A senior industry executive and his investment dealer agreed to sanctions in connection with a transaction involving complex offshore business dealings, which regulators alleged weren’t properly disclosed, or scrutinized.
A hearing panel of the Canadian Investment Regulatory Organization (CIRO) approved a proposed settlement with Cumberland Private Wealth Management Inc., and Gary Edmond Perron, a registered rep with the firm who is based in the Bahamas.
According to the settlement, Perron, who started a number of asset management businesses that were merged with the dealer’s parent company, Cumberland Partners Ltd., worked at Cumberland as an advisor and portfolio manager, and owns 34.7% of the parent company.
Under the settlement, Perron agreed to a $200,000 fine and to pay $50,000 in costs, and the firm agreed to a $150,000 fine.
The sanctions follow admissions that they breached the self-regulatory organization’s requirements.
Specifically, Perron admitted to having failed to disclose and seek pre-approval for transactions that involved transferring control of an offshore corporation from a client to himself (a process that was started in 2020 and finalized in early 2021).
CIRO’s rules required Perron to “disclose and seek prior approval” before taking steps to transfer control of the offshore company to himself, the settlement said.
“Perron did not properly disclose that steps were being taken to transfer shares and control of [the company] to himself,” the settlement said.
And, it noted that the dealings involved several “high-risk indicators” that required heightened due diligence, including the involvement of several offshore companies and jurisdictions (including Belize, the Bahamas and Curacao), along with complex corporate and account structures, and unexplained asset movements.
“Despite these factors, Cumberland failed to adequately address red flags and questions about the [company’s] account,” CIRO said, including determining the true beneficiary of the offshore company’s account at the dealer.
According to the settlement, when Cumberland learned of Perron’s involvement with the company in early 2021, it launched an internal investigation, and suspended him.
“Among other things, Cumberland’s internal investigation revealed that Mr. Perron had failed to seek approval of and disclose his beneficial ownership interest in [the company],” it said.
It self-reported the investigation to CIRO, and ultimately lifted Perron’s suspension, subject to certain conditions. It also directed him to transfer the company’s account to another dealer.
“Cumberland has been granted credit for cooperation for self-identifying the suspected misconduct, conducting a fulsome investigation and by providing a copy of the results of its internal investigation to CIRO,” the settlement noted.
It added that Perron and Cumberland cooperated with the self-regulatory organization “by participating in a mediation process with an experienced mediator that ultimately led to this settlement.”