ASC partially overturns IIROC decision and reduces penalty

The Alberta Securities Commission (ASC) has asserted its authority over the Investment Industry Regulatory Organization of Canada (IIROC), allowing Michael Francis O’Brien to appeal a disciplinary decision made against him by IIROC.

A hearing panel found that O’Brien contravened IIROC rules when he borrowed $156,000 from an elderly client and found that he made misleading statements about the loan during investigations conducted by IIROC staff and RBC Dominion Securities Inc.’s fraud detection group.

Initially IIROC ordered that O’Brien be suspended for two years, in addition to a fine of $100,000 and costs of $20,000. He was also ordered to rewrite and pass the Conduct and Practices Handbook examination and be subject to strict supervision for 18 months upon re-entering the industry. The ASC panel reduced the suspension from two years to nine months commencing in March 2020, and reduced the fine from $100,000 to $50,000. It upheld the other remedial elements imposed by the IIROC hearing panel.

A financial advisor since 2002, O’Brien became an approved person and a registered representative in 2008. He joined RBC Securities in 2012 before being terminated in November 2017 for his conduct. He later joined Raymond James Ltd. in December 2017.

O’Brien admitted that he started to borrow money from his client, “Ms. H” in June 2017. Between June and September that year payments were made from her bank account to his credit cards, line of credit, his mother’s line of credit and his own Canada Revenue Agency account. In addition O’Brien was issued a credit card on the client’s Visa account and incurred various expenses. O’Brien states that he borrowed the money to repair storm damage to his home. His statement however, showed expenditures for trips to London, Paris and Las Vegas.

During a recorded telephone conversation with RBC he also falsely told the company that he held a power of attorney for Ms. H, before later telling IIROC staff that he had not made any such assertions. O’Brien claims that injuries sustained in a motor vehicle accident affected his memory.

During his appeal, O’Brien said IIROC denied his right to natural justice by demonstrating bias, by considering irrelevant factors in arriving at a penalty decision, and by imposing discipline that wasn’t sought by IIROC staff. (Suspensions ordered in the precedent cases cited by IIROC ranged between six months and two years, while fines ranged between $20,000 and $75,000.

“The IIROC panel did not explain how it assessed $100,000 against O’Brien, which was outside the range suggested by comparable cases, nor why a lower amount would not suffice,” the ASC writes in its decision. “Having reviewed the record, the relevant cases and the parties’ submissions, we concluded that a suspension of nine months duration and a fine of $50,000 were sufficient to achieve the applicable sanctioning objectives,” they add. “Together, these penalties are proportionate in relation to relevant prior decisions, recognize the seriousness of the misconduct, and are stern but not excessively punitive.”