Former Approved
Person Disciplined
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By way of an Offer of Settlement, Stanley Steven Ross ("Ross"), at the time
of the infractions an Approved Person employed by Yorkton Securities Inc.
("Yorkton"), has agreed to the imposition of the following penalties by the
Exchange for violation of Exchange By-Laws 5.01(2) and Rules F.1.04, F.2.22 and C.1.08:
- payment of a fine in the amount of $130,000;
- voluntarily agreement to the permanent withdrawal of Exchange Approval;
- disgorgement of inappropriate profits in the amount of $135,000, and
- an assessment of investigative costs in the amount of $10,000.
By-Law 5.01(2) states in part, that an "Infraction" means any conduct,
proceeding or method of business, which is unbecoming or inconsistent with just and
equitable principles of trade or detrimental to the interests of the public.
Rule C.1.08 states in part, that no approved person shall trade or participate in any
trade in any listed security, whether acting as principal or agent, unless the trade is
made on VCT during a trading session.
Rule F.1.04 states in part, that no Member shall carry an account in the name of a
person other than that of the client except that an account may be designated by a nominee
name provided the Member maintains sufficient identification in writing to establish the
beneficial owner of the account or the party or parties financially responsible for the
account.
Rule F.2.22 states in part, that investment advisers shall not, subject to Rule F.3.04,
handle a discretionary order or exercise any discretion in the handling of an account of a
client of a Member.
Computrex Centres Ltd.
A director (the "Computrex Director") of Exchange listed Computrex Centres
Ltd. ("Computrex") was head of a group (the "Group") that had
negotiated a change of control agreement, announced on August 27, 1996, with Computrex
(the "Control Agreement"). The Computrex Director was a client of Ross.
On December 1, 1996, a deadline for the Control Agreement lapsed without the completion
of certain required transactions. On December 3, 1996, Computrex notified the Computrex
Director that the Control Agreement was terminated. On December 4, 1996, at approximately
6:50 a.m., the Computrex Director instructed Nicole Cleve ("Cleve") an assistant
to Ross, to sell 50,000 Computrex shares "at the market" from his account. The
Computrex Director was upset and in a hurry. Cleve contacted Ross and informed him of the
Computrex Director's sale of Computrex shares.
On December 4, 1996, at 10:15am, the Exchange halted trading in the shares of Computrex
pending explanation of Computrex' increased trading activity. When the Exchange learned
from Computrex of the collapse of the Control Agreement, the Exchange expunged all
Computrex trades occurring that morning prior to the halt. On December 4, 1996, at 2:45pm,
Computrex issued a news release announcing the Control Agreement was not proceeding.
By-Law 5.01(2) - Conduct Unbecoming
Ross knew that the Computrex Director was involved in the Control Agreement and was an
insider of Computrex. Ross believed that the Computrex Director's order to sell Computrex
shares was highly unusual, based on the Computrex Director's previous conduct and attitude
toward Computrex. Ross suspected that something was wrong with the affairs of Computrex,
yet made no effort to determine the nature of the problem or the reason for the Computrex
Director's sudden sale of Computrex shares. Ross failed to diligently question the
Computrex Director as to the nature of his sell order, and then Ross sold 75,000 Computrex
shares from his own account, and 25,000 Computrex shares from his wife's account. Ross
recommended Cleve sell her 20,000 Computrex shares.
Ross ought to have known that the collapse of the Control Agreement represented a
material change in the affairs of Computrex that had not yet been generally disclosed to
the public. Ross acted on the information he received by selling Computrex shares held in
his and his wife's accounts, and recommended the sale of Computrex shares by his assistant
Cleve. Ross thereby violated Exchange By-Law 5.01(2).
Discretionary Trading
During the period May 8, 1995, to May 31,1997, Ross exercised discretion in a client
account (the "Client Account"). A total of 985 trades were executed in the
Client Account and of the 985 trades, Ross exercised discretion on occasion. Of the 985
trades, 916 trades were in the shares of Exchange listed Turbodyne Technology Inc.
The Client had not given Ross written authorization to exercise discretion over the
account and Yorkton had not accepted the Client Account as discretionary. Ross thereby
violated Exchange Rule F.2.22(2)(a).
Undisclosed Nominee Accounts
On or about November 25, 1993 and April 8, 1997, Ross was the investment adviser for
accounts in the names of Robert Hand ("Hand") and Allen Clark
("Clark"). The Hand and Clark accounts (the "Nominee Accounts") were
opened by Larry Cocomile ("Cocomile"), a friend of Ross. Cocomile opened the
Nominee Accounts with fictitious names in the names of Hand and Clark. Ross came to know
that Cocomile was using the Nominee Accounts under false names to conceal the true
identity of the clients.
The Hand Account
The Hand account operated from November 25, 1993, to October 3, 1996. Ross was the
investment adviser for the Hand account.
The Clark Account
The Clark account operated from April 8, 1997, to July 18, 1997. Ross was the
investment adviser for the Clark Account.
During the period November 1993, through July 1997, there were approximately 938 trades
executed in the Hand and Clark Accounts. 304 of the 938 trades were in the shares of
Turbodyne. Ross, on occasion, entered orders on behalf of the Nominee Accounts.
During the period June 1995, through July 1997, Ross received approximately $135,000
from the Nominee Accounts.
Ross' operation of the undisclosed Nominee Accounts was in violation of Exchange Rule
F.1.04 and By-Law 5.01(2).
Trades Off-VCT
During the period May 5, 1995 to February 27, 1996, Ross participated in Off-VCT trades
in the Client Account and the Hand account as follows:
- On June 30, 1995, the Client Account delivered to the Hand account, 100,000 shares of
Turbodyne against payment of $52,000.
- On August 29, 1995, a second Respondent's client account journalled to the Hand account
32,500 shares of Exchange listed First Class Systems Inc., against payment of $20,000.
- On October 5, 1995, the Client Account delivered to the Hand account, 50,000 shares of
Turbodyne against payment of $26,000.
- On February 27, 1996, a third Respondent's client account journalled 50,000 shares of
Turbodyne to the Hand account against payment of $30,000.
Ross participated in the Off-VCT Trades and thereby violated Exchange Rule C.1.08.
The conduct of the Member Firm in the matter involving Computrex remains under review
by the Exchange. No fault was attributed to the Member Firm with respect to the matters
involving Ross' conduct unrelated to the Computrex matter.
The conduct of Cleve is addressed in Notice to Members #79/98.
The conduct of the Computrex Director has been referred to the B.C. Securities
Commission.
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