Toronto-based investment dealer Northern Securities Inc. is set to face a penalty hearing in October, after the Investment Industry Regulatory Organization of Canada (IIROC) found that the firm and its executives committed a variety of regulatory violations.
Following a disciplinary hearing that lasted nearly four weeks, an IIROC hearing panel found that Northern Securities, a subsidiary of Northern Financial Corp. (TSX:NFC), and three executives contravened several IIROC dealer member rules.
The panel found that between August and November 2008, Victor Alboini, chairman, president, CEO, ultimate designated person and a registered representative at Northern Securities, engaged in a trading practice which improperly obtained access to credit for his client, Jaguar Financial Corp. In doing so, the panel found that Alboini risked the capital of both Northern Securities and its carrying broker, thereby engaging in conduct unbecoming or detrimental to the public interest.
Jaguar Financial is a Canadian merchant bank that invests in undervalued small capitalization companies in a variety of industry sectors. Northern Financial and Alboini each hold substantial ownership interests in Jaguar, and in addition to Alboini’s role at Northern Financial, he also acts as chairman and CEO of Jaguar.
IIROC also found that between August and November 2008, Fred Vance, as chief compliance officer, failed to adequately supervise Alboini’s trading activity involving Jaguar Financial and other clients.
From 2006 to 2010, Northern Securities, Alboini and Vance also repeatedly failed to ensure that the firm corrected deficiencies found in three business conduct compliance reviews and one trading conduct review, according to the panel.
Lastly, IIROC found that Northern Securities, Alboini and Douglas Chornoboy, chief financial officer (CFO) and senior vice president, filed or permitted to be filed inaccurate monthly financial reports from February 2008 to February 2009 which failed to account for leasehold improvement costs, thereby mis-stating the firm’s risk adjusted capital.
IIROC staff withdrew other allegations that Northern failed to ensure reasonable efforts were made to execute orders at the best price, and failed to ensure that adequate policies and procedures were in place regarding its best price obligations.
Chornoboy, who was also CFO of Jaguar Financial, resigned from both firms in June, and is no longer registered with an IIROC-regulated firm. Alboini and Vance continue to be IIROC registrants at Northern Securities.
Northern Securities, Alboini and Vance will be appealing the decisions of the hearing panel, the company said.
A penalty hearing has been scheduled for October 11.