OSC denies registration for Pro-Financial founder

According to the panel’s decision, in November 2012, one of McKinnon’s former firms, Legacy, transferred certain managed assets and advisors to another firm, De Thomas Financial Corp., “with the intention of transferring his own registration as a dealing representative to De Thomas.”

Since then, the OSC has brought enforcement allegations against both PFAM and McKinnon in connection with a $1.2 million discrepancy in certain principal protected notes (PPN) for which PFAM acted as an advisor, selling agent and note administrator.

Those allegations have not been proven, and in the meantime, the PFAM’s registration has been suspended. The dates for the hearing on the merits of the OSC’s allegations has not yet been set. The next appearance in the case is scheduled for Sept. 15.

In June, the OSC heard a motion from McKinnon seeking an order granting him registration with DeThomas, and providing an exemption in connection with his application for registration. “In bringing the motion, McKinnon is, in essence, seeking an order of the commission that he be granted registration as a mutual fund dealing representative without complying with the registration requirements of the Act, pending the eventual determination of allegations brought by staff of the commission against him in an enforcement proceeding,” the panel wrote in its decision.

According to the panel’s decision, McKinnon argued that there’s no hope that staff of the OSC’s registration branch will approve his registration before the enforcement proceedings are resolved, and it would be a waste of time and resources to go through the process to seek registration.

Even if the commission assumes that the allegations against him are provable, McKinnon maintained that they don’t relate to his prospective registration as a dealing rep. Rather, he argued that they deal with his role in management at another firm. In addition, McKinnon argued that, “there is no evidence that he poses any risk to his former clients or potential future clients and that there is no public interest requiring protection to justify suspending his registration.”

According to the panel’s decision, OSC staff argued: the commission does not have jurisdiction to make the requested order; it would be prejudicial to the public interest to grant an exemption, given the ongoing enforcement proceeding; and this would create a “problematic precedent” by potentially allowing applicants to by-pass the commission’s established processes for seeking an exemption.

The panel didn’t rule on the question of whether the OSC has jurisdiction to grant an exemption. Instead, the panel found that it should not grant McKinnon registration as a fund dealer rep without requiring him to comply with the requirements of the Securities Act.

The panel concluded that based on the “serious and comprehensive nature of the allegations against McKinnon”, the investigation and prior inquiries that led to those allegations, and “the need for a detailed evidentiary record relating to McKinnon’s suitability for registration”, it would not be in the public interest to grant the motion. It is not making any decision about whether the allegations have merit or not, the panel stressed.

Instead, the hearing panel found that assessing McKinnon’s fitness for registration would involve reviewing much of the evidence that forms the basis of the enforcement allegations against him. “It will not be possible to resolve the issues raised in the motion materials without a hearing which would largely replicate the evidence that will be led at the hearing on the merits,” the panel wrote, adding, “to grant the motion would inevitably result in the replication of evidence led in two separate hearings.”

As a result, the motion was dismissed.