The Ontario Securities Commission has set aside sanctions imposed by the Investment Industry Regulatory Organization of Canada against investment dealer Credifinance Securities Limited, finding inadequate reasoning for the sanctions.

An IIROC hearing panel imposed penalties against Credifinance and three of its former registered representatives in April, after finding that they failed to properly perform their gatekeeper responsibilities in connection with trading in Credifinance client accounts, and improperly engaged in financial and business transactions with clients.

The penalties included fines totaling $400,000, permanent expulsion for Credifinance and suspensions for the three former reps: Georges Benarroch, Linda Kent and Majorie Ann Glover.

The firm and reps applied to the OSC for a review of the decision, asking the regulator to set aside the decision and impose more appropriate sanctions, or alternatively, to have a re-hearing by another IIROC panel.

In reviewing the decision, the OSC concluded that the reasons given by the IIROC panel for the sanctions were inadequate.

In its decision released on Wednesday, the OSC suggests that Credifinance and its former reps may have been sanctioned for the offence of fraud, when the allegations were restricted to failing to properly perform gatekeeping responsibilities and improperly engaging in financial and business transactions with Credifinance clients in relation to the distribution and sale of shares.

The OSC pointed out that no clients lost money, nor were there client complaints related to the misconduct. In addition, it noted that the former reps had no prior disciplinary record, they made an admission of wrongdoing thereby implying remorse, and that they fully co-operated with the investigation.

These were all factors that the IIROC panel was to consider when imposing sanctions, however, “There is no reference in the panel’s reasons to any of the mitigating factors advanced by the Applicants’ counsel,” the OSC said. “Were they considered by the panel? The reasons are silent on the issue.”

The OSC also noted that the sanctions imposed were considerably more severe than those sought by IIROC counsel at first instance. In cases where this occurs, the OSC said it’s even more important for the panel to outline thorough reasoning.

“We conclude that the reasons are so inadequate as to constitute an error in law,” the OSC said. “The decision is set aside.”

The OSC said it would hear submissions as to whether it will exercise its jurisdiction to substitute its decision for that of the IIROC panel.

IE