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Collaborer avec le bureau de la syndique : c'est à votre avantage

« Collaborer avec le bureau de la syndique : c'est à votre avantage », magazine Sécurité financière , vol. 38, no 4, septembre-octobre 2013, p. 18.

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Are you being investigated?

What leads to an inquiry?

Most often, an inquiry results from a request for an inquiry that can come from various sources. Upon receiving a request for an inquiry, the syndic may open an inquiry file and assign an investigator. For more information about requests for an inquiry, click here

What is an inquiry?

The inquiry serves to determine whether or not the allegations in the request for an inquiry are well-founded. In essence, the inquiry is a process for collecting and analyzing information allowing the syndic or assistant syndic to have the most information possible in order to make the necessary decisions. At this stage, the representative being investigated is not facing any charges and is not guilty of anything whatsoever.

For more information about the inquiry process, click here.

It should be noted that the entire content of the inquiry file, including information about the identity of the persons involved, is kept confidential so as to maintain the integrity of the inquiry process at all times. Complainants, just as the members who are being investigated, must be able to give their version of the facts without worry.

What powers does the syndic have?

The syndic may conduct an inquiry into the establishment of a firm, an independent representative, an independent partnership, a mutual fund dealer or scholarship plan dealer registered in accordance with the Securities Act.

The syndic may therefore have access to these establishments and examine and make copies of their books, registers, accounts and records and request any document relating to their activities. 

Moreover, every person having custody, possession or control of such books, registers, accounts, records and other documents must provide them to the syndic if the syndic requires it and must allow them to be examined, whatever their storage medium and whatever the means by which they may be accessed.

Must a representative cooperate with the syndic?

At this crucial stage, it is in the interests of any representative who is being investigated to cooperate with the syndic, the assistant syndic and the investigators, in order to ensure that the file contains all relevant information. In fact, sections 42, 43 and 44 of the Code of ethics of the Chambre de la sécurité financière and section 20 of the Regulation respecting the rules of ethics in the securities sector set out an obligation to that effect.

Failing to cooperate with the syndic’s staff during an inquiry is a serious breach liable to result in severe consequences affecting a representative’s right to practise.

Don’t forget that even if you choose to be represented by a lawyer, at the beginning or during the course of the inquiry, the obligation to cooperate with the syndic or a member of his staff is a personal obligation. Thus, although a lawyer can assist you, such as during a meeting, your lawyer cannot act on your behalf as long as a disciplinary complaint has not been filed.

Things you should not do:

  • Fail to respond to a notice of meeting from the syndic or the assistant syndic;
  • Contact the complainant or a witness after having been informed that you are being investigated.
Who can access the inquiry file?

Inquiry files are confidential. The syndic of the CSF is legally required to refuse to disclose information in an inquiry file, unless the disclosure is required by law.

Why is this so? The confidentiality is necessary in order to protect the various persons involved in an inquiry and to prevent any interference with the inquiry process. Legally speaking, the information and documents collected during the course of an inquiry are protected by the oath of discretion set out in the Professional Code. In addition, a number of these documents, if not all of them, contain nominative information protected by the Act respecting access to documents held by public bodies and the protection of personal information.

What are the possible outcomes of the syndic’s inquiry?

After analyzing the evidence, the syndic will decide on the outcome of the inquiry. He has three options:

(1) Close the file

The syndic will make this decision if he determines that none of the evidence supports the alleged offence or that the available evidence is not sufficient for him to discharge his burden of proof before the Disciplinary Committee. In such a case, he will send a notice to the person who requested the inquiry, indicating his decision not to file a complaint. He will also inform the person of the reasons for the decision and of the possibility of seeking the opinion of the Autorité des marchés financiers’ review committee. In such a case, the complaint may be filed directly by the person who requested the inquiry.

(2) Take an administrative measure

Verbal notice: If the syndic considers that the offence committed is minor and does not constitute a danger to the public, he will choose to give the representative a verbal notice.

Warning: The syndic will send the representative a warning if he considers it necessary to give a written reminder to the representative about his legal obligations. This measure can be used later if the representative faces another complaint.

A warning is made in writing and results in the file being closed. It is a document that sets out the breaches of the rules of ethics identified by the syndic and refers to the facts in the file and the relevant statutory or regulatory provisions.

(3) File a disciplinary complaint

The syndic may file a complaint before the Disciplinary Committee when he has reasonable grounds to believe that the representative has committed an offence under a provision of the Act respecting the distribution of financial products and services, the Securities Act or a regulation adopted under one of these statutes. Since the syndic has the burden of proof, he must prove that the representative committed the alleged offences. The syndic will inform the person who requested the inquiry that he has decided to file a disciplinary complaint.

In certain cases, the syndic can include with his disciplinary complaint an application for the immediate provisional striking off the roll of the CSF member.

Service of the complaint

After a request for an inquiry has been made against a CSF member and the syndic has decided to file a disciplinary complaint before the Disciplinary Committee, the secretary of the Committee must have the complaint served by bailiff on the representative in question.

The complaint must state the nature, time and place of the alleged offence and must be supported by a sworn or solemn declaration. 

Appearance by the representative

The representative then has ten days to file a written appearance (to plead guilty or not guilty to all or part of the charges) with the secretariat of the Disciplinary Committee, personally or through a lawyer. If he does not appear, he is deemed to have pleaded not guilty or to not have acknowledged his fault.

A representative who has been served with a disciplinary complaint has the right to present a full and complete defence. In particular, he can be represented by a lawyer and call witnesses.

Disclosure of the evidence

The syndic must disclose his evidence to the representative contemplated in the complaint. In practice, it is the syndic’s lawyer who sends the file containing all the relevant evidence regarding the complaint.

Conference call

The next step is to set a date for the hearing of the complaint (hearing on guilt). In the weeks following the appearance, a conference call is held in which both parties are asked to participate in order to fix the date and place of the hearing. The chair of the Disciplinary Committee participates in this conference call.

The Committee’s secretary then sends the parties a notice of hearing. 

Summoning of witnesses

Every representative who is the subject of a complaint is entitled to a full and complete defence. In particular, he may choose to be represented by a lawyer. To present his defence, the representative may call witnesses during his hearing before the Disciplinary Committee. He must send his request to the secretary of the Disciplinary Committee at least fifteen days before the hearing. The secretary will then send the witnesses a summons to appear.

A summons to appear is a court order. Persons who receive a summons must appear at the hearing and bring with them the documents they have been asked to provide. Exhibits are filed at the hearing by the witnesses who testify.

Hearing roll

The secretary of the Disciplinary Committee keeps a hearing roll which is available for public consultation, and which the secretary must post at least ten days before the date on which the hearing is to be held. Therefore, in principle, all hearings are public unless the general interest or public order requires that the hearing be held in camera. A notice of not less than three clear days of the date and place of the hearing must be given by the secretary of the Disciplinary Committee to the representative and, where applicable, to his lawyer. This notice must be served in accordance with rules in the Code of Civil Procedure. Once the representative has been validly informed about his disciplinary hearing, he has the obligation to attend. Therefore, the Committee can proceed with the hearing even in his absence.

Hearing on guilt

The disciplinary complaint is heard by the Disciplinary Committee. The Committee is composed of three persons: the chair of the Committee and two CSF members who work in the same sector and marketing sector as the representative. Hearings are public, unless the Disciplinary Committee orders that a hearing be held in camera. At the hearing, the Disciplinary Committee hears the parties’ evidence. The burden of proof is the same as in a civil action: The syndic only needs to establish the guilt of the representative based on a preponderance of the evidence, not beyond any reasonable doubt as is the case in penal or criminal proceedings.

The hearing is also the opportunity for witnesses to be heard on behalf of both parties. In addition, experts – such as a handwriting expert when a forged signature is alleged – may also be called to testify.

The Committee may hold the hearing in the absence of the representative if he does not attend on the date and at the place fixed for the hearing.

Decision on guilt

In the majority of cases, after the hearing on guilt, the Disciplinary Committee will take the case under advisement in order to render a written judgment setting out the reasons for wholly or partially rejecting or accepting the complaint against the representative.

The decision is then served on the representative. If the representative is convicted, a hearing on the sentence will be held. A conference call is held in which both parties are asked to participate in order to fix the date and place of the sentencing hearing. The chair and the other two members of the Disciplinary Committee participate in the conference call.

The secretary of the Disciplinary Committee then sends a new notice of hearing for the representations on sentencing.

Sentencing hearing

At the sentencing hearing, the parties may present their arguments regarding the appropriate sentence to be imposed. In rendering its decision, the Disciplinary Committee will consider, among other things, the objective seriousness of the offence and any aggravating or mitigating factors surrounding the commission of the offence. The sentence imposed by the Disciplinary Committee must also be fair, reasonable, appropriate and proportionate to the offence.

Possible sanctions

The Disciplinary Committee’s primary objective when imposing a sentence must be to ensure the protection of the public. The protection of the public is based on the pursuit of two specific objectives: dissuade the professional from reoffending and deter others from copying his actions. In other words, the purpose is to maintain the professional quality of the CSF’s members and the public’s trust in those members.

The Disciplinary Committee can impose the following sanctions:

  • A reprimand;
  • Fines (a minimum of $2,000 and a maximum of $50,000 per offence). In determining the fine, the Committee considers the damage caused to clients and the benefits derived from the commission of the offence;
  • A temporary striking off the roll (its duration may be weeks, months or years);
  • A permanent striking off the roll;
  • The obligation to remit to any person entitled to it a sum of money the representative is or should be holding for him;
  • The obligation to transmit a document or the information contained in any document, and the obligation to fill out, delete, update or rectify any document or information;
  • Revocation of the representative’s permit;
  • A restriction or suspension of the representative’s right to engage in professional activities.

Lastly, the Disciplinary Committee may recommend to the Board of Directors of the CSF that it require the representative to successfully complete a period of refresher training or a refresher course (or both) and that it restrict or suspend the representative’s right to engage in professional activities until that requirement is met. It may also recommend to the Autorité des marchés financiers (Fonds d’indemnisation des services financiers) that it compensate the persons harmed by the commission of the offence.

What is a provisional striking off the roll?

The syndic may ask for the provisional striking off the roll of a representative if the alleged offences are of a nature that the protection of the public could be compromised if the representative were to continue to practise his profession. A provisional striking off the roll is an emergency measure. If the Disciplinary Committee orders a provisional striking off the roll, the representative is prohibited from practising during the course of the disciplinary proceedings.

The syndic may require the provisional striking off the roll of a representative if, for example, the representative is accused of the following offences:

  • Having appropriated, without entitlement, sums of money or securities held by him on behalf of a client;
  • Having used sums of money or securities for purposes other than those for which they were entrusted to him in the practice of his profession;
  • Having committed an offence of such a nature that the protection of the public could be compromised if he were to continue to practise his profession.

These types of offences are serious and strike at the very heart of the profession. They demonstrate serious breaches of the duty to act honestly. They are also indicative of a significant lack of integrity as well as a lack of respect for the rules of professional ethics that govern the practice of the profession.

What are the criteria for ordering a provisional striking off the roll?

The case law is consistent on the criteria that must be met in order for the Disciplinary Committee to accept an application for a provisional striking off the roll:

  1. The disciplinary complaint must allege grave and serious offences;
  2. The alleged offences must jeopardize the raison d’être of the profession;
  3. The evidence must reveal that the alleged offences appear to have been committed (prima facie evidence, that is, evidence “at first sight”);
  4. There must be a risk that the protection of the public will be compromised if the professional contemplated in the application for a provisional striking off the roll continues to practise his profession.

The syndic must therefore show that the representative risks compromising the protection of the public if he continues to practise. Thus, he need only establish that the alleged offences appear to have been committed and compromise the protection of the public.

As for the representative contemplated in the application for a provisional striking off the roll, at this stage of the proceedings he does not have to defend himself against the alleged offences. Rather, he must demonstrate that the protection of the public will not be compromised if he continues to practise his profession.

An application for the immediate provisional striking off the roll filed by the syndic is heard on an urgent basis by the Disciplinary Committee, no later than ten days following service of the disciplinary complaint. When rendering a decision imposing a provisional striking off the roll, the Disciplinary Committee must decide whether a notice of the decision must be published in a newspaper having general circulation in the place where the representative has his business premises and in any other place where the representative has practised or could practise.

Payment of costs

The Disciplinary Committee can order the complainant or the respondent to pay the costs. These costs include, in particular:

  • Service costs;
  • Registration and stenography fees;
  • The cost of expert opinions admitted into evidence;
  • The indemnities payable to witnesses who have been summoned;
  • The travel and lodging expenses of the Committee members.
Publication of a notice in the newspaper

When the Disciplinary Committee imposes a temporary striking off the roll, it must decide whether a notice of the decision must be published in a newspaper having general circulation in the place where the representative has his business premises and in any other place where the representative has carried on or could carry on his professional activities. If the Disciplinary Committee orders the publication of a notice, it must also decide whether the publication costs are to be paid by the representative, by the CSF or by both of them. The Committee’s secretary will choose the newspaper most likely to be read by the representative’s clients. 

The notice must include the name of the representative who has been found guilty, the place of his professional domicile, the name of the Chambre de la sécurité financière, the date and nature of the offence committed and the date and a summary of the decision.

When the Disciplinary Committee imposes a permanent striking off the roll, the notice must be published. In such a case, the Committee does not have the discretion to order a publication exemption.

Appeal

The parties have 30 days following the date of the decision (regarding guilt or sentencing) within which to appeal the decision before the Court of Québec, with leave of a judge of that court.

The appeal does not suspend the execution of the contested decision, unless a motion to suspend the sanctions has been presented and granted by the judge. The representative must therefore comply with the Disciplinary Committee’s decision until the judgment of the Court of Québec has been rendered.

The final judgment of the Court of Québec is subject to appeal before the Québec Court of Appeal, with leave of a judge of the latter court.