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Canadian SRO pressuring gadfly on complaint data

OTTAWA — A tussle has erupted over what to do with complaints against more than 2,000 brokers that the Investment Dealers Association of Canada inadvertently posted on its website.

OTTAWA — A tussle has erupted over what to do with complaints against more than 2,000 brokers that the Investment Dealers Association of Canada inadvertently posted on its website.
Investor rights activist Robert Kyle, who discovered the list on the IDA’s website, deliberately posted it to his own website, investorvoice.ca., where it remains.
The Toronto-based IDA, a self-regulatory organization for securities industry participants, removed the information from its website Jan. 26.
“People are supposed to be innocent until proven guilty, but [anyone who saw the leaked documents] might jump to a different conclusion,” said Alex Popovic, the IDA’s vice president of enforcement. “We’ve had no complaints; the information is typical of the type of information that’s available in the U.S. on [Washington-based NASD’s] Central Registration Depository … It was never our intent to provide that information.”
Mr. Kyle, a former director of the Consumers Council of Canada in Toronto and the Small Investor Protection Association in Markham, Ontario, has no intention of removing the data from his website.
“This database is 18 months old,” he said. “Where has the IDA been? How many more clients have signed up with these brokers since then?”
Mr. Kyle has had a history of conflict with the IDA, which accused him of failing to cooperate with an investigation when he was the chief executive of Toronto-based Derivative Services Inc.
On May 26, 2005, the Ontario Superior Court of Justice handed down a decision rejecting his effort to challenge the jurisdiction of the IDA over its members. Mr. Kyle had sought a ruling that the IDA should be considered an agent of the government and that statutory limits to its investigative powers should apply. The court rejected his claim in a unanimous opinion.
That dispute “ended my career as a broker,” Mr. Kyle said.
Now he has received a letter from the IDA’s lawyers, Toronto-based Borden Ladner Gervais LLP, which said, “You must immediately remove from your website the information relating to IDA members and brokers.” The letter also stated, “The IDA does not accept any responsibility as a result of your unauthorized and wrongful publication and disclosure of the information in any way and, further, will hold you responsible for any loss or damages incurred as a result of you doing so.”
As of press time, Mr. Kyle was unsure whether the IDA would sue him.
Jeff Kehoe, IDA director of enforcement litigation, has said he could not discuss the IDA’s legal options in the matter, but he warned: “Anybody can launch a suit in court in Ontario.” However, Mr. Kyle said, “the data has been lodged in the Superior Court of Justice of Ontario in Toronto since Jan. 24” — in a case involving TD Waterhouse Canada Inc. of Toronto, a subsidiary of Toronto-Dominion Bank.
The information came from ComSet, a database the IDA uses to gather information about criminal complaints, civil claims, internal investigations and complaints from regulators and customers (InvestmentNews, April 3).
The IDA says that 87.6% of its registered representatives have had zero “events” reported on ComSet since mandatory reporting began in October 2002. Of 3,929 reported complaints registered with IDA members over the two-year period through February 2006, 463 remain outstanding. Only 15 individuals on the ComSet database have been charged with a criminal offense.
One spreadsheet among items posted lists the names of brokers who have five or more events tied to their name. There are 50 names on this spreadsheet, with one broker, Bertrand Trudel, allegedly linked to 59 events. He was a broker at Levesque Beaubien Inc., now part of Montreal-based National Bank Financial Inc.
The IDA on Jan. 31 announced a disciplinary hearing to consider various allegations against Mr. Trudel, including one stating that he “effected transactions without the authorization of his clients.”
The SRO community knows that it has problems. The IDA, the Mutual Fund Dealers Association of Canada and Market Regulation Services Inc., both of Toronto, and Bourse de Montréal Inc. in December released a Joint Regulatory Notice on the Role of Compliance and Supervision, which highlights instilling a “culture of compliance” in member firms. The notice was released in response to “requests from the securities industry for additional regulatory guidance from the SROs concerning their expectations that member firms establish comprehensive compliance programs.”