Repeated off-book activity results in sanctions

A Canadian Investment Regulatory Organization (CIRO) hearing panel has fined registered representative and portfolio manager, Allen Murphy $35,000, assessed costs in the amount of $5,000 and has suspended Murphy for a month after he facilitated off-book investments after being told not to on multiple occasions.

In November 2018 an issuer Murphy was familiar with, having purchased a large number of shares for himself, his family and for clients, announced a non-brokered private placement closing in December that year. The firm he worked for prohibited participation in non-brokered private placements at the time.

Prior to the announcement, Murphy, his family and clients together held approximately 8.238-million shares of the mining issuer, for a total market value of $335,541.

November 30, 2018 Murphy received a copy of the company’s subscription agreement, his assistant emailed the supervisory department to seek approval for his clients to participate, but was told the same day that the deal was rejected.

When he asked his branch manager for assistance in seeking an exemption, he was told the same day that the details of the deal should not be distributed. Despite this, both Murphy and his assistant emailed numerous clients and individuals who were not clients, seeking their investment in the private placement.

Ordered to cease and desist 

December 12 he was ordered to cease and desist by his regulatory supervision department but continued to send out the communications. December 19, he received a warning letter but then sent at least one more additional email to a non client about their participation in the placement. Murphy was then suspended January 31, 2020 until February 17, 2020.

Following the firm’s investigation, he was reprimanded March 18 for insubordination, and the firm also fined the portfolio manager $30,000. He was also required to successfully re-write the Conduct and Practices Handbook course. Since March 2020 his email communications have also been the subject of enhanced review by the firm. 

In addition to the regulator’s sanctions and the firm’s fine, CIRO also ordered two months of strict supervision for the representative once he returns from his one-month suspension.