A hearing panel of the Investment Industry Regulatory Organization of Canada (IIROC) has suspended former CIBC World Markets Inc. advisor, Sean Micheal Nother 22 months, beginning January 16, 2019, and fined him $20,000 plus costs of $15,000 for involving clients and non-clients in a gifting club, contrary to IIROC’s consolidated rule 1400.
Between May and August 2018, Nother allegedly breached his professional standards of conduct when he was involved with and involved five clients and four non-clients in a gifting club he knew, or ought to have known was a pyramid scheme.
With CIBC from 2001 until his termination in January 2019, Nother was first introduced to the gifting club’s organizer, Dino Delellis by a mutual friend in 2009. “Over the next ten years the respondent and Mr. Delellis became personal friends,” IIROC writes in its reasons for decision. “The respondent believed Mr. Delellis to be a high net worth businessman with interests in real estate, limited partnerships and other businesses and investments in the capital market. Mr. Nother had been trying to get Mr. Delellis as a client for some time.” Delellis introduced Nother to the gifting club, known as the Vine Club, in May 2018. Nother says based on his accountants advice, he believed the gifting club was not illegal.
In addition to speaking with seven clients he says were also friends, and discussing the gifting club with a number of non-clients, IIROC says the evidence demonstrates that he was more actively involved, taking payments from those on the lowest rungs of the pyramid scheme and keeping a master sheet with contact information for those who joined the Vine Club.
“We conclude that Mr. Nother saw his involvement in the Vine Club as an opportunity to make some money and at the same time ingratiate himself with Mr. Delellis by assisting him to find recruits for the club,” they write. “In our view, Mr. Nother’s involvement with the Vine Club was motivated by the desire to please Mr. Delellis in order to obtain Mr. Delellis as a client.”
While IIROC staff submitted that a permanent ban, plus a fine of $50,000 and costs of $20,000 were warranted in the case, Nother submitted 20 reasons why the proposed fine and a permanent ban would be excessive. Among his reasons for a lesser penalty, Nother pointed out that he was not the scheme’s organizer, that he did not promote the club to clients (only to a group of friends, some of whom were also clients), and that losses to each participant were not significant.
“Despite enforcement council’s able and forceful submissions, the panel ultimately declined to impose a permanent bar against the respondent,” they conclude, adding that Nother’s submission calling for a six-month suspension would also not satisfy the objectives of general and specific deterrence. “The panel concludes that a suspension of 22 months from January 16, 2019 until November 16, 2020, together with a fine and a cost award, are appropriate sanctions.”
