A regulatory hearing panel sanctioned a rep for breaching his gatekeeper obligations, but declined to impose the year-long suspension requested by staff of the Canadian Investment Regulatory Organization (CIRO) — ruling that this would be excessive and potentially career ending.
Previously, a CIRO panel found that Randy Bryan Hildebrandt, a rep with PI Financial Corp. (now Ventum Financial Corp.) in Vancouver, breached the self-regulatory organization’s rules by failing to adequately question client trading activity in a junior mining company listed on the CSE. The activity, CIRO staff argued, should have given rise to concerns about potentially manipulative trading.
While the panel ruled that it hasn’t been proven that any manipulative trading took place, it did find that Hildebrandt failed to live up to his gatekeeper obligations by not adequately questioning that trading activity, which raised some red flags.
Now, the panel has handed down sanctions in the case, imposing a three-month suspension, followed by 12 months of strict supervision, and ordering him to pay a total of $122,372 in monetary sanctions. That includes a fine of $60,000, costs of $50,000 and $12,372 in disgorgement.
According to the panel’s decision, CIRO staff requested a one-year ban, along with the monetary sanctions, arguing that, “Any gatekeeper failure is, by definition, a serious contravention that harms the integrity and credibility of the marketplace.”
Conversely, Hildebrandt argued that a full-year suspension would be excessive.
The panel said that he argued that, “If he is suspended for more than 30 days, there is a risk the reassignment of his clients to other investment advisors would become permanent” — and that this could effectively spell the end of his career, as it would be too tough to rebuild his book.
He also sought less severe monetary sanctions, arguing that the fine should be $30,000 and the costs award $15,000, along with disgorgement.
Ultimately, the panel agreed that a full-year suspension would be too harsh in this case, particularly given that it hasn’t been proven that the trading was manipulative.
“The one-year suspension proposed by staff is excessive,” the panel said in its decision. “A lengthy suspension is warranted when it has been established that a gatekeeper violation enabled some form of market abuse synonymous with investor harm. The evidence establishes the respondent was grossly negligent in failing to question a steady stream of suspect trading and other client instructions, but does not confirm his negligence enabled market abuse.”
Additionally, the panel stressed that the sanctions should be proportionate to the misconduct.
“When a respondent’s livelihood is at stake, a hearing panel must take particular care to ensure sanctions are based on an objective assessment of the seriousness of the contravention, the risk presented by the respondent, and the respondent’s personal circumstances,” it said.
In this case, the panel found that, “The respondent’s facilitation of hundreds of suspect trades was undeniably damaging to the credibility of the trading system, but it was not established as occurring in circumstances that would justify terminating his career,” it said.