The B.C. Securities Commission has fined an investment dealer $40,000 for executing trades in securities that were subject to a cease trade order.
A commission panel imposed the fine on Research Capital Corp. following a hearing in November 2003. The panel also ordered Research Capital to pay costs of the investigation and hearing, and to file a report on changes it has made to its compliance systems to prevent this type of contravention in the future.
Between February 2000 and February 2002, Research Capital contravened a cease trade order against the shares of Thermo Tech Technologies Inc., which traded in the United States through the Over-the-Counter Bulletin Board and the Pink Sheets Electronic Quotation Service. Research Capital executed, through its Vancouver office, client orders to purchase 96 million Thermo Tech shares for five persons in 108 transactions and to sell 121 million shares for five persons in 182 transactions.
In 2001, BCSC staff became aware that a number of brokerage houses had traded Thermo Tech shares in contravention of the cease trade order. The staff concluded settlement agreements with 18 firms in late 2001 and early 2002. The trading by Research Capital continued until the investigation began in February 2002, after settlements with 17 firms had been signed and published.
The commission accepted Research Capital’s assertion that the contravention of the cease trade order was inadvertent but said that enforcement orders are necessary in this case “to induce future compliance by Research Capital with the defined standards of conduct for registered dealers and, specifically, with the requirement in British Columbia to establish and apply ‘prudent business procedures for dealing with clients in compliance with the Act and the regulations.’ “
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