IN THE MATTER OF A DISCIPLINE HEARING PURSUANT TO BY-LAW 20 OF THE INVESTMENT DEALERS ASSOCIATION OF CANADA Re: JAMES MICHAEL BRENNAN Heard: April 28, 2004. District Council: The Honourable John B. Webber, Q.C. Guenther W.K. Kleberg F. Michael Walsh Appearances: Counsel for the Investment Dealers Association: Andrew P. Werbowski James Michael Brennan appearing for himself unrepresented DECISION AND REASONS The Notice of Hearing reads as follows: NOTICE is hereby given that a hearing will be held before the Ontario District Council ( the District Council ) of the Investment Dealers Association of Canada ( the Association ), on the 28 th day of April, 2004 at, Suite 1600, 121 King Street West, Toronto, Ontario, at 10:00 a.m., or so soon thereafter as the hearing can be held, regarding a disciplinary action brought by the Association concerning James Michael Brennan ("the Respondent"). NOTICE is further given that the staff of the Association allege the following violation of the By-laws, Regulations or Policies of the Association:
2 1. In or about April 2003, the Respondent prepared a false Proof of Passing Form for the Investment Management Techniques Course, and subsequently submitted, or caused the false Form to be submitted, to the Association for purposes of Registration Approval, thereby engaging in conduct unbecoming a registrant or detrimental to the public interest, contrary to Association By-law 29.1. 2. In or about November 2000, the Respondent prepared a false Certificate of Course Completion regarding the Conduct and Practices Handbook course and subsequently submitted the false certificate, or caused the false certificate to be submitted, to the Association for purposes of Registration Approval, thereby engaging in conduct unbecoming a registrant or detrimental to the public interest, contrary to Association By-law 29.1. 3. On or about July 21, 1998, the Respondent submitted, or caused to be submitted, to the Ontario Securities Commission a Uniform Application for Registration/Approval in which he represented that he had obtained a Baccalaureate in Social Sciences from the University of Ottawa when he knew, or ought to have known that he had not obtained such a degree and thereby engaged in conduct unbecoming a registrant or detrimental to the public interest, contrary to Association By-law 29.1. 4. Between October 2001 and July 2003, the Respondent misrepresented to clients that he had been qualified as a Certified Financial Planner and Certified Investment Manager and used the designations CFP and CIM when he knew or ought to have known that he had not obtained these designations, thereby engaging in conduct unbecoming a registrant or detrimental to the public interest, contrary to Association By-law 29.1. PARTICULARS NOTICE is further given that the following is a summary of the facts alleged and intended to be relied upon and the conclusions drawn by the Association at the said hearing: (i) The Respondent s Registration History 1. The Respondent was initially employed in the securities industry with C.M. Oliver Financial Corporation, a securities dealer as defined under the Ontario Securities Act, and under the jurisdiction of the Ontario Securities Commission ( OSC ). 2. On or about October 30, 2000, a Transfer Application for the Respondent s registration was submitted to the Association as a result of the integration of C.M. Oliver and Assante Capital Management Ltd. ( Assante ). The Respondent remained employed with Assante as a registered representative at its Carling Avenue branch office in Ottawa until May 23, 2003 when his registration approval was suspended by the Association s registration department.
3 3. The Respondent was terminated from his employment on or about July 23, 2003 and is currently not employed in the industry. (ii) The Falsification of the Proof of Passing Form for the Investment Management Techniques ( IMT ) Course: 4. When the Respondent submitted his Transfer Application to the Association, the Application was approved subject to the condition that the Respondent complete either the Professional Financial Planning ( PFP ) course or the Investment Management Techniques ( IMT ) course by May 1, 2003. These courses are administered by the Canadian Securities Institute ( CSI ), the organization responsible for industry education of professionals within the securities industry. 5. By letter dated April 21, 2003, Assante advised the IDA that the Respondent had completed the IMT course on August 26, 1999 and entered this information onto the Association s National Registrations Database. 6. On May 13, 2003, Ms. Orleena Rajanayagam, a Registrations Officer with the Association performed a random check with the CSI and was informed that the Respondent did not complete either the PFP or IMT course. Accordingly, Association Staff sought clarification of the Respondent s completion of these courses from Assante. 7. On May 22, 2003 Assante advised the Association that the Respondent had admitted to falsifying the Notice of Course Completion for the IMT course. 8. During the course of the investigation, the Respondent admitted to Association Staff that he falsified the IMT Notice of Course Completion. (iii) The Falsification of the Notice of Course Completion for the Conduct and Practices Handbook ( CPH ) Course 9. On or about November 2000, the Respondent submitted, or caused to be submitted, to the Association a Certificate of Course Completion for the Conduct and Practices Handbook ( CPH ) Course, despite the fact that he had not completed this course. 10. The CSI confirmed that the document submitted by the Respondent to the Association is falsified as it contains several items that would not appear on an official Notice of Course Completion. The CSI has also confirmed that, according to their student records, the Respondent was scheduled to write the CPH exam on October 1, 1999 but he did not attend the examination sitting.
4 11. During the course of the investigation, the Respondent admitted to Association Staff that he had falsified the CPH Certificate of Course Completion. (iv) The Misrepresentation of Qualifications on the Uniform Application for Registration/Approval 12. On or about July 21, 1998, the Respondent filed a Uniform Application for Registration/Approval with the OSC. On the Uniform Application, the Respondent represented that he had obtained a Baccalaureate in Social Science from the University of Ottawa. The Uniform Application was provided to the Association in or about November 17, 2000. 13. Association Staff has confirmed with officials from the University of Ottawa that the Respondent has not received a degree from that institution. (v) The Misrepresentation of Qualifications on Client Communications and Business Cards 14. In or about October, 2001, prepared a wealth management proposal for a client, M.H. In the wealth management proposal, the Respondent specifically states that he is a Certified Financial Planner (CFP) and uses the CFP and Certified Investment Manager (CIM) designations after his name. The Financial Planning Standards Council (FPSC) confirms that the Respondent had signed up to write the CFP exam in November 2000, but was ineligible to write it, and, therefore, did not obtain the CFP. The Respondent s CSI student information confirms that he has not obtained the CIM designation. 15. In addition, the Respondent indicates, on his business cards, that he has obtained both the CFP and CIM designations, despite the fact that he is not so qualified. NOTICE is further given that the Respondent shall be entitled to appear and be heard and be accompanied by counsel or agent at the hearing and to call, examine and cross-examine witnesses. NOTICE is further given that Association By-laws provide that if, in the opinion of the District Council, the Respondent has failed to comply with or carry out the provisions of any applicable federal or provincial statute relating to trading or advising in respect of securities or commodities or of any regulation or policy made pursuant thereto; has failed to comply with or carry out the provisions of any By-law, Regulation, Ruling or Policy of the Association; has engaged in any business conduct or practice which such District Council in its discretion considers unbecoming or not in the public interest; or is otherwise not qualified
5 whether by integrity, solvency, training or experience, the District Council has the power to impose any one or more of the following penalties: (c) (f) (a) a reprimand; (b) a fine not exceeding the greater of: (i) $1,000,000.00 per offence; and (ii) an amount equal to three times the pecuniary benefit which accrued to such person as a result of committing the violation; suspension of approval of the person for such specific period and upon such terms as such District Council may determine; (d) revocation of approval of such person; (e) prohibition of approval of the person in any capacity for any period of time; such conditions of approval or continued approval as may be considered appropriate by the District Council. NOTICE is further given that the District Council may, in its discretion, require that the Respondent pay the whole or part of the costs of the proceedings before the District Council and any investigation relating thereto. NOTICE is further given that the District Council may accept as having been proven any facts alleged or conclusions drawn by the Association in the Notice of Hearing and Particulars that are not specifically denied, with a summary of the facts alleged and conclusions drawn based on those alleged facts, in a Reply. NOTICE is further given that the Respondent has ten (10) days from the date on which this Notice of Hearing and Particulars was served, to serve a Reply upon: Investment Dealers Association of Canada Suite 1600 121 King St. West, Toronto, Ontario M5H 3T9 Attention: Andrew P. Werbowski, Enforcement Counsel A Reply may either: (i) (ii) specifically deny (with a summary of the facts alleged and intended to be relied upon by the Respondent, and the conclusions drawn by the Respondent based on all the alleged facts) any or all of the facts alleged or the conclusions drawn by the Association in the Notice of Hearing and Particulars; or admit the facts alleged and conclusions drawn by the Association in the Notice of Hearing and Particulars and plead circumstances in mitigation of any penalty to be assessed.
6 NOTICE is further given that if the Respondent fails to serve a Reply or attend at the hearing, notwithstanding that a Reply may have been served, the District Council may proceed with the hearing of the matter on the date and at the time and place set out in this notice, or on any subsequent date, at any time and place, without further notice to and in the absence of the Respondent, and the District Council may accept the facts alleged or the conclusions drawn by the Association in this notice as having been proven and may impose any of the penalties prescribed by the By-laws of the Association. The Agreed Statement of Facts reads as follows: 1. Mr. Brennan admits the allegations set out in paragraphs 1 through 15 of the Particulars section of the Notice of Hearing dated March 30, 2004 with the exception of paragraph 6 and the first sentence of paragraph 10 thereof. Mr. Brennan has no knowledge as to paragraph 6 and the first sentence of paragraph 10. 2. Mr. Brennan has requested that certain additional facts be included in the Agreed Statement of Facts and Association Staff acknowledges the following: a. Mr. Brennan is currently 39 years of age. He is a resident of Orleans, Ontario. b. Mr. Brennan was at all material times licensed to sell mutual funds. He sold mutual funds and provided related financial advice while employed with CM Oliver Financial Corporation. He had previously worked with a major bank. c. In the course of the integration of CM Oliver and Assante Capital Management Limited, Mr. Brennan was advised that he was required to satisfy the registration requirements of the IDA. He took steps to enroll for the relevant courses. He in fact took the Personal Financial Planning Course. He completed a written portion of this but apparently did not pass it. In early 2003, he realized that he had not passed and realized that he did not have sufficient time to complete the course in order to satisfy the requirements of Assante. The matters which were misrepresented would not have been required for the continuation of Mr. Brennan s practice, but for the integration with Assante. d. There is no allegation that Mr. Brennan was negligent in the handling of his clients accounts or that there was any impropriety with respect to his clients accounts. e. Mr. Brennan has suffered from severe depression and psychological illness. He will provide particulars at the hearing. f. Mr. Brennan is married with four children: Haley, age 10; Rebecca, age 8; Tommy, age 5; Claire, age 3.
7 g. As a result of the facts learned by the Association s registrations department and ultimately admitted by Mr. Brennan, steps were taken by Assante to effect Mr. Brennan s suspension, he was suspended by the IDA and was terminated by Assante. h. When confronted, Mr. Brennan admitted falsification of the IMT course and did not deny, and later admitted, falsification of the CPH notice of course completion. He has admitted the particulars as noted above in paragraph 1 of the Agreed Statement of Facts. His admissions have substantially reduced the time required for the investigation and have removed the need for evidence to be called at the discipline hearing. Mr. Brennan has acknowledged that the violations have been made out. Enforcement counsel seeks a permanent ban on registration in any capacity. We do not accept that submission on the facts as disclosed, including the mitigation matters of no record, his acceptance of his responsibility, his acknowledgment of the problems created, his cooperation with the investigation, including the documents that were released and given to the parties. It is our view that we should impose this penalty. A fine of $5,000. Mr. Brennan is prohibited from applying for registration in any capacity for a period of five years from the date of hearing. All relevant examinations will have to be written. Mr. Brennan shall pay the costs of the Association, fixed at $7,500. DATED at Toronto, this day of May 2004. The Honourable John B. Webber, Q.C. Chair Mr. Guenther W. K. Kleberg Member Mr. F. Michael Walsh Member