Former Approved
Person Disciplined
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Notice to Members #113/98
By way of an Offer of Settlement, Stephen John Fowler
("Fowler"), at the time of the infractions an Approved Person employed by
Marleau Lemire Securities Inc. ("Marleau Lemire") has agreed to the imposition
of the following penalties by the Exchange for violation of Exchange By-Law 5.02(4) and
Rules F.2.10, F.2.12 and F.2.21:
- payment of a fine in the amount of $30,000;
- permanent withdrawal of Exchange Approval;
- disgorgement of inappropriate profits in the amount of $7,600, and
- an assessment of investigative costs in the amount of $12,000.
By-Law 5.02(4) states in part, that purchasing or offering to purchase securities where
the person knows or ought to know that the effect of such purchase would be to unduly
disturb the normal position of the market or to create an abnormal market condition in
which the market prices do not fairly reflect the current market values.
Rule F.2.10 states in part, that no member shall act in such a manner
as to create a conflict between his own interests and those of his clients.
Rule F.2.12 states in part, that no member shall, directly or
indirectly, make a practice of taking the side of the market opposite to the side taken by
clients.
Rule F.2.21 states in part, that investment advisers shall devote their
full time during normal working hours to the securities business of the Member employing
him.
Fowler during the period of February 1993, to September 1994, (the
"Relevant Period") was the Investment Adviser for client accounts, May Gray
Holdings Ltd. ("May Gray") and SRG Holdings Ltd. ("SRG").
Fowler’s immediate family were the beneficial owners of the May Gray and SRG accounts
("the Family Accounts").
Rule F.2.10
In June 1993, Fowler became a director of a private company in the
United Kingdom, Modatech Systems Europe Ltd. ("Modatech Europe").
Fowler, at times, acted as agent on behalf of May Gray. May Gray was
the controlling shareholder of Modatech Europe. May Gray owned 310,000 shares of Modatech
Europe.
In December 1993, Exchange listed International Sales Information
Systems Inc. ("International Sales"), formerly known as Consolidated Alice Lake
Mines Ltd., announced it would acquire a 17.8% interest in Modatech Europe.
On December 20, 1993, a fiscal agency agreement between Marleau Lemire
and International Sales was signed by Fowler, the Corporate Finance Department of Marleau
Lemire, and Fowler’s wife ("Fowler's Wife") who was a director of
International Sales.
Fowler, and he understood Marleau Lemire, encouraged his clients to
directly or indirectly purchase shares of International Sales. Fowler did not make the
appropriate disclosure to his clients, which created a conflict between his own interests
and those of his clients.
Fowler thereby violated Exchange Rule F.2.10.
Rule F.2.12
During the Relevant Period, Fowler executed trades in the shares of
International Sales as the purchaser, in which he was the opposite side of his client on
19 occasions.
Fowler thereby violated Exchange Rule F.2.12.
Rule F.2.21
Fowler worked long hours at Marleau Lemire. However, as a result of
Fowler’s position as director of Modatech Europe and at times agent for May Gray and
Fowler’s involvement in the negotiation of certain agreements involving companies he
was associated with, Fowler failed to devote his full time to his duties as Branch Manager
of Marleau Lemire and Investment Adviser.
Fowler, although he understood that his conduct was encouraged by
Marleau Lemire, violated Exchange By-Law F.2.21.
By-Law 5.02.4(a)
During the period of June 16, 1994, through September 30, 1994,
Fowler through his own account and those of his clients, purchased approximately 518,370
shares or 52% of the market total buy volume of International Sales. Of the 518,370 shares
purchased, Fowler executed 59 upticks or 64% of the market total. Of the 80 days that
International Sales traded, Fowler established the day high trade price on 39 days or 48%.
High Close Trades
During the Relevant Period, Fowler executed buy orders for his
accounts and those of his clients in the shares of International Sales at prices higher
than the previous trade at which a board lot traded and there were no subsequent trades
that affected the market price of International Sales. The Exchange considers this to be a
high close trade.
Fowler, on 18 trade days, executed high closes after 1:00 p.m. (the
"High Close Trades"). The High Close Trades accounted for 75% of the high close
trades for International Sales executed after 1:00 p.m. Of the High Close Trades, 7 or 39%
were executed through Fowler’s personal account and 10 or 55% established the day
high trade price.
Fowler’s close association to International Sales placed him in a
position where he knew or ought to have known that the dominant buy trading, uptick and
high close trading activity executed through his own account and those of his clients
unduly disturbed the normal position of the market for International Sales.
Fowler thereby violated Exchange By-Law 5.02.4(a).
The conduct of Marleau Lemire was addressed by the Investment Dealers
Association, bulletin number 2159/95 refers.
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