An Investment Industry Regulatory Organization of Canada (IIROC) hearing panel has accepted a settlement between IIROC staff and Brian McCullough, a former advisor who has agreed to an $80,000 fine, a five-year ban, and $5,000 in costs for accepting a gift of $750,000 from a client, which was against his firm’s policy, and not telling his firm when he was served with a civil lawsuit over the gift.
McCullough — who was registered as a mutual fund representative and worked as an assistant with DWM Securities Inc., which later became Scotia Capital Inc., in its Powell River, B.C. branch — had a “close personal friendship” with the elderly client for several years, according to the settlement. In June 2013, the client ordered McCullough to liquidate her investment account, which contained more than $900,000 in securities; then, in July of that year, she gifted $750,000 to McCullough.
“At no time did the respondent notify his branch manager or anyone working in the compliance department at DWM that he had received this gift,” the settlement says, noting that the firm’s policies prohibited gifts of anything larger than a nominal value.
Later that year, McCullough was served with a civil claim brought by a friend of the client that “contested the validity of the $750,000 gift on the basis that the respondent was bound by his professional ethics not to profit or gain personal advantage from his clients.”
That lawsuit was dismissed, but the client’s “next of kin” was appointed as administrator of the estate and filed another civil action in 2015 “contesting the nature and validity of the gift”. That lawsuit was settled.
The IIROC settlement indicates that McCullough did not notify his branch manager or anyone in compliance at DWM about the lawsuit, which also violated the firm’s policies. On July 30, 2015, the firm terminated McCullough, “citing a failure to notify DWM of the gift and the [first lawsuit].”
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