IIROC Disciplinary Case

Drew Austin IIROC Disciplinary Case

IIROC is an acronym for Investment Industry Regulatory Organization of Canada, a national self-regulatory body which monitors all investment dealers and their business activities in Canada. This organization protects investors, strengthens investment market, and sets investment standards to ensure there is stability in Canadian debt, equity, and capital markets. IIROC also conducts an investigation on any delinquency from its affiliated firms or the registered employees and may undertake disciplinary procedures, and depending on the case, may or may not lead to sentences such as suspensions, membership expulsion, fines or even termination of rights of organizations and individuals. 

On 28th of January 2016, Jeremy Nicholas Drew Austin was arraigned before an IIROC panel. Austin entered the security market in 2009 as a registered member of Edward Jones. In 2012, he moved to Manulife Securities and later to Mandeville private client Inc. In April of the same year after failing to meet the needed performance targets, he was dismissed. He was then employed for short term by Home Depot. During his career, he was alleged to have engaged in illegal business, failed to conduct due diligence to ascertain the recommendations were appropriate for his customers and withheld information from the investigation that was undertaken by IIROC staff.

The first count of the case holds that during the period between May 2009 and June 2013, Mr. Jeremy Austin violated the dealer member Rule 1300.1(q) of IIROC.  As the law requires, when recommending either an exchange, a sale, purchase or holding a security to a client, a dealer member should observe due diligence to ascertain that the recommendation is appropriate. The dealer member should consider and consult from factors such as his/her knowledge of investment, risk tolerance, the financial capability of the client, time horizon, investment goals and the current investment risk level of the account (Ontario securities commission, 2009). Under the guidance of Mr. Austin, AG and EG, two of the clients of Edward Jones securities, had sold their remaining family restaurant business, with a purpose of funding their retirement. EG and AG testified during the hearing and answered to the questions raised by the panel. The committee concluded that Mr. Austin failed to use due diligence while advising AG and EG on the appropriate investment and therefore was banned altogether from conducting activities related to IIROC .His registration was also revoked due to failure to ascertain that the proposals were suitable for his clients. The ruling is unreasonably high as the alleged might have advised on the type of investment out of good intentions and to the best of his knowledge. However Mr. Austin could have completed an accurate survey of the market and relay correct information to AG and EG. The most ethical action however would have to partner with the firms to evaluate the clients’ losses and find better ways to recover the losses.

The second count holds that the accused participated in unauthorized trading in the period between May 2009 and April 2012 thereby violating the rule 29.1 of dealer membership. The law requires that any person under the jurisdiction or approved by the Corporation should submit any information that is related to the investigation of trading of security that is requested by the Canadian stock exchange (Ontario securities commission, 2009).  The information may be in the form of books, filings, records, papers or reports and may be either electronic or manual. As testified by EG and AG, Mr. Austin engaged in an illegal transaction on their behalf unknowingly therefore violating their four years relationship. The panel found him accountable and he was fined a total of $120,000. The ruling seems fair since Mr. Austin unethically engaged in the trading with a full knowledge that his action was illegal and could jeopardize his clients’ investment.  Through email, he was subsequently requested to attend to an interview with Edward Jones and Manulife Securities over his conduct, all which he brushed off, a huge mistake he would have prevented by concurring. Mr. Austin should also have ethically practiced complete disclosure of all information, prioritized his clients’ interests and given respect to their assets.

The third account holds that on August 2015, Mr. Austin violated Rule 19.5 of dealer membership by failing to give information as well as attend to an investigation that was being executed by IIROC staff (Ontario securities commission, 2009). After evaluating a report from IIROC staff, the panel found him accountable and he was subjected to a penalty of $50,000 due to non-adherence to cooperation and $60,000 for disgorgement of commissions. He was also supposed to pay an additional amount of $50,000. The ruling was fair. Rule 6.4 of IIROC states that the staff conducting the hearing must give a notice of not less than 45days before the date of the hearing. Additionally, if the respondent fails to appear for the proceedings, rules 7.2 and 13.5 of the same allow the hearing panel to proceed with the trial and take the staff’s finding as facts. The panel is also authorized to issue penalties in such a situation. Mr. Austin would have availed in court within the prescribed period. Also, he would have prepared his account and provide a chance to petition against the staff’s findings. In 2015 and 2016, Austin boycotted most of the attempts by the IIROC‘s employees to converse with him.   He also deterred from picking any registered letters, did not respond to any phone calls or even answer the door of his last known address. This action was both unethical and a huge mistake since it was evident by law that he was resisting from legal communication.

References

ontario securities commission. (2009). iiroc rules notice--notice of approval--iiroc dealer member rule amendments to implement the csa's registration reform project.

ontario securities commission. (2009). iiroc-rule review.