From the Regulators

IIROC panel dismisses allegations of “conduct unbecoming”

By James Langton |

The Investment Industry Regulatory Organization of Canada (IIROC) issued just $20,000 in fines to Peter Deeb, CEO of Hampton Securities Ltd., after a disciplinary hearing last year ended in a split verdict.

Hampton CEO failed to maintain records: IIROC

IIROC announced Monday that a hearing panel has fined Deeb $10,000 for each of the two counts that IIROC staff proved at a disciplinary hearing last year — namely, that he failed to maintain a proper set of books and records, and refused to provide IIROC with access to certain records.

However, the panel dismissed more serious allegations that Deeb engaged in "conduct unbecoming" by commingling client and pro orders, allocated trades after the close of business, failing to ensure client priority, and engaging in a practice known as ‘free-riding' by purchasing securities without sufficient cash not properly settling the transactions.

It found that IIROC staff failed to prove their case on those counts. For example, it found that while co-mingling did occur, it was not improper. Nor were the other alleged violations improper. As a result, it dismissed those counts.

IIROC staff sought a total of $75,000 in fines for the two counts it did prove, along with an order for $15,000 costs, and a requirement that Deeb prove that the recordkeeping violations have been remedied and that he write the partners, directors & officers (PDO) exam.

However, the panel ordered lesser fines. It noted that the recordkeeping violations were isolated, and were "relatively minor", and do not require proof of remedy, or that he take the PDO exam. As for the refusal to provide records, that was done on the advice of counsel, and the panel notes that it is easy to "sympathize with the difficult position that the respondent was in"; however, it ruled that a fine is necessary on the basis of deterrence, and to ensure that all registrants appreciate their obligation to comply with IIROC requests.

It also found that no costs order was warranted, given the fact that Deeb was successful on the counts that took up the large majority of investigative and hearing time, and the substantial costs he incurred conducting his defence.

The relatively modest penalty comes in a case that first had to survive a bid for a judicial review, which the court denied on the basis that it was premature; a decision that was upheld on appeal, allowing the IIROC hearing to go ahead last year.

Court rejects bid to review IIROC enforcement