Alban d’amours, ceo of Quebec’s giant Desjardins Group, was in Toronto recently to buck up the troops at Desjardins Securities Inc. after the sudden departure of the firm’s dynamic president, Jean-Pierre de Montigny.
De Montigny left Desjardins Securities under a cloud in April, about a month after being personally fined $300,000 by stock-market regulators for supervisory failures.
Desjardins, a credit-union co-operative that is Quebec’s largest financial institution, insists that de Montigny departed for personal reasons that had nothing to do with the disciplinary action taken against him and the brokerage firm.
“If it had been linked to the fine, it wouldn’t have been the decision of Mr. de Montigny [to leave],” says Desjardins spokesman André Chapleau. “It would have surely been done earlier.”
D’Amours, who has presided over the rapid growth of Desjardins Securities, flew into Toronto to reassure staff that the departure wouldn’t stop the firm’s growth.
“He said: ‘This is my baby.’ And he wants to see his baby grow,” says Chapleau, who was along for the trip. “He reassured staff and he reiterated the importance he attaches to compliance.”
In addition to de Montigny’s fine, Desjardins agreed in a settlement with Market Regulation Services Inc. to pay a fine of $1.5 million as well as $125,000 in costs. A former chief compliance officer was also fined $35,000, bringing total fines to just under $2 million.
The regulator found serious supervisory deficiencies at the firm, including “insufficient supervision of trading practices and procedures … most notably related to audit-trail violations.”
The problems occurred between November 2002 and August 2004, at a time when the firm was expanding rapidly, especially in institutional trading. The regulator found serious trading-desk supervisory issues, but noted the violations didn’t harm clients or other market participants, or result in financial gains for Desjardins.
De Montigny, 49, who was also chief operating officer, was criticized for failing to make compliance issues a priority at the firm, and continuing to expand the business, despite concerns raised by the regulator.
“The ultimate responsibility for the firm’s
consistently worsening compliance and supervision issues between November 2002 and April 2004 rests with the president and COO,” Maureen Jensen, a regulation services vice president, said in a toughly worded press release. “That these issues were allowed to deteriorate as they did is evidence of the president’s failure to fulfil his trading supervision obligations as stipulated in the trading rules.”
“A culture of compliance begins at the top,” the press release added.
D’Amours may have more work to do to shore up morale at the firm in the wake of de Montigny’s departure. Two equity analysts had baled out of the firm, in what the Globe and Mail says might be the first of a string of defections. Biotechnology analyst Laurence Terrisse-Rulleau and her associate, Simon Faber, left for Orion Securities Inc.
Desjardins Securities experienced a fast pace of growth over the past four years under de Montigny. Revenue increased to $226 million in 2004 from $104 million in 2001. It currently has more than $15 billion in assets, 1,100 employees and 40 branches in Quebec and Ontario.
In the first quarter 2005, the firm posted a 7.4% hike in revenue to $68.8 million, but recorded a loss of $800,000, compared with a profit of $3.5 million in the same quarter last year.
Although Desjardins Securities made a couple of small acquisitions back in 2001 (Rampart Securities Inc. and Groome Capital Inc.), its growth has been mostly internally generated. That’s a pattern, Chapleau says, the company expects to continue.
“That route has been working for us,” he says “If an opportunity for an acquisition comes along with an interesting fit and an interesting price, it will be evaluated on its merits. But we’ve already come a long way and we have to consolidate what we already have.”
As well as increasing its Ontario business, Chapleau says, the firm is focused on attaining a larger presence in the Quebec retail market — to bring its market share in line with Desjardins’ competitive position in other segments.
On the other hand, the increasing importance of Desjardins’ corporate-finance operation was evident when it was shut out of a syndicate selling the federal government’s $3.2-billion offering of Petro-Canada shares last year. The resulting controversy in Parliament forced Prime Minister Paul Martin to apologize to D’Amours.
Desjardins rights the ship at securities arm
- By: Don Macdonald
- May 31, 2005 May 31, 2005
- 14:38