Laurentian to pay CAD150,000 over leveraged ETF sales
Laurentian Bank Securities is to pay a CAD140,000 fine plus CAD10,000 costs over the sale of leveraged exchange-traded funds to retail investors.
A hearing panel of the Investment Industry Regulatory Organization of Canada (IIROC) has accepted a settlement agreement between IIROC staff and Laurentian Bank Securities.
Laurentian admitted that it failed to offer training to give its supervisors sufficient knowledge to adequately supervise the trading of leveraged ETFs in retail client accounts.
Specifically, Laurentian Bank Securities admitted to the following violations:
Between October 2008 and 25 April 2010, Laurentian Bank Securities failed to exercise adequate and effective supervision by not taking every measure to ensure that its supervisors fully understood the features and risks inherent in the leveraged ETFs in the accounts of two retail clients, contrary to Part 3.A (1) of IIROC Dealer Member Rule 2500; and
Between October 2008 and 25 April 2010, Laurentian Bank Securities failed to use due diligence, by neglecting to offer training to ensure that its supervisors had full knowledge to adequately supervise the trading of leveraged ETFs in its retail client accounts, contrary to Rule 18.3(b), Rule 38.2(b) and Part 3A (5) of Rule 2500 of the IIROC Dealer Member rules.
“Leveraged and inverse ETFs are examples of the kind of complex product innovation that continue to pose challenges for investors and the industry, which is why we continue to take steps to ensure dealer firms meet their obligations related to product due diligence and suitability in their sales practices,” says Rosemary Chan, IIROC senior vice president.
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