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by Mike Caswell

The Canadian Investment Regulatory Organization has imposed sanctions totalling $873,924 against Desjardins Securities Inc., citing the firm for supervisory failures with two employees. These included an employee who generated $1.1-million in commissions through options trades in the accounts of a client who had no knowledge of options. Another employee used a roundabout method to circumvent restrictions on OTC Markets trades, despite being under strict supervision.

The penalties for Desjardins are contained in a settlement agreement that CIRO released on Thursday, Nov. 14. Desjardins has agreed to pay a $225,000 fine and to disgorge $623,924 that it received in commissions (with the amount reduced to reflect money that the firm paid out to the clients). Desjardins will also pay $25,000 in CIRO's costs. The penalties represent a negotiated settlement in which Desjardins has admitted to the violations, at least for the purposes of settling the matter.

The violations, as set out by CIRO, stem in part from an employee, only identified as "MB," who implemented what the settlement describes as an "active options strategy" for clients in the summer of 2020. As with many options strategies, the employee relied on short-term share price movements to generate profits for the clients. MB also opened margin accounts for the clients to facilitate the trades.

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