A 30-year registration record offered no protection when disclosure rules came calling
Thirty years of registration did not spare Ronald Aleri Scott from a misconduct finding after he failed to tell his dealer about a $2m loan involving two of its clients.
A Canadian Investment Regulatory Organization (CIRO) hearing panel ruled on May 20 that Scott breached MFD Rules 2.1.4(2) and 1.1.2 by borrowing from clients of his dealer, HUB Capital Inc., without reporting the transaction or identifying the conflict of interest it created.
The panel, chaired by Don Young KC alongside Martin Davies and Jim Ross, heard the case over four days in January and April in Calgary.
The transaction in question occurred on October 1, 2021, when Scott's holding company, Ron Scott Financial Consulting Inc. (RSFC), sold promissory notes worth approximately $2m to LG and TG, long-time friends who were clients of HUB.
Scott said he did not disclose the deal to HUB because he no longer considered LG and TG his clients — he had sold his mutual fund book to a colleague, JJ, effective July 1, 2021.
In a letter to HUB, he was direct: "I did not report this financial transaction to HUB Capital simply because [redacted] were not my mutual fund clients."
The panel rejected that reasoning.
Citing Re Chau 2024 CIRO 78, it found that MFD Rule 2.1.4(2) applies to all clients of the dealer member, not only to those of the individual approved person.
"Any approved person who deals with a client of his or her firm is subject to these rules," the Chau panel had stated.
Because LG and TG remained HUB clients through June 2023, Scott's failure to identify and report the conflict violated the rule regardless of whether he considered them his own clients.
The panel cleared Scott on a separate allegation.
CIRO had argued he conducted unapproved outside activity from April 2015 to July 2023, but the panel found CIRO failed to prove it.
Investigators never contacted IPC Investment Corporation, Scott's previous dealer, even though his HUB onboarding form stated his outside activities had been "Disclosed with current dealer (IPC)."
The panel characterised the full sequence of transactions as a single insurance-related arrangement that evolved over time, not a separate undisclosed business activity.
CIRO bore the burden of proof and did not meet it.
The panel also declined to find a breach of Rule 2.1.1, the good faith standard of conduct rule, noting no client testified, no complaints were filed, and no evidence contradicted Scott's genuine belief that he had no disclosure obligation after the book sale.
No penalty has been set.
The panel directed CIRO to schedule a penalty hearing.
Scott is no longer registered with a CIRO-regulated firm.
