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by Mike Caswell

The Canadian Investment Regulatory Organization has begun proceedings against RBC Dominion Securities Inc. and one of its senior employees for failing to properly supervise Hongjia Liu, a former employee cited for inflicting $8.7-million in losses on clients through a disastrous futures strategy. CIRO claims that Mr. Liu and another employee engaged in "widespread and prolonged periods of high-volume and high-risk discretionary trading" for futures clients. The trading generated commissions that CIRO calculates to be $13.7-million.

The allegations are contained in a notice of hearing that CIRO released on Thursday, Jan. 22. In addition to RBC, the notice names one of the firm's supervisors, Peter Fullerton, as a respondent. Mr. Fullerton, who worked in Toronto, oversaw futures and options trading for RBC.

The case arises in part from discretionary trades that Mr. Liu entered between June, 2017, and December, 2019. According to CIRO, Mr. Liu generated commissions that were more than double those of the next-highest-producing adviser. The annual volume of trades, which peaked at 9,367 orders in 2018, should have made it apparent that Mr. Liu was not contacting clients ahead of each trade as required, CIRO says. At times the trades were occurring within seconds or minutes of each others, according to the notice.

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