A hearing panel for Canada’s regulator of stockbrokers failed to adequately consider the public interest and erred in its evaluation of the alleged misconduct of two Ventum Financial Corp. registered representatives, according to an April 7 B.C. Securities Commission review panel decision.
In a rare move last November, the executive branch of the Canadian Investment Regulatory Organization filed a request for review with the BCSC after its own hearing panel found stockbrokers Teymur Englesby and Cale Nishimura did not fail in their gatekeeper obligations, as alleged.
The allegations largely concerned how Englesby and Nishimura facilitated penny stock transactions for West Vancouver resident Cameron Paddock and others — known as the Bridgemark Group — who allegedly participated in a consultant scheme abusive to the capital markets. The pair’s facilitations of those transactions were alleged to have taken place between December 2017 and October 2018.
The CIRO enforcement division specifically alleged the duo “facilitated activity for several accounts … which generated a number of indicators or red flags which suggested that the accounts may have engaged in suspicious activity.”
But the CIRO hearing panel determined that was not the case.
The hearing panel heard from Ventum vice-president of compliance and general counsel Richard Thomas, who defended his representatives on grounds they did not fail in their gatekeeper roles.
Thomas’ testimony was unique in that in addition to his longstanding executive role at Ventum — formerly PI Financial Corp. — he is chair of the CIRO Pacific Regional Council. He is also a member of the CIRO National Hearing Committee and an adjudicating member on CIRO hearing panels for the Pacific district.
CIRO’s enforcement division took a different view of Thomas’ views on gatekeeper roles, arguing they are broader in scope than his interpretation.
Englesby and Nishimura challenged their regulator’s authority to appeal the hearing panel’s decision this past January, claiming it had no jurisdiction.
The stockbrokers’ lawyers, Owais Ahmed and Jessica Mank of McCarthy Tetrault LLP, also argued CIRO was not technically an “affected person.”
But the commission’s review panel disagreed and went ahead.
“The BCSC panel determined that when the CIRO panel found that the allegations were not proven, it proceeded on an incorrect principle, made an error in law and failed to adequately consider the public interest,” stated the commission in an April 8 news release.
“The CIRO panel was evaluating whether there was a possible plausible explanation for the warning signs, instead of asking itself whether to make inquiries because the warning signs existed.”
The proceedings have now been returned to CIRO, and the allegations against Englesby and Nishimura remain unproven.
