VSE: MacDonald,
Approved Person Disciplined
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Notice to Members #130/98
By way of an Offer of Settlement, Gordon Kenneth MacDonald
("MacDonald"), at the time of the infraction an Approved Person employed by
McDermid St. Lawrence Securities Ltd., ("McDermid"), now Goepel McDermid Inc.,
has agreed to the imposition of the following penalties by the Exchange for violation of
Exchange Rules F.1.01 and F.3.02:
1. payment of a fine in the amount of $5,000, and
2. an assessment of investigative costs in the amount of $1,000.
Rule F.1.01 states, in part, that every Member is required to use due diligence to
learn the essential facts relative to every client, every order, every cash or margin
account accepted or carried by him and every person holding power of attorney over any
account accepted or carried by him.
Rule F.3.02 states, in part, that no Member or a director or officer or partner of a
Member Firm or investment adviser of a Member Firm shall exercise any discretionary power
with respect to a client's account unless the client has given prior written authorization
and the account has been accepted in writing by the Member Firm or by a partner, director
or officer designated under Rule F.1.01.
MacDonald, during the period of January 1991, to May 1997, (the "Relevant
Period"), was employed as an investment adviser with McDermid. MacDonald was the
investment adviser for the account of a client (the "Client") who was an elderly
widow living on a fixed income. In 1989, MacDonald took over the Client account from an
investment adviser who had left McDermid.
The Client's new client application form ("NCAF"), as at May 1988 when she
opened the account with the previous investment adviser, had stated investment objectives
of 85% income, 10% long-term growth and 5% venture situations.
During the Relevant Period, the Client's portfolio changed from fixed income and high
quality securities to 100% venture securities. The Client did not object to the change of
investment objectives, however MacDonald at no time updated the Client's NCAF to reflect
the change in the client's investment objectives. MacDonald thereby violated Exchange Rule
F.1.01. MacDonald, during the Relevant Period exercised discretion in the Client account
executing approximately 275 trades in various Exchange listed securities.
The Client did not object to the discretionary trades, however the Client had not given
MacDonald written authorization to exercise discretion over the account and McDermid had
not accepted the account as discretionary.
MacDonald thereby violated Exchange Rule F 3.02.
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