Advisor fined $60,000 for failing to stop unsuitable trades

Respondent admitted he didn’t act quick enough to prevent elderly client’s son losing more than $52,000

Advisor fined $60,000 for failing to stop unsuitable trades

A Burlington-based financial advisor has been fined $60,000 by IIROC for failing to do his due diligence when the son of an elderly client ordered multiple short-term, risky trades on his mother’s account.

In late July 2014 Lelio De Cicco became the registered representative for a 90 year old client from BC. In 2013 the Supreme Court of BC, had declared that client incapable of managing her affairs and power of attorney was given to her son. That client’s account, worth more than $450,000, was also subject to oversight by the BC Public Guardian.

Between August 2014 and September 2015, the client’s son engaged in risky short-term trading and securities purchases on his mother’s account. He “aggressively” pushed De Cicco and his assistants to execute these risky trades. According to IIROC’s settlement agreement with De Cicco, those trades were in excess of the client’s risk tolerance and resulted in a loss of more than $50,000.

In June of 2014, the client’s account was managed by a different Scotia advisor. The client’s son contacted that advisor about trading options on his mother’s account. The client’s son revised the objectives and raised the risk tolerance on his mother’s account. The son then executed 55 unsolicited trades on the account, 25 of which were short-term trades. The original advisor told the client’s son he was unwilling to facilitate any further trades on the account. The original advisor and the client’s son agreed to transfer the account to De Cicco’s management.

The former advisor notified De Cicco of his concerns about the son’s trading behaviour.

De Cicco met the client’s son in late July 2014, but the settlement agreement states they didn’t have “substantive discussions about the account.” De Cicco had no further meetings with the son, despite trying to arrange a time to discuss the account more meaningfully. De Cicco told IIROC that he planned to address the son’s past trading behaviour in a second meeting, but he ultimately failed to do so.

Starting in August, 180 trades were executed on the account. 137 of those were unsolicited. Of all the trades, 67 were entered by De Cicco while the remaining 113 were entered by assistants at his branch. De Cicco asked the client’s son to stop ordering these trades, at which point the son started calling the assistants directly and placing orders with them. De Cicco told the assistants not to take the orders, but the client’s son “aggressively pressed the assistants,” according to the settlement agreement.

The client’s son traded securities over a short period which the settlement agreement describes as “inherently risky.” He also traded in “speculative” USD options.

By September 2015 the overall high-risk component of the account had increased from 51 percent to 82 percent. The account had also lost $52,540 in trading losses. Over that same period, De Cicco earned fees of approximately $3,500 on the account.

On October 1, 2015, the B.C. Public Guardian directed Scotia to freeze the client account and forwarded a complaint to IIROC. Scotia reimbursed the client account roughly $141,000 which De Cicco has since reimbursed Scotia through withheld compensation. 

For failing to use due diligence to learn the essential facts of the client and failing to ensure the orders and positions were suitable, De Cicco was fined $60,000 as well as a disgorgement of $3,500 and costs of $3,000.