A hearing panel of the Investment Industry Regulatory Organization of Canada (IIROC) has accepted a settlement agreement with Gregory Paul Bealer, after Bealer admitted to facilitating suspicious trading activity and to making off-book investments. He also agrees he failed to designate several client accounts as pro-accounts and invested assets in those accounts in ineligible new issues, contrary to his firm’s policies aimed at providing equitable investment access to all of its customers.
The activity Bealer is being sanctioned for occurred between April 2016 and March 2019 while he worked for CIBC World Markets.
Working in the industry since 2008, Bealer reportedly failed in his gatekeeper obligations after failing to inquire about suspicious circumstances, facilitating questionable transactions in a client account, making several off-book transactions himself and investing client assets in new issuer private placement investments without receiving appropriate approvals from his firm.
Although CIBC had an anti-money laundering and anti-terrorist financing policy which restricted employees from entering client relationships with persons or entities in the cannabis sector, Bealer opened accounts for a 68-year-old client, the stepfather of a cannabis CEO with whom Bealer had several unapproved interactions.
“Once the account was opened, the transactions almost exclusively involved the company’s securities. Share certificates were deposited into the account, they were liquidated, and the proceeds were transferred back out to third parties,” the settlement agreement states. “These activities were conducted on an unsolicited basis, with the respondent receiving wire transfer instructions from someone he knew to be the CEOs’ assistant.”
There were no power of attorney forms on file with CIBC giving the assistant any authority over the account. On at least two occasions, the liquidated proceeds were transferred to accounts belonging to the CEO. Total proceeds from the securities liquidation events totalled approximately $1,650,000.
More, Bealer failed to designate 18 different accounts over which he had power of attorney as pro-accounts. The accounts then participated in 32 new issue purchases worth nearly $2-million. “These purchases were not eligible for pro-accounts,” they continue. “A stated intention of the policies is to ensure the fair treatment of CIBC’s clients in the allocation of new issues. By not following CIBC’s policies regarding pro-accounts and new issues, the respondent could potentially have given these particular clients preferential treatment at the expense of other CIBC clients.”
Under the terms of the settlement agreement, Bealer agreed to pay a fine of $50,000, agreed to disgorge $17,269 and agreed to pay costs in the amount of $5,000. He also agreed to being banned from IIROC registration for five months.