Tribunal finds SRO panel erred

Ontario’s Capital Markets Tribunal partially upheld an appeal from a former rep, overturning one of the findings against him.

In March 2022, an Investment Industry Regulatory Organization of Canada (IIROC) hearing panel found that Mark Odorico, a former rep and portfolio manager with CIBC Wood Gundy, violated securities rules by misappropriating client money, engaging in authorized trading and failing to cooperate with the former SRO’s staff. IIROC became part of the Canadian Investment Regulatory Organization (CIRO) this year.

The former SRO ordered a permanent ban against Odorico along with a $125,000 fine, $579,000 in disgorgement and $25,000 in costs.

Odorico appealed the panel’s rulings to the tribunal, arguing that the sanctions it imposed were too harsh and seeking to overturn the findings.

While the tribunal rejected most of the appeal, it found that the hearing panel erred and it set aside one of the allegations that Odorico misappropriated client funds.

“We have concluded that the CIRO panel overlooked or misapprehended material evidence in this finding and expressed a supporting rationale for finding that Odorico’s evidence lacked credibility that was inconsistent with the overlooked or misapprehended material evidence,” the tribunal said in its decision.

Specifically, the tribunal found the SRO panel overlooked evidence of a promissory note that supported Odorico’s argument that the money he received from two clients was a loan, and not for an investment by him on their behalf.

“The fact that the promissory note was a document that [the client] herself had someone prepare for her and she demanded Odorico sign is also significant evidence tending to confirm that the money was advanced to Odorico as a loan,” the tribunal said in its decision.

As a result, the tribunal concluded that the portion of the sanctions attributed to that allegation should be set aside. However, it also ruled that CIRO staff should have the option to decide whether the now-overturned allegation should be reconsidered in a new hearing “if CIRO Staff considers that to be important from a regulatory perspective.”

The SRO has 30 days to decide whether or not to re-litigate the allegation.

If it decides not to rehear the case, the tribunal said the disgorgement order should be reduced by $150,000 (from $579,000 to $429,000), representing the money the tribunal found may have been a loan.

It also requested submissions from both sides on how the other sanctions — the fine, ban and costs order — should be affected by the tribunal’s decision to set aside one of the allegations.

While Odorico asked the tribunal to overturn the sanctions, the tribunal found that the hearing panel’s approach to determining the sanctions “is consistent with the purpose and principles applicable to regulatory sanctions, the IIROC sanction guidelines and prior CIRO decisions.”

“We do not find that the CIRO panel erred in law by imposing sanctions that were harsh and excessive,” it said.