Canada’s brokerage industry regulator has permanently barred two former executives of First Leaside Wealth Management Inc. from working as registrants in the securities industry.
The Investment Industry Regulatory Organization of Canada (IIROC) said First Leaside founder David Phillips has also been ordered to pay a fine of $2-million while senior salesman John Wilson has been ordered to pay $500,000.
IIROC said the fines will not be enforced until investor claims have been paid through the company’s receivership process, ensuring any funds recovered would go to investors first.
An IIROC hearing panel ruled the two men failed to tell their clients that certain First Leaside investment products they were purchasing were high risk, and also failed to consider the suitability of the products for their clients. The panel also ruled they had distributed “misleading” marketing materials to clients, and said Mr. Phillips had acted in a direct conflict of interest with his clients in connection with the sale of products.
The men were registered with IIROC because the First Leaside group of companies operated a brokerage firm, First Leaside Securities Inc.
The Ontario Securities Commission ordered Uxbridge, Ont.-based First Leaside Wealth Management to halt taking new funds from investors in November, 2011, and the company filed for court protection from creditors in early 2012, leaving over 1,000 clients in the lurch. IIROC removed the registration for First Leaside Securities at the same time, effectively shutting down the brokerage firm.
An OSC hearing wrapped up Wednesday in a case involving allegations of fraud against both men over the sale of almost $19-million of securities in the fall of 2011. The OSC alleged the men should not have sold securities without giving investors a copy of an accountant’s report, completed in August that year, that raised questions about the firm’s viability.
There has been no ruling yet in the OSC case.