Richardson GMP has fired back at a former star broker suing the investment dealer for wrongful dismissal and demanding repayment of $2.1-million in loans while denying allegations it ignored his pleas to help him deal with substance abuse.
RGMP says it did not know that Adam Woodward, a one-time Calgary investment adviser and oil patch deal-maker, was dealing with alcoholism as his business and personal life descended into chaos in 2015. Mr. Woodward subsequently entered a rehab program, but did not return to work and was fired 11 months ago. His downfall was the subject of a Globe and Mail article in June, 2017.
The brokerage’s statement of defence and counterclaim is in response to Mr. Woodward’s suit, which claims he was unfairly dismissed for conduct he says was “systemic within RGMP’s culture,” including heavy drinking. Mr. Woodward alleges he was made a scapegoat for a series of code-of-conduct breaches that led to hefty investment losses among the firm’s clients.
Mr. Woodward was responsible for the investment advice he provided and for properly supervising his team up to the time he entered the treatment facility, RGMP said in its counterclaim, filed in a Calgary court.
“RGMP denies that it was aware of Mr. Woodward’s alleged personal issues during this period of time or, in the alternative, the extent of those issues,” the dealer said.
Mr. Woodward is at the centre of numerous legal actions surrounding his conduct and that of his colleagues and the firm. Several clients claim they were shoehorned into a risky one-size-fits-all strategy, in which portfolios were heavily skewed to private energy securities, which performed well when oil hovered around US$100 a barrel but became impossible to sell when crude crashed.
A separate lawsuit, which names Mr. Woodward, his former supervisor Blair Pytak and RGMP as defendants, seeks $50-million in damages for uniformly filling out client documents to allow such trades and for insufficient supervision of the broker and his team. The plaintiffs are seeking class-action status for the suit.
In January, the Investment Industry Regulatory Organization of Canada imposed a lifetime ban on Mr. Woodward and fined him $500,000. It did not address the firm’s role.
The complex case raises serious questions about the power that investment advisers have over clients’ financial well-being and the extent to which even major retail brokerages supervise and oversee their staff.
In his suit against RGMP, Mr. Woodward alleges the returns and fees he and his team racked up were among the highest at Canada’s largest independent brokerage in 2014, just before the bottom fell out of the oil market. At the time, he was drinking heavily, and the firm’s management, he said, was aware of his problem, but did not question it as he landed lucrative transactions. None of the allegations has been proven in court.
In addition to its statement of defence, RGMP is seeking repayment of $2.1-million in various outstanding “promissory notes and loan agreements” accumulated throughout Mr. Woodward’s time at both RGMP and his predecessor firm Macquarie Private Wealth.
Promissory notes, also known in the industry as recruitment or retention bonuses, are typically paid out to an adviser during a time of transition when a firm wants to recruit a new adviser or ensure an adviser doesn’t take his book of business elsewhere – usually when one firm acquires another.
Typically, many of these signing bonuses are paid out in cash – usually as a five- to seven-year, forgivable loan. If the adviser fulfills a certain set of mandates, repayment of the loan is waived. To protect its assets, the firm can demand the adviser either remain for a certain period of time, or hit specific revenue targets over the first couple of years. Mr. Woodward’s notes had terms ranging from six to 10 years.
Hardeep Sangha, Mr. Woodward’s lawyer, noted the promissory notes claim does not directly involve the allegations in Mr. Woodward’s lawsuit. “Our position at this time is that we’re going to defend everything vigorously and to the extent of what is due,” he said.
An executive with RGMP declined to comment.
With a file from Clare O’Hara in Toronto.