panel showed that Bodnarchuk was embroiled in a proxy battle with several of the investment companies in question, and that he involved his clients’ shares as well as his own in the contest. “This activity was beyond the scope of a Registrant and without knowledge or permission of [his] dealer,” the decision noted.
“Both clients suffered significant loss with the volatility of the market,” it added. G.S., who was 80% concentrated in the high-risk investment, lost around $30,000, while T.B. had a 90% high-risk concentration and lost $212,000.
As a result of its findings, the IIROC Panel imposed the following penalties on Bodnarchuk:
- A fine amounting to $100,000;
- An 18-month suspension from registration in any capacity with IIROC;
- A successful completion of the CPH examination; and
- Strict supervision for 12 months upon re-registration.
He is also required to pay costs in the amount of $20,000.
Speaking at the hearing, Bodnarchuk acknowledged that he had breached his duty, and said that he had moved many of his clients out of high-risk investments after the proceedings with IIROC started.
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