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Blog Posted in avatar   Michael Steinberg's Blog

IIROC panel vindicates Peter Deeb of any wrongdoing against client interests

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By Michael Steinberg
Posted Apr 5, 2013 in Business
Following a three-year-long investigation, a panel for the Investment Industry Regulatory Organization of Canada (IIROC) – has dismissed the "conduct unbecoming" allegations against Hampton Securities Chairman, Peter Deeb.
According to transcripts from the hearing, the attorneys and staff representing IIROC were unable to provide proof that Deeb had violated any IIROC or OSC rules. In addition, it's noted that they were, at times, unclear and seemingly confused about what they were alleging that Deeb actually did wrong in the first place.
These proceedings appear to have been brought about to deal with bizarre allegations which IIROC claimed surfaced from “unidentified sources”, charging that the Hampton Securities CEO had committed wrong-doings that included:
-allocating trade transactions after the designated close of business;
-“co-mingling” client orders and pro orders;
-allegedly failing to maintain client priority
-free-riding.
The practice known as “free riding” entails the purchase of securities, without sufficient cash backing; as a result, the transactions are not performed properly.
With regards to the free-riding allegation, the transcripts from the IIROC panel hearings revealed that the IIROC staff failed to conduct a thorough enough review which would have disclosed millions of dollars of additional funds in Deeb’s personal accounts and had in fact disregarded this evidence when previously presented to them. With regards to the remaining counts, the panel ruled that not only is it obvious that clients were not harmed, but they went as far as to say that Deeb assumed increased personal risk, all in an attempt to provide a benefit to his clients.
In addition, the panel found that while “co-mingling” did apparently occur, it did not fall into the realm of wrong-doing since this was done deliberately and that Deeb's clients received a better price than they would have otherwise obtained as a result of his decision.
To the horror of many on Bay Street, the transcripts also revealed that the IIROC's complaint was brought forth, not by way of any complaint or IIROC findings but after two former employees – who had reportedly remained anonymous in the proceedings -- sent a total of four letters to the IIROC. No clients ever came forward to submit complaints against Deeb; IIROC audit findings did not reveal any suggestion of wrong-doing. And to complicate matters, the two individuals who authored the complaint letters are said to be involved in some rather questionable activities; one of whom was barred for life from the securities industry by… IIROC.
Deeb has avoided $150,000 in fines and fees that IIROC staff demanded. Noteworthy and in clear contempt of the Public interest mandate was testimony that Deeb had offered a settlement by way of a $150 for each of his clients. IIROC had claimed that all three of the clients could have benefited by this amount if Deeb had executed the trades in a different manner. But the IIROC declined the settlement offer. Instead, they demanded a cash settlement in the amount of $150,000 – payable to IIROC.

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