Former investment advisor fined for unsuitable recommendations
The Investment Industry Regulatory Association of Canada (IIROC) has announced a settlement agreement with sanctions imposed on a former Vancouver investment advisor who violated Dealer Member Rule 1300.1(q) by making unsuitable investment recommendations.
According to the settlement agreement dated July 2, Alykhan Kassam failed to ensure the suitability of his recommendations in two separate instances: once between March 2013 and January 2015, and another time in or around December 2014.
The first case involved client “JL”, who worked with Kassam when he was an advisor at the Vancouver branch of what is now Canaccord Genuity.
JL opened an RRSP account in 2002, initially declaring a net worth of $60,000 and investment objectives of “50% moderate growth — medium risk” and “50% short-term trading — medium to high risk.” That information was updated in 2014, when JL’s net worth was indicated as $600,000 and his investment objectives were “50% moderate growth — medium risk,” “25% short-term trading — medium to high risk,” and “25% speculative — high risk.”
Because of a series of recommendations Kassam made to sell and purchase securities in JL’s RRSP account, it became more heavily weighted toward high-risk investments. Starting from approximately 30% in January 2014, the RRSP’s concentration in high-risk securities increased to 80% in September 2014. It went on to reach 98% in January 2015, and 95% in March 2015.
The RRSP account’s market value as of September 2006 was around $61,000; Kassam made a $7,000 contribution in January 2014. By December 2014, the account’s market value had decreased to around $30,000, and it dipped further to around $22,000 by March 2015.
The second case centred on Client “DT,” who had a spousal RSP account at Canaccord with Kassam. According to an account information form from March 2004, DT’s income from all sources amounted to $75,000; he and his spouse had total assets of $230,000; and the stated investment objective was “100% moderate growth medium risk.”
“There were no account update forms signed by the client after the March 2004 Account Information Form,” IIROC said in the settlement agreement.
Kassam reportedly recommended and executed a purchase of BNK Petroleum Inc. on or around December 30, 2013; at the time, BNK Petroleum was considered a speculative, high-risk security that fell outside the account’s objective.
For the statement period ending December 31, 2013, 67% of the account’s holdings were in speculative high-risk securities. As of December 31, 2014, it was 92%, and for the next statement period ending December 31, 2015, the account held 89% in speculative, high-risk investments.
The losses relating to the purchased stake of BNK Petroleum from December 30, 2013 to June 30, 2015, were around $6,400, marking a 67% decline in its market value.
From December 30, 2013 to December 31, 2014, the DT account sustained total losses of over $18,000, representing a 72% total loss in value. From December 30, 2013 to June 30, 2015 — around which time Kassam left Canaccord — the total losses were estimated at $17,250 or 68%.
IIROC made note of other factors, including the fact that Canaccord entered into a settlement with JL for some $58,000, to which Kassam contributed $3,000 as of May 2018. Aside from having no prior disciplinary history with IIROC, he also acknowledged that he would have been subject to a higher fine and ordered to pay costs if not for his inability to pay.
Kassam has agreed to a $15,000 fine, a 60-day suspension from approval in any capacity, and a period of close supervision lasting nine months upon any registration with IIROC.