A hearing panel of the Ontario Securities Commission (OSC) on Friday approved a settlement with Toronto-based K2 & Associates Investment Management Inc. and two of the firm’s executives, in which the respondents admitted they engaged in numerous manipulative options trades on the Montreal Exchange (MX.)
According to the settlement, Shawn Kimel, portfolio advisor and K2’s founder, will pay an administrative penalty of $550,000, K2 will pay $400,000 and Daniel Gosselin, a trader and K2’s president, will pay $20,000. The respondents were also ordered to pay $30,000 in costs.
Additionally, the agreement prohibits Kimel from acting as a chief compliance officer (CCO) or ultimate designated person (UDP) for 10 years and bans him from trading for nine months. The agreement prohibits Gosselin from acting as a CCOr or UDP for five years and bans him from trading for six months. K2 has also agreed to undergo a review of its trading practices and procedures as part of the settlement.
The sanctions stem from the respondents’ admission that they engaged in manipulative, spoofing trades on behalf of K2’s two private funds involving equity options on MX. The manipulations were designed to allow K2 to trade options on the MX at artificial prices, which generated illicit profits of approximately $250,000, the OSC panel said .
“This type of conduct by registrants is serious because it undermines the integrity of our capital markets and reduces confidence in our markets,” the hearing panel stated in its oral reasons for approval.