A hearing panel of the Investment Industry Regulatory Organization of Canada (IIROC) has imposed penalties against Rocco Tony Cornacchia and, Northern Securities Inc., after finding that both had violated IIROC rules in the following manner:

  • Cornacchia facilitated the participation of 12 clients in a private placement based upon an exemption for which they did not qualify; and he failed in his know-your-client duties by not updating client account forms.
  • Northern Securities Inc. failed to ensure that the 12 client accounts qualified for the indicated exemption required for participation in the private placement. The panel also found that the firm failed to establish and maintain procedures, training and guidance regarding purchases of private placements using the exemption.

    • As penalties, the panel ordered that:

  • Cornacchia pay a $10,000 fine and $1,768 as disgorgement of profits. Cornacchia must pay these amounts within 12 months of the panel’s order. In the same period he must also successfully complete the Conduct and Practices Handbook course and work under terms of close supervision.
  • Northern Securities Inc. pay a $25,000 fine and $1,768 as disgorgement of profits. The firm must pay these amounts within 45 days of the panel’s order.

    • Specifically, the panel determined the parties committed the following violations:

  • Cornacchia engaged in conduct unbecoming and detrimental to the public interest, contrary to IIROC Rule 29.1, when he:
    1. facilitated the participation of 12 clients in a private placement for which the issuer relied on the accredited investor exemption from the registration and prospectus requirements of the British Columbia Securities Act, even though the clients did not qualify for the exemption; and
    2. failed to use due diligence to remain informed of the essential facts of as many as 12 clients by failing to update the New Client Application Forms for those clients.
  • Northern Securities Inc.:
    1. facilitated purchases of a private placement in client accounts pursuant to the accredited investor exemptions of the British Columbia Securities Act without ensuring that the clients qualified for the exemption, contrary to IIROC Rules 1300.1(a), 1300.2, and 2500; and
    2. failed to establish and maintain investment review or approval procedures regarding private placements pursuant to accredited investor exemptions, and failed to establish and maintain sufficient training and guidance to its approved persons to ensure clients properly qualified for the investments, contrary to IIROC Rule 29.27, 1300.2, and 2500.

    IIROC began the investigation into Cornacchia’s conduct on July 31, 2008 and into Northern’s conduct on April 8, 2009. The violations occurred when Cornacchia was a Registered Representative at the Vancouver branch of Northern Securities Inc., an IIROC-regulated firm. Cornacchia is still employed as a Registered Representative at Northern.