Nelson Allen has been fined $525,000 by the Ontario District Council of the Investment Dealers Association of Canada. The IDA has imposed penalties on Allen and Robin Moriarty for improper activities, engaged in while registered representatives with Essex Capital Management. The penalty against Allen is the largest ever levied against a member.

The District Counsel found Allen and Moriarty guilty of all charges against them. Both failed to observe high standards of ethics and conduct in the transaction of their business, engaged in conduct unbecoming to the public interest and were not of good character or business repute. In addition, both refused give information to the IDA with respect to its investigation into their activities and the activities of Essex. Finally, they failed to ensure two investments recommended to clients were appropriate for the clients.

Allen was the founder and Moriarty was an employee of Essex Capital Management and a related unregistered company, Nelbar Financial. Nelbar Financial was a cover for a pyramid scheme in which investors were sold what they were told were short term, interest-bearing deposits, called Corporate Investment Certificates. Redemptions of the CICs were funded by subsequent depositors’ “investments”. Both Allen and Moriarty recommended CICs to their clients as a safe and low-risk investment, covered by insurance, secured by bank guarantee and asset liens and subject to regulatory oversight. In this manner they misrepresented the true nature of the investment, and made recommendations which were not suitable.

The disciplinary penalties assessed against Allen were the fine and a permanent prohibition against receiving IDA approval in any capacity. He must also pay $40,000 toward the IDA’s costs of investigation.

The disciplinary penalties assessed against Moriarty were a fine of $160,000 and a seven-year bar against receiving approval in any capacity. She must also pay $12,000 against investigation costs.