Rep sanctioned for third party app usage and failing to act as gatekeeper

A hearing panel of the Investment Industry Regulatory Organization of Canada (IIROC) has accepted a settlement agreement with Tiffany Sweeney, after the registered representative admitted that she failed to fulfill her gatekeeper responsibilities and communicated with her clients using WhatsApp Messenger and Signal Messenger – unapproved third-party communication applications.

Between December 2017 and October 2018, Sweeney agrees she facilitated activity in seven accounts for five different clients, which generated a number of red flags suggesting the accounts may have been engaged in suspicious activity.

Among the red flags listed, IIROC says many of the individuals who were authorized to trade on behalf of the seven accounts knew each other and some account holders were also consultants to some of the same issuers of shares being deposited into the accounts. Other red flags included the large quantities of shares being deposited, some of which were sold before or shortly after being deposited, often at a loss. Proceeds were often withdrawn immediately, and the account activity often greatly exceeded the stated value of liquid assets. IIROC says the red flags generated multiple inquiries with both firm’s compliance departments where Sweeney worked.

Registered since 2006 with Union Securities, later PI Financial Corp., and with Research Capital Corporation, formerly known as Mackie Research Capital Corporation, the conduct in question occurred when Sweeney worked with PI and Research Capital.

“The red flags and the compliance department inquiries should have caused Sweeney to make further inquiries to ensure that the account activity was undertaken for legitimate purposes. In all of the circumstances, Sweeney did not fulfill her gatekeeper responsibilities,” the IIROC settlement agreement states.

In addition, Sweeney is being sanctioned for making use of WhatsApp Messenger and Signal Messenger, both of which were unapproved third-party communication applications. The settlement agreement further states that both firm’s policies and procedures dictated that all of her correspondence needed to be captured by company servers for sampling and data retention, and specifically prohibited sending messages which could not be supervised or recorded.

In addition to a one-month suspension, Sweeney agreed to pay a $50,000 fine, $28,806 to disgorge commissions earned, and agreed to pay costs in the amount of $15,000.