Jory Capital has been suspended for failing to maintain sufficient capital to keep its doors open, but unless it can convince a hearing panel the suspension was unjustified, the firm may have completed its final trade.
The troubled Winnipeg company and its three registered brokers, including president and CEO Patrick Cooney, have been suspended by the Manitoba Securities Commission in all four western provinces.
The suspension was requested by the Investment Industry Regulatory Organization of Canada (IIROC), which oversees all investment dealers in the country and trading activity on debt and equity markets.
On Oct. 18, IIROC gave notice of a "capital deficiency" at Jory.
Doug Brown, director of legal affairs and enforcement at the MSC, said the latest penalty stems from a regulatory order last May that if Jory failed to maintain a certain amount of free capital for operations, such as paying its rent, and the situation wasn't fixed within five days, it would be suspended. In industry parlance, this is called being "RAC deficient" or risk adjusted capital deficient.
"We received notification from IIROC that Jory was RAC deficient. It wasn't corrected in five days so we moved to suspend the firm (Thursday)," he said.
Jory has indicated it would like to appear before a panel and explain why it shouldn't be suspended. The hearing will likely take place next week. The two-person panel will include Jim Hedley, a lawyer in private practice, and Glenn Lilles, a retired accountant.
Brown said the panel's options are to lift the suspension, lift the suspension and put conditions on it, or uphold the suspension.
"Part of the consideration will be the firm's past behaviour," he said.
Brown said Jory is not allowed to conduct any trades on behalf of clients, but clients are able to move accounts to other firms or liquidate investments.
No client money is at risk, he said.
Calls to Cooney's lawyer, Art Stacey at Thompson Dorfman Sweatman, were not returned on Friday.
Warren Funt, IIROC's vice-president for Western Canada, said Jory's RAC deficiency is an "extremely serious" offence.
Jory had been given extra leeway, as any other firm would have just two days to correct the situation, he said.
"It's fair to say this is a unique experience in IIROC's history. This order is also unique. We've never found ourselves in this kind of situation," he said. "The terms of the order are quite clear. If (Jory) can't meet those terms on an ongoing basis, the commission certainly has the power to cancel their registration. Those words are in the order."