The British Columbia Court of Appeal has ruled in a decision delivered on Oct. 23 that the Investment Industry Regulatory Organization of Canada may pursue former members for wrongdoing.

The decision paves the way for IIROC to proceed with allegations of misconduct against Charles Dass, a former investment advisor with Dundee Securities Corp.in Port Alberni, B.C.

The ruling also enables IIROC to proceed with cases against former Research Capital Corp. advisor John Collias, who is accused of turning a blind eye to illicit trading in a Vancouver-based over-the-counter bulletin board company; and former Union Securities Ltd. broker Trevor Morrison, who is accused of failing to co-operate with an IIROC investigation into his conduct. Both cases were being held in abeyance pending the outcome of the Dass case.

Warren Funt, IIROC’s vice president for Western Canada, is relieved over the verdict. “Now that the appeal court has ruled in our favour,” he says, “we will get these cases moving forward.”

IIROC has not released the notice of hearing in the Dass matter but, now that the court case has been decided, Funt expects the hearing panel to order its release.

The notice is expected to contain allegations that Dass, who worked as a broker at Dundee from January 2002 to July 2004, took money that clients gave him for investment in private placements for his personal use.

Dass is also being sued by two former dairy farmers in Port Alberni who claim they gave him almost $3.9 million to put into guaranteed investment certificates and other low-risk investments. They similarly allege that Dass diverted the money for his own use rather than invest the funds as instructed. Dass has denied he misappropriated any money, but admits he provided the families with bogus account statements.

IIROC served Dass with its notice of hearing in May 2006, but he appealed to the B.C. Securities Commission on grounds that IIROC does not have jurisdiction to discipline brokers who have left the industry, as he had done by then. The BCSC denied the appeal, prompting Dass to take the case to the B.C. Court of Appeal, which heard the matter in May.

In the appeal court’s unanimous decision, written by Judge Daphne Smith, the tribunal stated that the question is whether IIROC’s jurisdiction is vested in its bylaws or the Securities Act.

The bylaws, to which members voluntarily agree to adhere when they join IIROC, specifically state that the self-regulatory organization has jurisdiction over members up to five years after they have ceased to be members. The Securities Act, however, states only that IIROC has jurisdiction over members. It does not stipulate current or former members.

The Ontario Court of Appeal, in a similar case launched by former Toronto broker Stephen Taub, has interpreted this to mean current members, not former members. IIROC is appealing this decision.

In the decision in the Dass matter, Smith wrote, the BCSC correctly held that the source of IIROC’s jurisdiction is in its bylaws — and that its jurisdiction is not limited by the Securities Act.

“In my view, the commission’s process of reasoning reflects a thoughtful, orderly and logical consideration of the facts and the applicable legal rules,” she wrote in the decision. “Further, the result is acceptable. By way of contrast, a decision that [IIROC] could not discipline former members despite their agreement to submit to [IIROC] jurisdiction for five years after termination would undermine the regulatory scheme. A non-compliant member would be able to avoid any oversight of his conduct simply by resigning and any general deterrence to be gained by findings of misconduct and consequential penalties would be lost.”

The Ontario court, which ruled in the Taub matter that IIROC does not have jurisdiction over former members, agreed that IIROC is a voluntary association but found that its contractual relationship with members was limited when it obtained statutory recognition in the Securities Act.

Smith disagreed, saying the case law upon which the Ontario decision is based does not, in her view, support that conclusion.

The fact that these two tribunals have come to opposite conclusions suggests that the matter may eventually end up in the Supreme Court of Canada.

As IIROC pushes forward with its disciplinary case against Dass, two Port Alberni families are pressing lawsuits against him in the B.C. Supreme Court.

@page_break@George Haack, 51, says that his family sold their cows and milk quota several years ago and invested $625,000 with Dass. Haack says Dass provided account statements showing the family had invested in low-risk investments, as requested. The statements were printed on the letterheads of the various financial services firms at which Dass worked.

“It doesn’t appear any of them were real,” Haack says. He alleges that only $100,000 of the $625,000 placed with Dass has been accounted for. “That was my pension money,” Haack says. “It’s gone.”

The Emblems, who invested $3.3 million with Dass, tell a similar story in court filings.

RCMP Supt. Gordon McRae, head of the RCMP’s commercial crime section in B.C., confirmed in an interview that Dass is under police investigation.

Both families are also suing Dundee and other firms that Dass worked for on the grounds that they either breached their fiduciary duty or are vicariously responsible for their now former employee’s conduct. The firms deny any liability.

In Dass’s statements of defence, he claims he initially invested in low-risk securities, as instructed. But in each case, he claims, certain family members subsequently instructed him to invest in high-risk investments: “…specifically Micromem Technologies Ltd.”

Dass claims that because other family members would not approve of this investment, the first family members instructed him not to him say anything about the redirection of funds. So, he fabricated statements to hide the Micromem investments.

Haack dismisses this explanation as “nonsense.” He says he never heard of Micromem before Dass filed his statement of defence.

Micromem is a money-losing Toronto-based company that trades on the OTCBB in the U.S. IE