Re Psihopedas reminds us that it’s never a good idea to provide incomplete or inaccurate information about past misconduct to the regulator. In this case, a firm applied to the Ontario Securities Commission (OSC) to register Maria Psihopedas (Ms. P) as a mutual fund dealing representative. She disclosed on Form 33-109F4 Registration of Individuals and Review of Permitted Individuals (Form F4) that she had pleaded guilty to two counts of fraud in 1996 and been sentenced to two months of community service but did not disclose that she had been sentenced to 80 days of imprisonment.
The OSC’s background check turned up the prison sentence as well as the fact that, in 2015, she had not disclosed either her conviction or her sentence to the Financial Services Commission (FSCO) when she had applied for an insurance license. FSCO, however, had agreed to register her after she disclosed her conviction to her then-employer.
After OSC staff recommended that her application for registration be refused on the grounds of lack of integrity, the Director of the Compliance and Registration Branch (Director) gave Ms. P a chance to be heard before making a decision. She submitted that she didn’t remember serving jail time and that she hadn’t intended to mislead the regulator. The Director did not find the applicant’s explanation credible. Taking into account Ms. P’s conduct in relation to her application, the Director concluded that she wasn’t confident that Ms. P would “uphold the principles of integrity and act in an honest and responsible manner.” Accordingly, the application for registration was refused.
We think it is quite possible that Ms. P’s application would have been accepted if she had candidly disclosed the sentence imposed on her for an offence committed over 20 years ago. It is clear, however, that the Director attached a great deal of weight to Ms. P’s recent pattern of non-disclosure to FSCO and the OSC. Case law (e.g., Re John Doe, Re M.H., Re Pyasetsky, and Re Couto) supports the view that intentional non-disclosure will most likely result in a refusal of registration on grounds that the applicant lacks the requisite integrity.
This case also serves as a reminder that firms should take steps to check that the information provided to them by their employees for inclusion in regulatory filings is accurate and complete. Firms and individuals should expect regulators to conduct background checks that include criminal records searches as well as research into publicly available information such as filings with other regulators, websites associated with the firm/individual, and public social media activity.
With lawyers who have worked in senior roles for securities regulators, AUM Law can offer our clients insights into the regulator’s decision-making process. We also have extensive experience helping firms and individuals draft registration packages, prepare for pre-registration interviews, and participate in hearings before the Director.