A regulatory hearing panel revoked its own order, which would have required a clearing broker to produce certain materials as part of an enforcement hearing against a brokerage firm and one of its reps.
In March 2024, the Canadian Investment Regulatory Organization (CIRO) issued a statement of allegations against Echelon Wealth Partners Inc. and one of the firm’s reps, Stephen Burns, alleging that they violated CIRO rules.
Specifically, the self-regulatory organization alleged that they failed to exercise due diligence involving four foreign broker-dealers, failed as gatekeepers regarding trading in U.S. over-the-counter (OTC) securities by those brokers and failed to properly supervise their U.S. OTC trading.
Those allegations have not been proven.
In response to a motion from Echelon, on Nov. 1 last year, the panel issued an order requiring the firm’s former clearing broker, Fidelity Clearing Canada ULC, to produce records as part of the enforcement proceeding. Those records included Fidelity’s policies and procedures relating to U.S. OTC trading, records of Fidelity’s due diligence efforts involving the foreign brokers and records of Fidelity’s compliance monitoring of U.S. OTC trading by the brokers.
That ruling was made after a hearing that did not include Fidelity, which is not a party to the enforcement case.
After the panel issued its order, in a letter, Fidelity, “raised concerns that its right to procedural fairness was compromised” and it asked the panel to stay the order.
In response, the panel held a hearing on Dec. 2 to consider Fidelity’s objections.
Ultimately, the panel sided with Fidelity, ruling that Echelon didn’t meet its onus for requiring the production of Fidelity’s records.
The panel said that the inconvenience to Fidelity of producing the records being sought, “further tipped [the balance] in favour of vacating the order…”
It also found that requiring Fidelity to produce the records would raise, “privacy and confidentiality concerns” and that it would, “place a burden on Fidelity, a non-party, both from a cost and time perspective, to collect and produce records,” that aren’t likely to be relevant to the outcome of the case.
As a result, the panel set aside its original order, saying that this move is, “consistent with justice and fairness of the process as it relates to all the parties in this case.”