The New Self-Regulatory Organization of Canada (New SRO) has imposed fines and costs totalling nearly $2.5-million, on former PI Financial Corp. representative, Jeffrey Rutledge. The representative is also permanently barred from seeking employment in any capacity with any regulated person.
Broken down, the New SRO levied a fine in the amount of $2,468,974 for misappropriating funds from two client accounts. Of this, $50,000 is for failing to cooperate with Investment Industry Regulatory Organization of Canada (IIROC) staff who were investigating his conduct. Rutledge is also ordered to pay $10,000 in costs.
The former registered representative who worked in the Vancouver branch of PI Financial, admitted that he misappropriated more than $2-million form the two client accounts over a 27-month period. “Misappropriation of client funds is among the most serious misconduct a registrant can engage in. It goes to the very heart of the trust clients put in registrants and their firms. As such, it clearly harms the integrity and reputation of the capital markets,” the New SRO’s penalty decision states.
“In this case there are no mitigating circumstances that would affect the appropriate sanction.”
After skipping initial interviews with IIROC investigators, Rutledge admitted the misappropriation allegations in June 2022. A penalty hearing was delayed four months to allow the former representative time to take action which could affect the amount he would be required to pay in disgorgement. At the penalty hearing he requested another three-month adjournment to allow him further time to sell a piece of property to pay his former firm’s insurer. (Rutledge entered into an agreement in June 2021 to settle a civil suit against him. He later claimed that the agreement was evidence that he would repay the misappropriated amounts.)
“In early February 2023, Mr. Rutledge advised the panel that he had not sold the property and repeated his argument that disgorgement was not appropriate because of the insurer agreement,” the New SRO’s penalty decision states. “Mr. Rutledge has not repaid his clients or any party that has compensated his clients. He has only raised the possibility that he may do so in the future,” they add. More, Rutledge claims that he is unable to provide a full explanation outlining the insurer agreement because of a confidentiality clause.
Although Rutledge had been sanctioned in 2007 and ordered to pay a $35,000 fine at the time, the panel said the case did not influence its current conclusions about the appropriate sanctions. “The previous discipline was 15 year ago and does not appear to have included an admission or finding of dishonesty or of failing to cooperate with IIROC. While unfortunate, it pales in comparison to the facts in this case.”
