The Alberta Securities Commission has reached a settlement with a Calgary-based Savoy Capital Management Ltd. and its CEO, over allegations that it failed to properly supervise a trader.

The regulator says the portfolio management firm allowed the unnamed trader to allegedly create artificially high prices for securities that he purchased on behalf of a hedge fund managed by the company, during the summer of 2002.

Savoy Capital Management Ltd. agreed to pay a $15,000 penalty to settle these allegations plus $5,000 towards costs of the investigation. As well, Sayoy’s CEO, Eugene Vollendorf, agreed not to act as a compliance officer for six months and to pay $5,000 to settle the allegations plus $2,500 towards costs.

Staff of the ASC conducted an investigation into allegations that Savoy, Vollendorf and one of its trading officers breached the Securities Act. The settlement says that the investigation confirmed, and Savoy and Vollendorf admit, that they failed to comply with the rules and acted contrary to the public interest.

Between May 2002 and September 2002, Savoy’s bought securities in Medicure Inc., Matrikon Inc., Electromed Inc., Great Canadian Gaming Corp., Big Rock Brewery Ltd., VSM Medtech Ltd. and Intermap Technologies Corp. ASC staff allege that the purchases of these securities by Savoy’s trading officer were made to create an artificially high price for the stocks in order to enhance the performance of its Gladiator Fund, a hedge fund.

Savoy and Vollendorf acknowledge that their failure to have adequate safeguards in place created an opportunity to engage in improper trading activity. Since then, it has initiated improvements in its compliance regime. In August 2004, it hired a dedicated compliance officer.

The ASC noted that Savoy and Vollendorf cooperated fully with commission staff during the investigation and neither has been previously sanctioned by the commission.