An appeal panel of the Investment Dealers Association of Canada (IDA) has dismissed an appeal brought by Jory Capital Inc. and Patrick Michael Cooney, at all material times the CEO of Jory.

The appeal was from two decisions of an Ontario District Council Hearing Panel. The first decision, dated July 28, 2005, found that a June 22, 2004 payment by Jory to Cooney, while Jory was in a loss situation and under certain Early Warning Restrictions, violated IDA by-laws. The panel also found that Cooney engaged in conduct that was unbecoming or detrimental to the public interest.

The second decision, dated Jan. 5, 2006, imposed sanctions on Jory and Cooney. Jory was fined $25,000. Cooney was fined $25,000 and was prohibited, for a period of five years, from receiving approval in any capacity where he might exercise significant influence on, or responsibility for, financial compliance.

Cooney and Jory argued that the initial decision ought to have been set aside because the hearing panel should have given effect to a defence of officially induced error, that Cooney’s alleged violations were not intentional, that Jory and Cooney were entitled to rely on the defence of due diligence, and that the IDA had no authority to restrict payments to Cooney. They also argued that the sanctions imposed were too excessive.

In support of their arguments, Jory and Cooney sought to introduce certain “fresh evidence” regarding their financial projections at the relevant time. However, the appeal panel found that the “fresh evidence” confirmed the conclusion of the hearing panel that the appellants’ projections of profits showed no measure of caution. The hearing panel also found that the due diligence defence was not available to Jory and Cooney on the evidence presented because they had taken no steps to confirm whether the June payment was authorized by the IDA and had no basis for reasonably believing such authorization had been received.

Finally, the appeal panel found that the sanctions imposed were reasonable, having regard to Jory’s and Cooney’s prior disciplinary record in matters relating to financial compliance. The appeal panel agreed with the hearing panel that repeated violations had to attract progressively escalating sanctions.

The appellants have indicated an intention to bring a further appeal to the Manitoba Securities Commission.

For a complete summary of facts, please see IDA Bulletin 3626.