An Ontario appeal court has upheld the Investment Industry Regulatory Organization of Canada’s (IIROC) right to try and collect a costs award against a former advisor that was disciplined by the regulator.
The Court of Appeal for Ontario ruled in favour of IIROC after a former investment dealer, Julius Vitug, appealed a lower court ruling, which found that the regulator could seek to enforce a costs order against him as a contract issue, and granted its motion for judgement against him.
According to the decision, Vitug argued that the lower court erred by not taking into account a section in IIROC’s recognition order, which limits the uses of money collected as fines and settlements. “He submits that the costs award is akin to a fine and [is covered by that section of the recognition order],” it notes.
However, the appeal court disagreed. It says that the recognition order only deals with the use of fines and settlements, not costs awards. And, it says that it agrees with the lower court decision, which found, “The very reasonable order for costs pursuant to the IIROC’s rules made by the hearing panel, which represent only a fraction of IIROC’s actual costs of this investigation and prosecution, which I am satisfied it has incurred, must therefore be paid by him. The bringing of an action by IIROC to recover those costs, framed as an action for breach of contract, is both appropriate and available in view of the contractual terms which govern Vitug’s membership.”
As a result, it dismissed the appeal, and found that IIROC is also is entitled to the costs of this appeal. IIROC was seeking to enforce an $80,000 costs order against Vitug as a result of disciplinary proceedings, which found that he had violated IIROC’s rules due to his undisclosed interests in trading accounts opened in the names of his aunt and father-in-law, and that he used the account opened in the name of his aunt for his own personal benefit. It also ordered him banned from the industry and levied a $350,000 fine.