The Investment Industry Regulatory Organization of Canada (IIROC has fined two former dealers a combined $2.5 million and permanently banned them for selling inappropriate products and acting against the interest of clients.
An IIROC disciplinary hearing found that David Charles Phillips and John Russell Wilson failed to tell their clients that certain First Leaside Group products were high risk and failed to consider the suitability for their clients' risk profiles.
Phillips has been ordered to pay a fine in the amount of $2,000,000 while Wilson was ordered to pay $500,000. Both have been permanently barred from IIROC firms. The pair are also required to pay costs in the amount of $230,000 on a joint and several basis.
The pair were also found to have distributed misleading marketing materials for products to their clients. Phillips also acted in a direct conflict of interest with his clients in connection with the sale of these products, IIROC said.
IIROC formally initiated the investigation into the conduct of Phillips and Wilson in November 2011. The violations occurred when Phillips was the ultimate designated person and both Phillips and Wilson were registered representatives with First Leaside Securities Inc (FLSI), an IIROC-regulated firm.
IRROC said that between January 2009 and October 2011, Phillips misrepresented, and allowed FLSI sales staff to misrepresent, to clients that the proprietary fund products recommended and sold by the firm were low or medium risk, when, in fact, they were high risk. Wilson misrepresented the risk level of proprietary fund products over the same period.
Between November 2009 and September 2011, Phillips authorized the preparation and issuance of marketing materials for investment products sold at FLSI, which included statements which were misleading and failed to fairly present the potential risks of those products to the client, IIROC said.
Between November 2009 and September, Wilson provided marketing materials for investment products sold at FLSI to his clients and potential clients, which included statements which were misleading.
IIROC said further details will be posted when available.