Market Regulation Services Inc. today fined CIBC World Markets Inc. (CIBC WM) $700,000 for failing to provide adequate trading supervision systems and procedures to detect alleged manipulative and deceptive trading by CIBC WM clients between March and December 2002.

CIBC WM also must pay $92,500 to offset the costs of the RS investigation.

In addition, two employees of CIBC WM were fined for failing to fulfill their gatekeeper responsibilities during the same period.

Scott Mortimer, an investment advisor, was fined $50,000 and ordered to pay $15,000 for costs. Carl Irizawa, a sales assistant, was fined $20,000 and ordered to pay $7,500 for costs.

An RS hearing panel approved the settlement Aareement between RS, CIBC WM, Mortimer and Irizawa in which CIBC WM, Mortimer and Irizawa agreed to the sanctions imposed.

In the settlement agreement, RS alleged that in 2002, a group of related clients with accounts at CIBC WM engaged in suspicious trading in certain stocks and warrants listed on the TSX and the TSX Venture Exchanges which had the appearance of manipulative and deceptive trading. The trading was carried out through numerous accounts held by the client group, at CIBC Investor Services Inc. (CIBC ISI), CIBC WM and another, unrelated investment dealer (Investment Dealer X).

Mortimer was the investment advisor at CIBC WM for all the CIBC WM client accounts in question and had overall gatekeeper responsibility for the entry of orders in these client accounts. The orders were manually entered by Mortimer’s sales assistant, Irizawa and others, with Mortimer’s knowledge and approval.

“The crosses generated red flags that should have been recognized by CIBC WM and its employees when they entered the crosses and during the daily review of trading,” said Maureen Jensen, vp of market regulation – eastern region at RS. “CIBC WM did not have adequate supervisory systems and procedures in place to detect manipulative and deceptive trading, which is considered one of the top risks to market integrity.”

RS has referred its allegations of manipulative and deceptive trading to the Ontario Securities Commission.