Skip Navigation
About

News Release

Securities Commission Fines Williams, Reprimands Him and Mellios Over Fund Trading Without Registration

  • Date:

    1996-03-22

  • Number:

    96/11

Released: March 19, 1996  Contact: Ron Messent  660-4800 or (BC only) 1-800-373-6393

In a decision which re-emphasizes the reasons for registration of mutual fund salespersons and the importance of the "know your client" rule to registered salespersons, the B.C. Securities Commission has fined John Philip MacKenzie Williams $1,000 and has reprimanded Williams and his former colleague, Aristedes Mellios.

Williams was fined and reprimanded for holding himself out to a member of the public as a mutual fund salesperson and for trading mutual funds without registration. Mellios, once registered to sell mutual funds, was reprimanded for facilitating Williams' trading and for failing to comply with the "know your client" rule.

In announcing the decision, the Securities Commission said that neither Williams nor Mellios will be permitted to seek registration to trade securities without having taken an appropriate course.

The Commission order, issued following a December 1995 hearing, relates to two transactions arranged by Williams for a client he had known for two years. When they first met, Williams was registered to sell mutual funds. He was not registered for a period of time when he continued to advise the client nor at the time the client decided to purchase the mutual funds.

Williams knew that the client believed him to be registered and did nothing to correct that view. Williams asked Mellios, who was registered at the time of the first transaction, to process the purchases. Mellios never met the client and made no attempt to determine the client's investment needs or objectives or the suitability of the proposed purchases. This breaches what the Commission described as "one of the most important rules imposed on registrants - the know your client' rule", which recognizes that a registrant can give an investor expert advice only when the registrant knows the investor's financial situation, needs and objectives.

The Commission noted that Williams had knowingly contravened the registration requirements of the Act and had held himself out as being registered when he was not. The Commission said:

The courts and the Commission have recognized in several decisions that the Act is aimed at regulating the market and protecting the public, and that a cornerstone of the regulatory structure established by the Act is the requirement that people advising and trading in securities on behalf of others be registered. This is intended to ensure that the investing public receives expert advice from competent and ethical people.

With respect to Mellios, the Commission said:
Mellios was registered under the Act, but failed to comply with one of the most important rules imposed on registrants - the "know your client" rule. This rule is based upon the recognition that it is impossible for a registrant to give an investor the expert advice to which the investor is entitled unless the registrant knows the investor's financial situation, needs and objectives. On the basis of Mellios' testimony, we are concerned that, even now, Mellios does not fully understand either the importance or the obligations of the "know your client" rule.

The British Columbia Securities Commission is a provincial government agency responsible for regulating trading in securities and exchange contracts.

Copies of the Commission's decision (7 pages) may be obtained in person at 1100 - 865 Hornby Street, Vancouver, British Columbia.