A hearing panel of the Investment Dealers Association of Canada has fined a trio of reps at Rampart Securities Inc. for their roles in a scheme to sell shares of Alive International Inc. at contrived prices.

Sean Shanahan, Stephan Katmarian and Nicole Brewster were approved persons at Rampart, a former member of the IDA.

Following a disciplinary hearing on June 13, 2005, the panel found that during the period of April and May 2000, Shanahan, Katmarian and Brewster, while at Rampart, participated in a scheme in which the shares of Alive were purchased and sold at contrived prices for the purposes of unduly benefiting one Rampart client, NOA Ltd. to the detriment of other clients at Rampart.

The trading scheme involved clients of Shanahan, Katmarian and Henry Cole, then president of Rampart, selling their Alive shares to NOA at prices between $1 and $1.25 per share. Shanahan, Katmarian and Brewster also sold their own personal shares to NOA.

NOA would then resell the shares within minutes or hours to other clients of Rampart with a mark-up on the price. NOA profited each time it bought and sold Alive shares. When the price of Alive shares fell significantly in April 2001, NOA’s account was closed at Rampart. By that time, NOA has realized a profit of more than $1.1 million from trading in Alive shares.

In a second charge involving Shanahan and Katmarian, the IDA panel that during the period of November 1998 to November 1999, while members of Rampart’s corporate finance group, the pair failed to use due diligence relative to a group of clients who opened accounts for the purpose of purchasing shares in three private corporations, and thereby failed to learn the essential facts relative to the clients. The IDA panel found that the purchase orders taken for these clients could not be considered to be within the bounds of good practice, given the nature of the transaction, a locked-in RRSP stripping scheme.

An allegation related to the second charge that Shanahan and Katmarian failed to ensure that the purchases of shares in three private corporations were appropriate for the group of clients was dismissed by the panel.

For his misconduct, Shanahan was permanently banned from the IDA, fined $325,000, must disgorge $50,009.50 and pay $107,344.08 in costs.

Katmarian was banned from the IDA for a period of 15 years. In addition, Katmarian was fined $275,000, must disgorge $47,983.50 and pay $85,875.27 in costs.

Brewster was banned from the IDA for a period of five years. She was assessed a $25,000 fine and must pay $21,468.80 in costs.

In its penalty decision rendered on Jan. 10, 2006, the IDA panel found that because the type of conduct relating to the trading scheme was intentional and designed to create a scheme, serious sanctions must be imposed.

With respect to the second charge, which involved an RRSP stripping scheme, the panel said that while investments in the RRSP stripping scheme have not reached maturity, there is clearly possible harm to clients and to the securities market.

Shanahan, Katmarian and Brewster are no longer registrants with any IDA Member firm.

For a complete summary of facts, please see IDA Bulletin 3504.