The Ontario Securities Commission (OSC) has upped a fine against a former rep after finding that an Investment Industry Regulatory Organization of Canada (IIROC) hearing panel made mistakes in its ruling.
In a decision issued Tuesday, the OSC ruled in favour of IIROC enforcement staff, who had sought a review of a decision against Mark Allen Dennis handed down by a hearing panel of IIROC's Ontario District Council in 2011.
The IIROC hearing panel had levied a $1 million fine against Dennis — saying that $1 million was the maximum fine it could levy — after finding that he misappropriated approximately $1.4 million from a client.
Dennis was a registered representative with the Hamilton branch of TD Waterhouse Canada Inc. when the misappropriation occurred between September 2004 and May 2006.
In its ruling, the OSC set aside the IIROC panel's decision, and ordered a $1.45 million fine against Dennis, along with the other sanctions originally levied by IIROC, including a permanent ban, a $25,000 fine for failing to cooperate with an investigation, and costs of $7,500.
It its decision, the OSC panel said that it agreed with IIROC staff that the district council proceeded on an incorrect principle when it ruled that IIROC sanctioning power is penal in nature. It stresses that its sanctioning power is intended to regulate future conduct, not punish past conduct, and that the provisions authorizing those penalties are regulatory, not penal. The OSC also found that the district council made an error of law, and that it considered irrelevant factors in making its decision.
"We find that the hearing panel proceeded on an incorrect principle and made an error of law in imposing a fine against Dennis which does not achieve disgorgement of the entire amount that he was found to have misappropriated from his client," the OSC ruled.
In its appeal, IIROC sought either a higher penalty, or that the OSC refer the case back to the district council to reconsider the penalty. And, the commission decided to simply vary the fine itself, saying it is unnecessary to send the case back to the IIROC panel.
The OSC notes that it considered imposing an even higher fine, indicating that it could have gone as high as $4.2 million. However, it decided not to do that, as IIROC staff didn't seek a higher fine, and Dennis did not attend the hearing, or have anyone appear on his behalf, so he wouldn't have had any notice of this possibility.