Carolann Steinhoff faces a suspension, a fine and other penalties following an investigation into her handling of a couple’s investment account.
Canada’s regulator of stock-brokers has elected to hand a Vancouver Island investment advisor an 18-month suspension and a $100,000 fine following a lengthy investigation.
Carolann Steinhoff has also been ordered by the Investment Industry Regulatory Organization of Canada (IIROC) to relinquish $6,613 worth of commissions earned on trades.
IIROC has ordered that when the suspension ends, Steinhoff will face 12 months of strict supervision and then another six months of close supervision. As well she must pay $20,000 to IIROC to cover its investigative and prosecutorial costs, and repeat the Conduct and Practises Course before she is re-registered.
Details of the sanctions, which are subject to an appeal, were released on July 4, 2012.
Steinhoff was facing a series of allegations relating to her handling of a young couple’s investment account.
The allegations that were proven were that Steinhoff invested $240,000 of her clients’ money without first obtaining their approval as to the specific securities to be purchased. Known as CK and AK, the couple were married and in their early 30s.
Furthermore, when Steinhoff used $120,000, borrowed on margin, to purchase securities, the use of margin to that extent was inconsistent with the clients’ investment objectives because the money was needed for a home purchase in approximately four months.
Steinhoff “invested the money and when it was needed it wasn’t available,” said Warren Funt, Vice president, Western Canada IIROC.
Also, Steinhoff recommended her clients continue with the previously purchased investments even though they did not suit her clients’ objectives.
Finally, Steinhoff made a false statement in response to an inquiry from her firm’s Chief Compliance Officer, and Chief Regulatory Counsel, who had requested information after receiving a written complaint. In an email, Steinhoff erroneously stated that “Margin and leverage were brought up by (CK)”.
After CK and AK requested their money, the account only had $55,000. This was a huge loss for the clients who had told Steinhoff that they could not afford to lose any of their down payment.
Counsel for Steinhoff argued that his client did not deserve a permanent ban, or even any suspension. Her counsel also argued for a minimum fine of $10,000 to $15,000, and said there was no basis for an award of costs against the respondent.
Currently, Steinhoff has filed an appeal on the panel’s decision of the penalty and she’s asked the commission to stay the sanctions pending the outcome of the appeal.