Two B.C. stockbrokers are challenging their regulator's authority to appeal a hearing panel decision that cleared them of allegations that they failed in their “gatekeeper” obligations.
The Canadian Investment Regulatory Organization (CIRO) had filed a request for review (appeal) with the B.C. Securities Commission (BCSC) after a CIRO hearing panel cleared Teymur Englesby and Cale Nishimura of PI Financial Corp., now known as Ventum Financial Corp., of the allegations in July 2024.
The stockbrokers’ lawyers Owais Ahmed and Jessica Mank of McCarthy Tetrault argued before a commission review panel that CIRO has no jurisdiction to appeal the CIRO hearing panel.
The issue, said Mank, is whether CIRO is an “affected person” and thus has standing at the commission to appeal.
“We say they do not,” Mank told the review panel Jan. 23.
Mank lumped together CIRO enforcement staff and the hearing panel, which is said to be independent of the former.
“Why does CIRO need a right of appeal? CIRO has already made a decision.
“The interests really being advanced here is that of CIRO staff,”
“It is not possible for them to be affected. …They are a public interest actor,” said Mank, who proceeded to argue case law favours her position.
Mank said the Court of Appeal of Alberta has ruled against investment regulators appealing decisions before the Alberta Securities Commission and that ruling ought to apply here in B.C.
But CIRO counsel Jagdeep Khun-Khun argued similar cases have been tried at B.C. Court of Appeal with opposite outcomes.
Khun-Khun also pointed to differences between the two provincial securities acts.
Since 2006 there have been “numerous” review hearings brought by CIRO that the commission has rendered decisions on, said Khun-Khun.
“This commission has an oversight function in order to protect the public” and not allowing a review “would deprive the public interest mandate both CIRO and the BCSC were formed to champion,” said Khun-Khun.
“CIRO’s mandate is to maintain integrity of the capital markets. CIRO is directly affected; it directly affects its mandate,” added Khun-Khun.
The commission’s representative agreed that CIRO is directly affected by its hearing panel decision.
The review is otherwise scheduled for three days this month.
Case tied to 'Bridgemark Group' transactions
The allegations largely concerned how Englesby and Nishimura facilitated penny stock transactions, between December 2017 and October 2018, for West Vancouver resident Cameron Paddock and others, cited by the commission as the Bridgemark Group, who allegedly participated in a consultant scheme abusive to the capital markets.
And while the commission dropped many allegations, it reached several administrative settlements with key respondents, including Paddock, who admitted to insider trading and conduct that was “abusive to the capital markets through a pattern of acquiring and then selling shares of companies for which he was acting as a consultant.”
The CIRO enforcement division alleged in its hearing notice that Paddock, among others, used the services of Nishimura and Englesby to deposit company shares and withdraw money via trading accounts.
CIRO alleged the duo “facilitated activity for several accounts … which generated a number of indicators or red flags which suggested that the accounts may have engaged in suspicious activity.”
One red flag was uneconomic trading, CIRO stated.
But the CIRO panel sided with PI Financial, whose vice-president of compliance, corporate secretary and chief compliance officer Richard Thomas testified.
Thomas’ testimony was unique in so much that in addition to his longstanding executive role at PI Financial/Ventum—dating back to 2003 when he became president of the brokerage—Thomas is chair of the CIRO Pacific Regional Council. He is also a member of the CIRO National Hearing Committee, and is listed as an adjudicating member on CIRO hearing panels for the Pacific district.
Thomas noted CIRO staff did not challenge his participation before the hearing panel.
