A $20,000 costs award trails the $50,000 fine after the Toronto rep skipped his own hearing
A Canadian Investment Regulatory Organization (CIRO) hearing panel permanently prohibited Neilay Modi from conducting securities-related business while in the employ of or associated with any CIRO Dealer Member, and fined him $50,000.
The panel also ordered Modi to pay a costs award of $20,000.
The proceeding was commenced by CIRO Staff over his failure to cooperate with an investigation into his conduct, an investigation based on a complaint received from his dealer.
Modi was registered as a dealing representative with Desjardins Financial Security Investments Inc. in the Toronto, Ontario area at the time of the violation, and is not currently registered in the securities industry in any capacity.
Modi filed no Reply to the allegations, did not appear at the hearing, which was heard by teleconference, and did not otherwise defend against the allegations.
Tyler Beazer appeared as Enforcement Counsel.
The panel, chaired by Paul Moore, KC, and including industry representatives Sarah Shody and Dave Persaud, found the conduct alleged in the Statement of Allegations contravened Mutual Fund Dealer Rule 6.2.1.
In reaching that finding, the panel relied on Mutual Fund Dealer Rule 7.3.4 and Rules of Procedure 7.3 and 8.4, which allow it to accept as proven the facts set out in the Statement of Allegations.
It also considered affidavit evidence submitted at the hearing and decisions in comparable cases submitted by Staff.
The misconduct was “serious and unacceptable,” the panel wrote in its reasons for decision, released September 18.
The panel described the ability of Staff to investigate possible regulatory infractions as fundamental to the effective enforcement of CIRO’s regulatory scheme, and the obligation to cooperate under Rule 6.2.1 as “a cornerstone of the enforcement regime.”
Sanctions should be protective of the public interest and not punitive, the reasons state, and should provide effective, appropriate and efficient deterrence to the respondent and to the general public.
The dollar amounts and possible fraud, dishonesty and related concerns underlying the complaints Staff was attempting to investigate were “potentially large and serious,” the panel wrote.
The investigation was not limited to alleged minor infractions such as improper forms completion or improper retention, which in other cases before CIRO panels have resulted in fines regularly in the range of $10,000.
In three cases cited by Staff in which only non-cooperation was at issue, prohibition orders and fines of $50,000 were deemed appropriate.
The panel had no information about Modi’s financial resources and future prospects, or the actual impact the sanctions might have on him, and determined that the fine, the permanent prohibition order and the costs award should together provide adequate deterrence.
Under the rules, the panel could have imposed a fine of up to $5m per contravention.
Mutual Fund Dealer Rule 7.4.2 permits a panel to order a respondent to pay all or part of the costs of a proceeding and investigation incurred by CIRO.
Staff submitted a bill of costs for $52,000, an amount the panel found reasonable, and requested an award of between $15,000 and $20,000, noting that discounting a costs award from the full amount incurred is not unusual.
Discounts in other cases usually followed evidence of cooperation or efficient ameliorating conduct that allowed proceedings to conclude expeditiously, the panel wrote.
Because the misconduct at issue was non-cooperation itself, without any participation by Modi, the panel found he had not earned credit for a discount.
Staff gave two reasons for capping the award at $20,000, the reasons state: that respondents in future cases should not be deterred from defending allegations for fear of costs, and that a costs award of $52,000 set above a $50,000 fine might not look right to the general public as a matter of justice.
The panel accepted that submission and set the award at $20,000, principally because the prohibition order, the fine and the costs award together constituted adequate and sufficient deterrence.
