An Investment Industry Regulatory Organization of Canada (IIROC) hearing panel has permanently banned the founder of failed firm, First Leaside Securities Inc., and one of its top executives, and ordered $2.7 million in sanctions against them.

IIROC announced that, following a disciplinary hearing that was not attended by either First Leaside founder, David Phillips, or his co-accused in the case, John Wilson, a hearing panel found that they committed various violations of IIROC rules. As a result, it ordered that both men be permanently banned by IIROC. It also ordered a $2 million fine against Phillips and a $500,000 fine for Wilson. The panel levied costs of $230,000 against them too.

However, IIROC indicates that its staff do not intend to try and enforce the fines or costs against Phillips and Wilson until investor claims have been resolved through the ongoing receivership proceedings of various First Leaside entities.

The two men also face proceedings from the Ontario Securities Commission (OSC), which has accused them of selling almost $19 million in securities while withholding important information from investors about the future viability of the First Leaside Group; which, an independent accounting report said rested on its ability to raise new capital. The OSC alleges that investors should have been told about the company’s condition. Allegations that they breached securities laws have not been proven. Closing arguments at the OSC’s hearing into the case were heard this week.

IIROC notes that the hearing panel’s written reasons for its decision will be posted on IIROC’s website when they become available. In the meantime, the panel ruled that they misrepresented the riskiness of proprietary fund products to clients; gave marketing materials to clients that misrepresented the risks of these products to clients; and, failed to ensure suitability. It also found that Phillips, as the general partner of certain First Leaside Limited Partnerships was in a conflict of interest with clients who invested in those LPs, and that this conflict was not properly addressed.