Surrey senior wins $ 200,000 damage claim against advisers who were ruled negligent

An elderly Surrey man has won a $ 212,952 damage claim against his advisers in a complex investment strategy because the brokers didn’t do enough to determine whether he was suitable for their highrisk strategy, thus violating their obligations to “know their client.”

In a written judgment released Wednesday, B. C. Supreme Court Justice Elaine Adair ruled that Traian Moldovan and Robert Holmes, brokers at Canaccord Genuity, were negligent for failing to take reasonable care to assess whether their options- trading program was appropriate for the account of Marlin Investments Inc., the holding company of Kenneth Marlin.

The lawsuit stems from substantial losses suffered by Moldovan and Holmes’ clients during stock- market volatility in the summer and fall of 2008, which rendered their optiontrading program ineffective in generating the income they expected from its strategy.

Marlin, who was 82 at the time he opened the account in 2004, was one of nine clients named on the suit, but the only one who had not previously settled with the defendants.

In the decision, Adair noted that Moldovan and Holmes acknowledged the duty to “know their client” under securities legislation and industry rules, but argued in their defence that Marlin had given them enough information on client forms to determine he was a sophisticated investor.

Marlin, who has a family connection to the Marlin Travel company, had a career in the financial industry in Alberta, mostly in mutual fund sales.

Adair ruled that the defendants hadn’t done enough to determine whether Marlin had the $ 1- million net worth and an ability to sustain losses that were criteria for investing in the option program. Client forms indicated he had net liquid assets of $ 500,000 and a net worth of $ 700,000, but at trial, Marlin said his holding company had few assets, and as of 2005, few fixed assets outside of a car. Further, he said his income consisted of CPP, old- age security and government subsidies.

Marlin’s age was another indicator of his unsuitability. Canaccord’s internal employee policies warn against involving older, low- net- worth and unsophisticated investors in speculative investments.

Adair ruled that “( Marlin) should and would have been excluded from the ( option program) at the outset.”

Moldovan and Holmes also face a disciplinary hearing before the Investment Industry Regulatory Organization of Canada over their actions in the options- trading program. IIROC alleges the pair failed to use due diligence to remain informed of essential facts relative to trading orders and for failing to ensure recommendations were suitable for clients. Those allegations have not been proven in a hearing.

Moldovan and Holmes no longer work for Canaccord Genuity.