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Review of IIROC Enforcement Decisions by Provincial Securities Commissions

OSC Endorsement of IIROC's Request for Suspension

We have previously reported about this case in a prior issue of Securities Snapshot.

The investment advisor had recommended "off book" mortgage funds without a prospectus or exemption to clients which would likely result in client losses. Her husband was the owner and promoter of the funds.

Initially, the IIROC panel imposed a fine of $50,000, costs of $45,000, close supervision for 6 months, and a rewrite of securities courses. IIROC staff appealed and sought a 2-year suspension, which the OSC affirmed.

The OSC held that the IIROC panel had failed to adequately consider the principles of deterrence in combination with the length and egregiousness of the securities law violation.

In particular, the IIROC Panel did not address her participation in an illegal distribution of securities and instead found her conduct was the result of "an incomprehensible lack of understanding". The Panel was found to have been erroneously influenced by the CEO of her employer who wrote her a letter of support and stated his belief that the industry viewed suspension as a tool to deal with dishonesty, which was not found persuasive. The OSC also held that while "stigma" is a factor, "trauma" of an investment advisor subject to a regulatory proceeding cannot be considered in mitigating a representative's sanctions. The Panel was found to have been more concerned with the consequences of a suspension on the investment advisor and her clients than "investor protection". The OSC endorsed the Sanction Guidelines that recommended suspensions for breaching of the Securities Act and egregious large value high risk off book distributions. Read the full decision here.

BCSC Affirms IIROC Panel Decision

An investment adviser was subject to a 3 month suspension and fined $48,000 with minimum monthly payments of $2,000, 1 year of strict supervision and $15,000 in costs for discretionary trading, unsuitable use of margin, misrepresentation of certain solicited orders as unsolicited and communicating with the client using an email address not approved by the firm. The investment adviser sought to appeal IIROC's decision to the BCSC. The key question was whether the decision of the IIROC Panel contained errors of law based on the manner in which the Panel assessed the credibility of the witnesses who gave evidence. The investment adviser alleged the Panel erred in accepting the oral testimony of all of IIROC's witnesses that was not supported by the BCSC's review of the Panel's decision as a whole. A full copy of the reasons for decision can be found here.

  • By: Laura Paglia, Suzanne Kittell