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Activist investor Vic Alboini’s appeal of OSC penalties fails

Vic Alboini asks a question during the Research In Motion Limited (RIM) annual general meeting of shareholders in Waterloo July 10, 2012.

MIKE CASSESE/REUTERS

Toronto activist investor Vic Alboini has lost an appeal of penalties imposed on him by Ontario's financial markets watchdog, including restrictions on his activities in the investment industry and nearly $500,000 in fines and commissions to be repaid.

Saying that the action against him had no basis, Mr. Alboini, a lawyer, represented himself and appealed sanctions imposed on him by the Ontario Securities Commission before the Ontario Divisional Court, arguing they were unreasonable. But in a decision released on Tuesday, a three-judge panel rejected his arguments.

Mr. Alboini, who could now seek leave to appeal the ruling before the Ontario Court of Appeal, declined to comment when contacted by The Globe and Mail on Tuesday.

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He made headlines in 2011 with his challenge of the leadership at what is now known as BlackBerry Ltd., calling for a shake-up or a sale of the struggling company. (His merchant bank, Jaguar Securities Corp., still owns shares in the smartphone maker.)

However, he soon ran into problems with regulators, facing a hearing before the Investment Industry Regulatory Organization of Canada (IIROC), the investment industry's self-regulatory body, in 2012.

In December, 2013, the Ontario Securities Commission upheld IIROC findings that Mr. Alboini had "engaged in conduct unbecoming a registrant" when his brokerage, Northern Securities Inc., "improperly obtained access to credit" for Jaguar as it engaged in transactions on behalf of its clients in 2008. He was chief executive officer of both entities. The OSC also found that Northern Securities had filed inaccurate monthly reports.

The OSC had knocked down stiffer penalties imposed by IIROC but still demanded that Mr. Alboini pay a $250,000 fine, and pay back $244,985 in commissions. He was also given a reprimand, a one-year suspension from IIROC, and a two-year suspension from overseeing the compliance of a brokerage firm. The penalties are on hold pending the final outcome of any appeal.

At issue was a series of stock purchases starting in 2008 in which, Mr. Alboini has argued, Jaguar had commitments for funds from high-net-worth clients, but did not actually have the money on hand. Tuesday's Divisional Court ruling said Mr. Alboini had wrongly tried to include fresh evidence in his appeal – evidence excluded from the OSC proceeding – to back up the commitments Jaguar had secured.

The decision, written by Justice David Corbett, ruled that OSC's call not to allow the new evidence was reasonable, as was the regulator's conclusion that Jaguar was not "creditworthy by the standards of the investment industry at the time it purchased the securities."

Still, Justice Corbett praised Mr. Alboini's efforts.

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"The appellants feel very strongly about their views of their own conduct and the conclusions of the IIROC panel and the OSC," the judge writes. "Mr. Alboini, who is a lawyer, represented himself and the company on this appeal. He knows the file very well, and has an insider's knowledge of the regulatory issues. He did his best to convey this information to us, and the depth of his sincerity and commitment to these issues was evident."

Since closing Northern Securities, Mr. Alboini has renamed its parent company Added Capital Inc. and has continued to operate the company as a mergers and acquisitions advisory firm. Jaguar, of which Mr. Alboini also has effective control, remains a merchant bank taking equity positions in small and mid-sized companies and working to change their operations. Those roles do not involve operating a brokerage firm with client accounts and would be unaffected by the OSC decision's suspensions.

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