Risky Trading Fallout: RBC Rep Fined for $8.7M in Client Losses

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Risky Trading Fallout: RBC Rep Fined for $8.7M in Client Losses

Jul 9, 2025

A former representative of RBC Dominion Securities has been sanctioned after engaging in unauthorized, high-risk commodity futures trading that resulted in massive losses for clients, according to the Canadian Investment Regulatory Organization (CIRO).

$8.7 Million in Client Losses from Discretionary Trading

Between June 2017 and December 2019, Hongjia Liu, a Vancouver-based rep, executed discretionary trades across a large portion of his futures portfolio. This activity involved frequent, high-volume transactions in volatile markets—energy, metals, and agricultural commodities—without documented client permission.

The trading strategy included writing naked futures contracts. While this technique allowed Liu to earn premium income, it carried “potentially unlimited losses,” according to the official settlement.

Clients ultimately lost $8.7 million, while Liu and his dealer earned $4.8 million in commissions—$2.4 million of which went directly to Liu.

Violations of RBC and CIRO Rules Confirmed

The CIRO settlement states that Liu was fully aware his conduct violated both firm policies and CIRO standards. RBC explicitly prohibits discretionary trading in futures accounts. Yet, Liu misled supervisors, claiming he had obtained client authorization for each trade.

His actions only came to light after multiple client complaints triggered an internal audit, revealing the unauthorized nature of his trades.

Sanctions Reflect Misconduct and Financial Circumstances

Under the agreement approved by CIRO’s hearing panel, Liu will pay:

$225,000 in disgorgement
$75,000 in fines
$15,000 in legal costs
A six-month suspension from the investment industry

He has not worked in the industry since his termination in September 2020 and also voluntarily contributed $75,000 toward settling client complaints.

The panel described the sanctions as “fair and reasonable,” taking into account Liu’s financial condition, lack of previous disciplinary actions, and his early disclosure of the misconduct.

Investor Protection and Regulatory Oversight
The incident underscores the critical role of regulatory bodies like CIRO in maintaining financial market integrity and protecting investor assets. It also highlights the importance of oversight in complex investment areas such as commodity futures.

High-Risk Products Demand Strict Compliance
Commodity futures are inherently risky, especially when used in leveraged or uncovered strategies like the ones employed by Liu. These products require clear disclosures, suitability assessments, and often, written client consent for discretionary trading.

Discretionary trading without documentation not only violates regulatory expectations but also puts firms and investors at substantial financial risk

Enforcement Action Sends Strong Message

This case serves as a reminder that breaches of conduct—even if financially motivated—will result in serious consequences. Firms are encouraged to tighten internal controls, conduct regular compliance audits, and act swiftly on red flags raised by clients or supervisors.

CIRO’s Role in Market Supervision
The Canadian Investment Regulatory Organization, formed from the merger of IIROC and the MFDA, has a broad mandate to oversee the investment industry in Canada. Its goal is to ensure transparency, fairness, and accountability among registered firms and advisors.

Conclusion: A Wake-Up Call for Advisors and Firms

Liu’s case illustrates the damage that can occur when compliance is ignored in favor of commission-driven behavior. Both individual advisors and firms must remain vigilant, particularly when operating in volatile markets with products like futures.

Clients, meanwhile, are reminded to monitor their account activity regularly and seek clarification on any unfamiliar transactions. Trust and transparency remain the cornerstones of successful financial relationships.