A Victoria investment adviser will likely not be suspended from trading securities for one year after the B.C. Securities Commission chastised the Investment Industry Regulatory Organization of Canada (IIROC) for too harshly penalizing Carolann Steinhoff.
On Thursday, the Securities Commission announced it agreed with IIROC’s finding that Steinhoff, while working for Wellington West Capital, committed a number of infractions while handling the investments of a Victoria couple in 2008.
However, the commission set aside the penalties, including the one-year suspension IIROC had imposed.
IIROC, the self-regulatory organization that oversees stock brokers in Canada, found that Steinhoff failed to obtain approval for stock trades and traded on margin, which exposed the clients to greater risk. Steinhoof also recommended the couple hold their investments, which were taking losses in late 2008, despite knowing they needed money to buy a new home, IIROC found.
The couple lost nearly $70,000 of $125,000 they invested with Steinhoff.
When IIROC issued its decision last July, it called for Steinhoff to face a year-long suspension, a $100,000 fine, $20,000 in costs and an order to pay back $6,813 in commissions earned through trades using the couple’s investment fund.
The suspension was to have started last July but was stayed after Steinhoff appealed to the Securities Commission.
Thursday’s decision threw out those penalties and took issue with IIROC’s characterization of Steinhoff as dishonest.
Steinhoff’s legal counsel Greg Harney called the decision a “substantial success” and said he expected his client would now face only a fine.
“I also note that IIROC was chastised for the process and the foundless sullying of her reputation,” Harney wrote in an email.
Indeed, the commission noted that, while Steinhoff contravened investment suitability requirements, there was “no evidence in the record of a fundamentally dishonest person, which is what the IIROC panel would have people believe. There is absolutely no basis in the record for the panel’s finding that Steinhoff cannot be trusted to act honestly and in a fair manner.”
In its decision, the Securities Commission agreed a fine would be appropriate as “Steinhoff’s misconduct may be an isolated event, but the [couple in question] suffered severe consequences as a result, and, certainly, a representative with Steinhoff’s skill and experience ought to have known better.”
However, the commission decided to defer on the amount of the fine until it receives submissions from both Steinhoff and the regulatory body.
The commission also agreed Steinhoff should pay costs and pay back commissions earned on the trades made with the couple’s investment fund.
However, the commission does not believe a suspension is warranted, noting a year’s suspension is “tantamount to the termination of the registrant’s career.”
In its decision, the commission wrote: “Steinhoff made a serious mistake. Does the public interest demand that she lose her career over it? She has been in the business now for 25 years. She has no previous regulatory sanctions. There is no basis to conclude she acted dishonestly or for an improper motive, or has ever done so … there is no evidence that she represents any ongoing threat to her clients, to potential new clients, to the reputation of the securities markets or of IIROC or its members.”
The commission has given IIROC until Sept. 13 to file its submissions on penalty, and has given Steinhoff until Sept. 27 to file a response. IIROC will then have until Oct. 4 to reply to those submissions.
IIROC has twice previously found Steinhoff broke industry rules, and administered penalties. However, in each case, the penalties were thrown out by the B.C. Securities Commission on appeal.