99/16

May 6,1999

Notice to Members #44/99

By way of an Offer of Settlement, Member Firm, Golden Capital Securities Ltd. ("Golden") has agreed to the imposition of the following penalties by the Exchange for violation of Exchange Rule F.1.01:

1. a fine in the amount of $10,000;
2. to co-operate fully in the completion of an internal control review, focused on account opening procedures; and
3. 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 the member and to specifically approve the opening of an account prior to or promptly after the completion of any transaction for the account of or with a client.

During the period of February 2, 1996, to February 26, 1996, (the "Relevant Period") an Investment Adviser (the "IA") employed by Golden was the head of Golden's bond department and had been since September 1991.

The IA, in late January 1996, met with a group of investors (the "Group") in Abbotsford, B.C. As a result of this meeting, the IA opened 3 corporate margin accounts (the "Corporate Accounts"). The day after the meeting, the IA sent new client application forms ("NCAF's") to one member of the Group, a lawyer, and was promised prompt return of the executed NCAF's.

The Corporate Accounts were active prior to receiving approval from Golden and prior to receipt of the NCAF's. The executed NCAF's were received from the Group before the end of February 1996.

During the Relevant Period, prior to receiving the executed NCAF's and prior to receiving approval from Golden, the IA executed 6 transactions in the Corporate Accounts purchasing and selling Government of Canada bonds valued at approximately $24,500,000 (the "Bond Trades"). The IA also executed a number of sales of Exchange listed and other securities (the "Share Sales") in the Corporate Accounts in order to produce the necessary margin in the Corporate Accounts.

Although the IA was promised unencumbered delivery of the necessary funds or equity to provide the required margin for the Bond Trades and unencumbered delivery of the necessary shares to cover the Share Sales, the Corporate Accounts had no funds or equity on deposit prior to the orders being executed. The promised equity, funds and shares were never delivered. As a result, a number of purchases to cover the sales and a number of sales to cover losses were made at the insistence of Golden. Accordingly, there were 42 orders for the purchase and sale of approximately 640,000 shares of Exchange listed and other securities valued at approximately $1,200,000. The transactions in the Corporate Accounts resulted in a loss of approximately $950,000.

Golden permitted trading in the Corporate Accounts prior to receipt of the executed NCAF's and prior to the approval of the Corporate Accounts from Golden. Golden thereby violated Exchange Rule F.1.01.

Golden notified the Exchange of the facts giving rise to this matter in a timely fashion. Golden made representations that they were a victim of fraud and the Exchange accepts their representations.

The conduct of the IA has been reviewed by the Exchange and resulted in no formal disciplinary action.

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