Fine increased to $50K for former First Leaside CFO after OSC review

The OSC doubled the fine and issued a three-year ban for the former CFO of First Leaside Securities Inc. (FLSI) after reviewing a January disciplinary ruling by an IIROC hearing panel, said the regulator on Wednesday.

The OSC found that Brian Sutton, the former CFO of First Leaside who was responsible for ascribing a price for certain fund units, “failed to discharge his responsibility properly.”

First Leaside was a real estate and wealth management company based in Uxbridge, Ont.

The OSC was reviewing an IIROC hearing panel’s ruling against Sutton that found he failed to ensure the proper pricing of fund units.

At his IIROC hearing, Sutton said he relied on an active market to set the appropriate price for the fund units in question. However, the IIROC panel’s liability decision in 2017 said there was no active market “to form the basis for pricing decisions and that the price of the Fund Units as communicated to unitholders did not reflect the value of those securities.”

In a subsequent Jan. 31, 2018 decision, an IIROC panel fined Sutton $25,000 and reprimanded him, describing Sutton’s error as an “honest mistake.” The panel didn’t follow the request by IIROC staff for a permanent prohibition and $100,000 fine, as well as reimbursement of costs, after considering Sutton’s unblemished track record as a mitigating factor.

Sutton appealed the liability panel’s decision that he violated IIROC rules, said the OSC in its decision, and IIROC staff also appealed the sanctions decision against Sutton.

The OSC reviewed the decision at IIROC’s request. As a result, OSC found “the IIROC panel made errors that, when taken together, constitute an error of law that leads us to set aside the Liability Decision and substitute our own decision.”

The OSC’s analysis also found that Sutton violated IIROC Rule 38.6(c), and that the “sanctions imposed by the IIROC panel did not adequately address the seriousness of this matter.” The OSC instead ordered Sutton be banned for three years, pay a $50,000 fine and to pay costs of $50,000.

An IIROC spokesperson said in an email to Advisor.ca that IIROC staff is pleased with the commission’s decision.

“This OSC decision confirms that individuals in senior roles must clearly understand the responsibility that they have accepted and that they will be held accountable for wrongdoings, with serious consequences,” the statement said.

Staff

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