At a sanctions hearing in Re Eley, a Hearing Panel of the Investment Industry Regulatory Organization of Canada (“IIROC”) (the “Panel”) disallowed evidence submitted by the respondent, Douglas Eley, that was found to amount to “a thinly disguised attempt to re-open the Panel’s findings on the merits” rather than evidence relevant to sanctions (the “Sanctions Decision”).
The Merit Decision
Following a contested hearing, the Panel released a decision (the “Merits Decision”) in which it found that Mr. Eley had altered previously signed client documents, “seriously violating industry regulations” and his firm’s policies. This was conduct unbecoming, and breached the high standards and ethics demanded by IIROC Dealer Member Rule 29.1.
The Sanctions Decision
At the sanctions hearing, Mr. Eley contested the imposition of the sanctions that IIROC Enforcement counsel argued be imposed:
- A permanent bar from approval with IIROC;
- A prohibition from employment in any capacity with an IIROC Dealer;
- A fine in the amount of $25,000; and
- A contribution of $75,000 to IIROC’s costs.
Prior to the sanctions hearing the Panel had ordered that Mr. Eley deliver affidavits from his proposed witnesses on sanctions in advance of the hearing to allow IIROC Enforcement Staff to require the presence of those affiants whom they proposed to cross examine.
At the sanctions hearing, IIROC Enforcement Staff objected to the admissibility of the evidence of the five witnesses whom Mr. Eley proposed to rely upon on the basis that their evidence amounted to re-opening and re-litigating the findings on the merits. The Panel agreed that the evidence was irrelevant to sanctions. It did not constitute character evidence, nor did it relate to the financial impact of the proposed sanctions. Most of it was a “thinly disguised attempt to re-open the Panel’s findings on the merits”. Further, from a public policy perspective, allowing the admission of the affidavits “would encourage parties to split their case” and “undermine the credibility and efficiency of the IIROC process”.
In determining appropriate sanctions and costs, the Panel considered aggravating factors: (i) Mr. Eley had a prior disciplinary record, (ii) Mr. Eley’s actions constituted a pattern of repeated misconduct, (iii) a suspension was appropriate, and (iv) a permanent bar should be considered. In mitigation, there was no evidence of harm to any client and Mr. Eley did not receive any financial benefit from the misconduct. Accordingly, the Panel determined that an appropriate order was:
- A 12-month suspension from registration with IIROC with the requirement that Mr. Eley not take employment in any capacity with any IIROC Dealer Member during that period;
- A requirement that should Mr. Eley obtain re-registration with IIROC, he would be subject to close supervision for 18 months;
- A fine of $50,000; and
- A contribution of $50,000 to IIROC’s costs.
Re Eley serves as a reminder that an IIROC hearing on sanctions and costs does not allow for another “kick at the can”. Only evidence relating to sanction or costs, such as character evidence or evidence about the financial situation of the individual is admissible.
The author would like to thank Malcolm Woodside for his contribution.