Disciplinary Proceedings: In the Matter of Desjardins Securities Inc. (“Desjardins”), Jean-Pierre De Montigny (De Montigny”) and Jean-Luc Brunet (“Brunet”) (March 16, 2005) SA 2005-002
Facts – RS Trade Desk Reviews (“TDRs”) in November 2002 and October 2003 highlighted insufficient supervision of trading practices and procedures and other UMIR deficiencies related to audit trail violations. In a subsequent TDR in 2004, it was found that the deficiencies noted in 2002 and 2003 were not corrected, and in many instances were more extensive. In addition to these failings, RS’s investigation also noted 17 instances of the Desjardins trading along side a client, without recording the requisite client consent for each order.
Disposition – By failing to address the various deficiencies noted by the TRD team, and failing to implement an effective trading supervision system, the Participant, De Montigny and Brunet failed to establish an effective compliance and trading supervision system for the firm’s trading operation, contrary to their respective obligations under UMIR.
Requirements Considered – Rules 5.3(6), 10.11, 7.1 and Policy 7.1
Desjardins Securities Inc. – $1,500,000 fine and costs of $125,000; Board of Directors certification that trading compliance and supervision systems are compliant with UMIR;
Jean-Pierre De Montigny – $300,000 fine;
Jean-Luc Brunet – $35,000 fine.
Disciplinary Proceedings: Rule 5.3 was considered In the Matter of Kai Tolpinrud (“Tolpinrud”) (January 16, 2006) OOS 2004-001. See Disciplinary Proceedings under Rule 2.1.
Disciplinary Proceedings: Rule 5.3(6) was considered In the Matter of Salman Partners Inc. (“Salman”), Sameh Magid (“Magid”), William Burk (“Burk”) and Ian Todd (“Todd”) (February 18, 2005) SA 2005-001. See Disciplinary Proceedings under Rule 3.1.
Disciplinary Proceedings: In the Matter of Raymond James Ltd. (“Raymond James”) and Marc Deslongchamps (“Deslongchamps”) (June 30, 2006) DN 2006-006
Facts – In the period February 2003 to February 2005 Deslongchamps, the “Head Trader” for Raymond James, was responsible for supervising Raymond James’ institutional sales, proprietary and facilitation traders across Canada. In addition to acting as Head Trader, Deslongchamps conducted proprietary trading for one of Raymond James’ inventory accounts. During the relevant period, trading by certain traders under the direction of Deslongchamps and trading by Deslongchamps himself resulted in numerous client priority, audit trail and order marking violations. RS identified instances in which Deslongchamps and traders under his supervision traded ahead of or alongside clients without client consent, failed to properly record client consent in cases where client consent was obtained, failed to complete trade tickets with appropriate information and improperly marked client trades “non-client”, all of which resulted in an incomplete audit trail.
In the period July 2003 to February 2005 Raymond James’ institutional trading supervision and compliance systems were not reasonably designed to prevent the UMIR violations referenced above. Also, the Manager of Compliance at Raymond James used a flawed methodology to test for possible client priority issues. The flawed nature of the testing resulted in ongoing trade and audit trail problems not being escalated.
Disposition – In failing to implement an institutional trading supervision and compliance system which was reasonably designed to prevent and detect client priority, consent, order marking requirements set out in UMIR and failing to take effective steps to ensure the Head Trader carried out his trading supervision obligations, Raymond James failed to comply with its trading supervision obligations under UMIR.
In failing to take effective steps to supervise the traders he oversaw to ensure compliance with client priority and audit trail requirements Deslongchamps failed to comply with his trading supervision obligations under UMIR.
Requirements Considered – Rules 5.3(1), 5.3(2), 5.3(6), 6.2(1)(b), 10.11(1), 7.1(1), 7.1(4) and Policy 7.1.
Raymond James – $400,000 fine and costs of $125,000;
Deslongchamps – $50,000 fine; prohibition against acting in a supervisory capacity for 1 year.
Disciplinary Proceedings: In the Matter of Bert Griffin (“Griffin”) (August 31, 2009) DN 09-0245
Facts –On January 27, April 11, and 21, 2006, Griffin failed to give priority to client orders over non-client orders in the same security and on the same side of the market. Griffin’s improper order handling resulted in a financial disadvantage to certain clients and a disadvantage to other clients who did not receive a fill that may have otherwise been obtained in the absence of Griffin’s non-client orders.
Disposition – Absent specific client consent to the Participant trading ahead or alongside an order, client priority must be respected in order to minimize the conflict of interest that occurs when a firm or trader competes with the firm’s clients for executions. Under the terms of a Settlement Agreement, Griffin agreed that he did not record that any client had specifically consented to his trading ahead or alongside on any of the order tickets, as required by UMIR 5.3(6), nor did he make any other record of any of the clients providing their consent. Griffin contravened the client priority rule on multiple occasions by filling orders for his own account that his clients could have obtained had the client orders been entered first.
Requirements Considered – Rule 5.3 and Policy 5.3.
Sanction - Griffin agreed to a $15,000 fine, $5,000 in costs and to successfully complete both the Conduct and Practices Handbook and Trader Training Course examinations within six (6) months.