TORONTO – RBC Dominion Securities Inc. will pay $500,000 in a regulatory settlement for professional lapses by employees who failed to ask questions and take precautions about a client who was later convicted of fraud.
The fraud was committed by Earl Jones, who has been convicted of defrauding more than 150 clients over more than 20 years as a Montreal-based financial adviser before he was found out.
The brokerage arm of Royal Bank of Canada (TSX:RY) and two individuals admitted in the settlement to allowing Jones to have authorization to trade on behalf of numerous unrelated clients.
They also admitted to failing to question withdrawals he made on certain accounts.
Besides RBC Dominion, the Investment Industry Regulatory Organization of Canada settled with Jean-Pierre Menard and Serge Leclaire, who will pay $100,000 each and have their registrations suspended for six months.
In March, Royal Bank agreed to pay $17 million to settle a suit launched by victims of Jones, who operated a financial-services business for more than two decades.
Much of the money initially lost by Jones’ clients was held at an RBC branch on Montreal’s West Island.
The unregistered, self-styled financial planner ran a Ponzi scheme in which many of his former clients were friends or family and people he met through word-of-mouth.
Some people invested money with him directly. Others were clients through the estate-management part of his business, and some he sought out and recruited by falsely promising 10- to 12-per-cent returns on personal loans.