A hearing panel of the Investment Dealers Association of Canada has fined Union Securities Ltd. $1 million and banned its chief compliance officer for failing to develop and implement compliance systems.

The panel today accepted a settlement Agreement negotiated between IDA staff, Union and the firm’s former chief compliance officer John Thompson.

The agreement resolves all outstanding enforcement matters resulting from the Union’s failure to develop and implement compliance systems.

Union and Thompson admitted they failed to develop and implement adequate compliance systems to ensure effective supervision of activity at the firm to the required standards of the IDA.

The IDA cited numerous failures by the respondents to set up adequate compliance, including:

  • failure to correct sales compliance Reviews;

  • accepting accounts for U.S. residents through Yukon holding corporations, contrary to IDA by-laws;
  • failure to adequately implement proper controls on the short selling U.S. securities;
  • failure to supervise a registered representative in Union’s Toronto branch that had been placed under strict supervision; failure to cooperate in the IDA investigation of the Toronto rep; and
  • failure to supervise a newly registered Calgary rep who commenced a trading strategy in the accounts of two clients, both of which suffered losses.



    As a result of its misconduct, Union has agreed to pay a fine in the amount of $1 million and will, over the next three-year period, retain the services of Grant Thornton LLP or another similarly qualified external compliance consultant acceptable to the IDA, to review and test its compliance systems and policies.

    Union will also add at least one external independent director to its board of directors, refrain from operating any accounts for corporations for which the purpose of incorporation is to circumvent registration requirements, and ensure that it creates and maintains an audit trail for any short sales.

    Thompson is permanently prohibited from acting as ultimate designated person for Union or any other IDA member firm.

    IDA staff, Union and Thompson acknowledge and agree that the penalty agreed to in the Settlement Agreement would have been significantly higher except for the following mitigating factors:

    • Union and Thompson fully cooperated with the Compliance Monitor and consented to the extension of the Compliance Monitor’s term;
    • by agreeing to an early resolution of these matters, Union and Thompson enabled IDA staff to devote resources to other matters;
    • with the exception of the failure to provide the preserved records, Union and Thompson fully cooperated with IDA staff in their investigation of the matters;
    • Union has and/or will spend $500,000 for the services of the Compliance Monitor and for the services of the external compliance consultant that it has undertaken to retain for the next three years; and
    • Thompson had no prior disciplinary history.