Ordinarily, self-regulatory organizations hear disciplinary proceedings involving registered reps. But in a case where the Mutual Fund Dealers Association of Canada (MFDA) called in the Ontario Securities Commission (OSC) for help, an OSC hearing panel has now ruled that a former fund rep violated both regulators’ rules.
Ontario’s Capital Markets Tribunal released its decision in a case against a former fund rep at IPC Investment Corp., Aurelio Marrone, who was accused of violating MFDA rules, his former firm’s policies and OSC rules when he was named sole beneficiary of an elderly client’s estate 10 days before she died.
Typically, this kind of case is handled by the self-regulatory organization. However, according to the tribunal’s decision, the MFDA requested help from the OSC, given its more extensive powers to compel evidence.
Specifically, the MFDA sought the OSC’s assistance to compel the lawyer who drafted the client’s estate documents to turn over the client’s file.
The MFDA and OSC worked together on the case and acted jointly as litigation counsel.
“This was clearly an efficient and effective use of both MFDA and commission resources, and resulted in a more efficient investigation,” the panel said.
The tribunal rejected arguments that the MFDA must hear these kinds of cases.
“We are persuaded that the commission has jurisdiction to hear this matter,” the tribunal said in its decision, adding, “We do not find that the MFDA and commission cooperated inappropriately, nor are we persuaded by Marrone’s submission that the matters before us are related to a private dispute.”
Ultimately, the tribunal concluded the regulators’ staff proved their case, and ordered a further hearing to consider potential sanctions.
“[W]e conclude that Marrone acted unfairly, dishonestly and in bad faith towards his vulnerable client by failing to follow the required procedures for dealing with conflicts or potential conflicts of interest, which was a significant breach of the MFDA rules and IPC policies and procedures, and this constituted a breach of OSC [rules],” the tribunal said in its decision.