Market Regulation Services Inc. has issued allegations against Credit Suisse First Boston Canada Inc. and two traders, alleging that they violated market rules by improperly trading BCE stock off the market.

A hearing has been set for December 1. RS alleges that on April 16, CSFB violated the market integrity rules by conducting trades “by means other than the entry of an order on a marketplace”, when it purchased as principal 9,047,092 shares of BCE Inc. at $27.73 from Ameritech Canada Business Trust; sold 7,701,000 BCE shares as principal to Canadian clients at $27.90; and sold another two blocks of shares that were improperly processed through a CSFB error account.

RS says that CSFB also violated the rules:

  • by failing to complete and time stamp trade tickets in relation to the BCE transaction thereby impairing the audit trail;
  • when it made oral and written misrepresentations to RS concerning the BCE transaction;
  • when it failed to preserve tape recordings from its traders’ desks relating to the BCE transaction after being advised by the Market Surveillance division of RS that a preliminary investigation had been commenced;
  • when it failed to correct the time of 14:22 time (London time) reported by CSFB (Europe) to the Financial Services Authority as the time of the trade for the London portion of the BCE transaction; and
  • when it failed to ensure that Credit Suisse First Boston LLC properly time stamped trade tickets relating to the U.S. portion of the BCE transaction.

Separate proceedings are being brought against trader, Dwayne Nash to determine whether he engaged in conduct inconsistent with just and equitable principles of trade, when he sold 100,000 BCE shares to a client through the CSFB error account to facilitate the two off-marketplace trades. RS also alleges that Louis Anthony De Jong engaged in conduct inconsistent with just and equitable principles of trade, when he approved and arranged the sale of 100,000 shares to a client. Both their hearings are also slated for December 1.

RS is seeking reprimands against all defendants; a fine not to exceed the greater of: $1 million and triple the financial benefit received as a result of committing the contravention; and, a restriction, suspension or revocation of access to the marketplace for some period.