The Nova Scotia Securities Commission has settled with a former corporate director over allegations that he failed to uncover possible improper trading by a group of insiders.

The case involves Knowledge House Inc., an issuer that was based in Nova Scotia and traded on the Toronto Stock Exchange. The defendant, Blois Colpitts, was lead director of KHI and served as chairman of its audit committee.

According to the settlement agreement, NSSC staff and Colpitts agreed that, “Colpitts failed in his role as lead director of KHI to uncover conduct by certain of the insiders group and persons in special relationship with KHI which contravened the provisions of the Act or was contrary to the public interest. The conduct so identified by staff and others included an arrangement amongst certain insiders, to which it is acknowledged that Colpitts was not a party, to carry out transactions in the market for KHI shares that were, in staff’s view, contrary to the public interest.”

The settlement notes that he voluntarily and fully cooperated with the NSSC’s investigation; that he admits that, with the benefit of hindsight, that his conduct was contrary to the public interest. It also notes that he did not engage in the alleged improper trading and was not a party to the alleged improper trading activities.

Also, the settlement notes that he complied with all requirements under the Act, including filing all required insider trading reports; that he was an investor in KHI, and that he lost substantially all of his investment in the firm upon the demise of the company in September 2001.

Under the agreement, Colpitts shall make a voluntary settlement payment to the Minister of Finance of $25,000, is prohibited from acting as an officer or a director of any reporting issuer for two years, and must pay costs of $25,000.