CIRO suspends Vancouver-based representative and orders $225,000 disgorgement after settlement
The Canadian Investment Regulatory Organization (CIRO) has released its reasons for decision in the matter of Hongjia Liu, following a settlement hearing held on June 18.
The decision, dated June 27, outlines findings of improper discretionary trading and imposes sanctions including a six-month suspension, fines, and costs.
According to CIRO, Liu engaged in discretionary trading in the futures accounts of 23 clients between June 2017 and December 2019.
This conduct represented over half of the trading activity in Liu’s futures book.
The trading strategy, which involved writing naked futures contracts across sectors such as energy, metals, and soft commodities, was high-risk and high-volume.
CIRO found that Liu failed to obtain prior client approval for specifics such as quantity, security, price, or timing on a significant number of trades.
CIRO reported that most of the clients were high net-worth individuals with investment experience, and their futures accounts represented a small portion of their overall assets. However, nearly all of them suffered losses, totalling approximately $8.7m.
During the same period, Liu earned an estimated $2.4m in net commissions from these trades, representing 64 percent of the revenue generated from his entire futures book.
CIRO noted that Liu had been aware his conduct contravened RBC Dominion Securities’ policies and CIRO rules.
Despite receiving internal queries from supervisors in 2017 and 2018, Liu told them he was contacting clients about trade specifics, which CIRO determined was not accurate.
CIRO also stated that documentation lacked evidence that clients had granted discretionary authority or understood the trading strategy’s suitability.
The hearing panel accepted the Settlement Agreement, which imposed a $75,000 fine, a $225,000 disgorgement, and $15,000 in costs.
Liu also agreed to a six-month suspension from acting in any registered capacity. CIRO acknowledged mitigating factors, including Liu’s self-reporting, lack of prior disciplinary history, and that he had not worked in the industry since September 2020.
Liu had also paid $75,000 to settle complaints with two clients.
The panel concluded that the sanctions fell within a reasonable range for the admitted conduct and that the settlement served the objectives of deterrence and fairness.
At all material times, Liu had been a registered representative with RBC Dominion Securities Inc. in the Vancouver area. He is currently not registered in the securities industry in any capacity.
