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
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