The plaintiffs sued a discount broker, Interactive Brokers Canada Inc., in negligence after a trader they authorized to manage their corporate account lost over $1.8 million.
The plaintiffs alleged the broker breached its 'know your client' and 'gatekeeper' obligations by failing to investigate 'red flags' regarding the trader's status as an unregistered investment advisor.
The court dismissed the action, finding the broker complied with all regulatory requirements for opening a corporate account and was entitled to rely on the corporate resolution granting the trader authority.
The court also noted that even if liability were found, the plaintiffs failed to mitigate their damages after discovering the initial losses.
