Vancouver broker's 3-year suspension should have been a permanent one
By David Baines, Vancouver SunOctober 3, 2009
The regulatory body for Canadian stockbrokers has come a long way since the 1990s, when it had only one enforcement officer in B.C. and an abysmal enforcement record that included just one contested hearing in an 11-year period.
In those days, it was called the Investment Dealers Association of Canada, and it had the dual role of regulating the brokerage industry and promoting it, an obvious conflict of interest.
Several things have happened since then. The B.C. Securities Commission audited the IDA's disciplinary function in B.C., found it woefully lacking, and told it to shape up. Other provincial commissions came to the same conclusion.
Under pressure, the IDA re-tooled itself and began acting like a self-regulatory body should.
The number of disciplinary cases increased dramatically, most notably contested hearings, which are a good measure of regulatory resolve. Sanctions have increased commensurately, both in number and severity.
More recently, the IDA moved to resolve the inherent conflict of being both a regulatory and lobby group by hiving off its trade industry function. It also reconstituted itself as a more arm's-length regulatory body and adopted a new name: The Investment Industry Regulatory Organization of Canada (IIROC).
While these changes are all positive, it doesn't mean that all its disciplinary decisions make sense. In fact, some are incomprehensible, such as the penalty rendered in the case of Vancouver stockbroker Konstantinos (Dino) Georgakopoulos a few days ago.
Georgakopoulos has not had a very illustrious career as a broker. He started out in 1996 at Georgia Pacific Securities, a firm that has lurched from one regulatory problem to another.
Two years later, he moved to Wolverton Securities, another firm that always seemed to be in hot water with regulators, largely on account of its affinity for stocks listed on the dreadful OTC Bulletin Board, which was Georgakopoulos's specialty.
It was there that he opened an account for David Amsel, whose brother, former U.S. broker Mayer Amsel, had a long regulatory rap sheet.
In 1995, Mayer Amsel was permanently banned as a broker by the National Association of Securities Dealers (NASD) for serious offences, including parking stock in fictitious accounts, for which he used his brother David's address.
He appealed that ban, but the U.S. Securities and Exchange Commission upheld it: "In light of his deliberate and serious misconduct, we consider his exclusion from that business a desirable safeguard for both broker-dealers and members of the public," the SEC ruled.
Two years, later, Mayer Amsel once again came under regulatory scrutiny. The SEC alleged that, while he was still working as broker, he "used manipulative and deceptive practices in a scheme to defraud the market" in a bulletin board stock called Vertex Industries Inc. Without admitting or denying the allegations, he settled the matter by agreeing to another lifetime ban.
In 2002, Georgakopoulos moved to another dodgy Vancouver brokerage firm, Golden Capital Securities. Not only did he open an account for David Amsel, he opened an account for Mayer Amsel, the twice-banned U.S. stock offender. Georgakopoulos claimed he discussed Mayer Amsel's disciplinary record with his bosses at Golden, but there was no evidence of that.
It was obvious the two brothers worked together. They used the same address and phone number, and they both placed trade orders with Georgakopoulos on the same stock.
That stock was another piece of bulletin board junk called East Delta Resources Corp. Both brothers were closely tied to it. In fact, the company and Mayer Amsel shared the same address.
The brothers placed orders to buy and sell thousands of shares, which Georgakopoulos dutifully executed. In many trades, they were both the buyers and the sellers. In many cases, the trades made little economic sense, they were simply trading paper back and forth for no material profit or loss. They not only dominated the market, they were the market: On many days, they accounted for 100 per cent of the trading volume.
Georgakopoulos executed most of these trades through a U.S. brokerage firm called Public Securities Inc., which was East Delta's market maker. He dealt there with a person named John Hull, who was in on the Amsel brothers' scheme.
In 2006, Hull admitted to the NASD that he had manipulated East Delta's share price, largely through the brothers' accounts at Golden Securities. He agreed to a permanent ban as a broker.
That begged the question: Was Georgakopoulos in on the scheme, too? IIROC enforcement staff figured he knew, or ought to have known, that he was facilitating a manipulation.
A hearing was held in December 2008, and in May this year, the hearing panel -- headed by Stephen Gil -- found that Georgakopoulos had ignored many red flags and failed to live up to his duty to act as a gatekeeper for the securities market. Gil also found Georgakopoulos's testimony to be evasive, self-serving and "lacking the ring of truthfulness."
These are serious findings. IIROC enforcement staff asked the panel to revoke his broker's licence for 10 years, but for reasons that are not clear the panel decided on three years. This, in my view, is inconsistent with such a serious lapse in professional conduct. I think Georgakopoulos should be permanently barred from any securities dealings with the public.
One IIROC official suggested to me that Georgakopoulos might have a hard time getting back into the industry in view of his regulatory record. I'm not so sure. After the hearing in December, but before the decision was rendered, Georgakopoulos obtained new employment at Global Securities in Vancouver.
Even after the decision was rendered in May, he kept working there. It wasn't until Sept. 15, after he was officially suspended, that Global terminated his employment. I think that tells you all you need to know about that brokerage firm.
