An Investment Industry Regulatory Organization of Canada hearing panel has found that Carolann Steinhoff, a high-profile stockbroker in Victoria, had instructed her assistants to fabricate client documents, then engaged in an elaborate but ultimately futile coverup.
The IIROC hearing panel found in its March 5 decision that while Steinhoff worked at Wellington West Capital Inc. <\/b> in Victoria, she:
> \u201cEncouraged, instructed or condoned\u201d a practice in which her assistants cut client signatures from old forms, then pasted or copied those signatures onto new forms.
> Directly instructed two assistants to create a false client guarantee and fax it to Wellington West\u2019s head office as a properly executed document.
More seriously, the panel found Steinhoff had attempted to frustrate or obstruct Wellington West and IIROC investigators by:
> Not responding truthfully or completely to questions.
> Counselling or encourag-ing an assistant to make evasive or misleading statements to investigators.
> Altering a courier delivery receipt, then presenting it as evidence to corroborate previous statements.
\u201cThis is a charge \u2014 fabricating a story designed to mislead and obstruct a lawful investigation and, in that connection, creating and tendering a false document \u2014 of high seriousness,\u201d the IIROC panel said.
It also criticized Steinhoff\u2019s conduct at the hearing: \u201cAs a witness on her own behalf, Mrs. Steinhoff did not, in our opinion, serve herself well. While testifying, [she] seemed to us to display a highly developed sense of entitlement and station that at times verges on hubris.\u201d
Steinhoff countered that she is the victim of petty office politics, fomented by disaffected assistants and a hostile co-manager.
The panel disagreed: \u201cWe have seen nothing that establishes that any of these qualities or sentiments is a significant cause of the predicament in which she found herself. [It] is entirely due to her own words and her own acts and omissions.\u201d
Steinhoff, who now works at Queensbury Securities Inc. <\/b>in Victoria, maintains her innocence. \u201cI am extremely disappointed with the panel\u2019s ruling,\u201d she says. \u201cMore than 20 years of hard work to build my reputation have been severely undermined by allegations from former assistants.\u201d
Steinhoff says she will wait until the panel decides on a penalty \u2014 at a date yet to be determined \u2014 before deciding \u201cmy next steps in proving my innocence.\u201d Penalties could include permanent revocation of her registration (although a temporary suspension is more likely), plus fines and costs.
Steinhoff is a high-performing investment advisor and a well-known Victoria society figure. She worked at ScotiaMcLeod Inc. until 1999, by which time she was the firm\u2019s largest producer in Western Canada and the third-largest in the country, with about $225 million of client assets under administration.
Steinhoff had left ScotiaMcLeod under a cloud. The Investment Dealers Association of Canada, IIROC\u2019s predecessor, subsequently charged her with making unauthorized trades for clients while at that firm. An IDA panel found that she had made one unauthorized trade, but the B.C. Securities Commission<\/b>overturned that finding in 2004.
By that time, Steinhoff had moved on to Wellington West as a partner, senior vice president and investment advisor. She estimates that by 2007, she had 250 clients and $125 million of AUA at the firm.
The issue of altered documents came to the attention of Wellington West\u2019s compliance staff in March 2007, after Steinhoff sent emails to two assistants instructing them to fabricate new guarantees for clients. An email Steinhoff sent to Trish Terrell stated: \u201cJust go to the file and get the guarantee and change the date on it, and fax it to them, thx.\u201d
A subsequent email to Tjerk De Gruijter from Steinhoff stated: \u201cJust get a new form; cut out his signature from something we have already and paste it on form and fax. Send him one in the mail to sign and when u get it back, send it to head office. Trish or Bonnie [another assistant], please show Tjerk how to cut and paste signatures. Thx :-)\u201d
When Wellington West\u2019s compliance staff questioned Steinhoff about these emails, she said she was just joking, as indicated by the \u201chappy face\u201d symbol.
Wellington West\u2019s compliance staff referred the matter to IIROC investigators, who found 132 altered documents in Steinhoff\u2019s client files. Most were letters of authorization \u2014 for example, letters authorizing a monthly transfer from a particular account \u2014 that had to be renewed periodically.
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