The Investment Industry Regulatory Organization of Canada (IIROC) announced it has fined and sanctioned Industrial Alliance Securities representative, Aaron Jay Rowlatt, $50,000 plus costs in the amount of $7,500 after Rowlatt admitted he failed to fulfill his gatekeeper responsibilities to IIROC-regulated marketplaces.
Rowlatt is being sanctioned for facilitating suspicious trading by a group of related clients and insiders of two TSXV-listed issuers. The trading occurred in five accounts held by the related clients. Trading the securities of the two companies – dubbed Company X and Company Y in the decision documents – was virtually the only trading activity that went on in the five accounts. Trades ordered by the related clients represented a significant proportion of each company’s daily trading volume. The unsolicited orders were received either from a company insider, a director and chairman of one company and director and CEO of the other, or from the spouse of the insider or the insider’s son or daughter. Suspicious activity included the frequent depositing of a large quantity of securities certificates, followed by the subsequent sale of those securities. The trading resulted in a significant number of upticks for both Company X and Company Y.
The trading was uneconomic, IIROC adds, and on three occasions Rowlatt’s compliance department raised questions about late day trading. “The red flags generated by the trading should have caused the respondent to question the trading, which at a minimum would have required him to receive an explanation from the clients as to whether there was a legitimate purpose for the trading,” say authors of IIROC’s settlement agreement with Rowlatt.
The client accounts were a large portion of Rowlatt’s book of business, representing about 50 per cent of his commission income. Rowlatt received the orders on an unsolicited basis and executed them without making inquiries.
Employed with Industrial Alliance since April 2014 and registered since December 2006, Rowlatt has been under enhanced supervision imposed by the compliance department at Industrial Alliance and remains so at the present. In addition to the monetary penalties imposed by IIROC, Rowlatt must also successfully complete IIROC’s Trader Training Course within six months.
