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by Mike Caswell

The Canadian Investment Regulatory Organization has begun proceedings against Echelon Wealth Partners Inc. and one of its employees, Stephen Burns, over gatekeeping failures with respect to U.S. over-the-counter trading. CIRO claims that the firm allowed foreign clients to unload $105.9-million worth of shares over a four-year period and send the money to offshore accounts in Russia, Kyrgyzstan and elsewhere. The selling came amidst promotional campaigns and caveat emptor warnings, CIRO says.

The allegations are contained in a notice of hearing that CIRO released on Wednesday, March 27. The case arises from accounts that Mr. Burns brought to Echelon in July, 2018, three months after he had joined the firm. According to CIRO, the accounts were held by offshore entities and primarily sold OTC securities listed in the U.S.

As CIRO sees things, Echelon should have put the accounts under increased scrutiny. OTC issuers are not required to provide detailed financial information and often end up in the sights of regulators, with those behind OTC companies frequently being accused of market manipulation and fraud, CIRO says. Despite those risks, Echelon made no changes to its policies, and allowed Mr. Burns to self-supervise, the notice states.

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