OSC suspends Argosy Securities advisor over KYC misrepresentation

The advisor had worked in Ontario’s financial services industry since 1988 and had been registered with Argosy Securities Inc., a CIRO-member investment dealer, since July 30, 2009. His record already included a 2011 IIROC settlement in which he admitted selling an unsuitable investment to a vulnerable elderly couple, causing them substantial financial loss; he was fined $20,000 and ordered to pay costs and disgorge his commission.

Staff’s more recent investigation found that the advisor routinely breached Argosy’s policies on selling exempt market products and communicating with clients by email, contravening his know-your-client and suitability obligations and his duty to deal with clients fairly, honestly and in good faith under OSC Rule 31-505. In August 2022, staff said he also engaged in unauthorized trading, redeeming mutual fund holdings that had been mistakenly transferred into a client’s account instead of confirming the transfer or obtaining instructions.

Much of the conduct centered on Argosy’s exempt market product policy, adopted in October 2021 to govern sales of those high-risk products. Staff said the advisor repeatedly tried to place exempt market trades without the required pre-approval. In July 2022, he admitted deliberately misrepresenting two retired clients’ risk tolerance on their KYC forms to support recommendations he considered “safe,” even though Argosy’s policy classified the products as high-risk. The following month, he recommended two $100,000 investments in the same product for a retired couple with a combined income under $30,000 a year – trades compliance rejected for breaching concentration limits. Compliance also blocked a similar recommendation for an 81-year-old client in September 2022, and rejected further exempt market trades in December 2022 and March 2023.

Staff further found the advisor solicited clients using aggressive, misleading language, including describing a fund as real estate co-ownership, and sent emails to Argosy’s compliance officers – several copied to the firm’s ultimate designated person – demanding they be disciplined or fired for enforcing the rules. In one email cited in the reasons, he wrote: “Give you this rationed commodity… or should I give it to the next in line?”

Tedesco concluded that the advisor’s admitted misrepresentations, unauthorized trading and treatment of Argosy’s compliance staff reflected a disregard for the regulatory framework governing exempt market product sales. For compliance teams across the industry, the case shows how pressure applied to internal gatekeepers can factor into a regulator’s suitability assessment – and, in this case, cost an advisor his registration entirely.