The B.C. securities commission has reversed an earlier decision by the Investment Industry Regulatory Organization of Canada to ban Vancouver stockbroker Kianosh Rahmani permanently for failing to report a criminal charge against him for sexual assault.

Under IIROC rules, brokers must report any criminal charges within 10 days of a charge being laid. Rahmani was charged on May 4, 2000, while employed by CIBC World Markets, but did not report that fact to IIROC or CIBC.

In November of that year, he was required to fill out a licence renewal application. To the question, “Are you presently subject to a charge or indictment?” he answered “No.” The application form contains a bold-faced warning that any false statements could result in the termination of an applicant’s registration.

In February 2002, Rahmani was fired from CIBC and sought employment with Canaccord Capital Corp. On his application form, he lied once again, stating that he was not subject to any criminal charges. Despite the unequivocal wording of these forms, Rahmani has said he thought he had to disclose only securities-related offences.

In August 2004, an IIROC hearing panel decided this argument was “much too facile” to accept. The panel also noted the former Vancouver Stock Exchange had previously questioned Rahmani on his failure to report a prior regulatory problem relating to his employment as an insurance broker, which should have “sensitized” him to the issue. “This is not a case of mere inadvertence,” the IIROC hearing panel concluded. “Nor is it a single incident. We find that there was a reckless attempt to mislead [regulators] and that, therefore, a permanent bar is warranted.”

By that time, Rahmani had been convicted and handed an 18-month conditional sentence, but it wasn’t the legal charge or the conviction that the panel focused on; it was the fact he intentionally misrepresented his criminal charge in his disclosure forms, thereby breaching the “trust and responsibility” that the investment industry is founded on.

Rahmani appealed to the BCSC on the grounds that he should not have been permanently banned; rather, he sought a temporary suspension. His appeal had a familiar ring.

In 2005, convicted cop-killer Bill Nichols applied to the TSX Venture Exchange for permission to conduct investor relations work for TSXV-listed companies. In his disclosure form, he reported his conviction for first-degree murder, but failed to mention 19 other convictions for extortion, possession of stolen property, break and enter and theft, possession of narcotics, robbery, causing bodily harm with intent, possession of a weapon, prison breach, forcible confinement and armed robbery.

The TSXV deemed Nichols unsuitable to conduct investor relations work, not simply because of his criminal past but because of his failure to make proper disclosure. Nichols appealed to the BCSC, and in August 2006, a hearing panel — led by BCSC chairman Doug Hyndman — reversed the exchange’s decision on the grounds there was evidence Nichols was a changed man. Although the decision was controversial, it established a precedent.

“[Rahmani’s] misconduct — failure to disclose the criminal charges — is not itself criminal or quasi-criminal,” the panel’s June 3 decision states. “Neither that misconduct nor Rahmani’s criminal conviction evidences behaviour that would call into question his ability to competently and honestly perform his duties as a registrant.”

The panel has replaced IIROC’s permanent ban with a five-year suspension, which means Rahmani is free to apply for a securities licence in two months’ time.

The irony is that IIROC, with the encouragement of BCSC officials, has become quite diligent in disciplining errant brokers but is now being restrained by those very same regulators. IE