The Investment Industry Regulatory Organization of Canada has scheduled a hearing to consider accepting a settlement agreement with National Bank Financial Inc., related to allegations that the firm violated the Universal Market Integrity Rules.

At a hearing on Dec. 6 in Montreal, an IIROC hearing panel will consider the agreement, which concerns allegations that NBF failed to meet its trading supervision obligations and audit trail requirements under UMIR.

Specifically, it is alleged that NBF violated UMIR by:

(i) Failing to supervise the trading activity of Paul Clarke and Todd O’Reilly, both of whom are alleged to have failed to transact business openly and fairly and in accordance with just principles of trade.

(ii) Failing to record specific information relating to certain orders.

At the same hearing, the panel will consider penalties against Clarke and O’Reilly, registered representatives with National Bank Financial who are alleged to have failed to meet their audit trail requirements under UMIR.

Specifically, it is alleged that Clarke and O’Reilly each violated UMIR by:

(i) Failing to record client account numbers or identifiers upon receipt of client orders and delaying timely allocation of trades to client accounts, resulting in the ability to effect improper post-execution allocation of trades and grant preferential treatment to certain clients. In doing so, both individuals failed to transact business openly and fairly and in accordance with just and equitable principles of trade, according to IIROC.

(ii) Failing to record specific information relating to certain orders.

The alleged violations occurred between April 2006 and June 2007. Market Regulation Services, which is now part of IIROC, began its formal investigation into NBF’s conduct in December 2007. IIROC began its formal investigation into Clarke’s and O’Reilly’s conduct in June 2008.

The hearing is not open to the public, but will become open in the event the panel accepts the agreements. If the agreements are accepted, the panel’s decision and reasons will be made available on IIROC’s website.

IE