IIROC announces National Bank Direct Brokerage hearing

A hearing has been scheduled before a Hearing Panel of the Investment Industry Regulatory Organization of Canada (IIROC) to consider whether the panel should accept a settlement agreement between IIROC staff and National Bank Direct Brokerage Inc. (NBDB).

The agreement concerns allegations that NBDB, while a regulated firm with the Investment Dealers Association of Canada (now part of IIROC), failed in its duty to provide supervision and maintain adequate internal controls. The agreement also concerns allegations that NBDB failed to maintain proper records and continued the registration of its chief compliance officer with the regulatory authorities although this person was no longer in the employ of NBDB.

Hearing Date: 10 a.m., October 21, 2010 Location: 5 Place Ville Marie, Suite 1550, Montréal, Québec

The hearing is not open to the public, but will become open if the panel accepts the agreement. If the agreement is accepted, the panel’s decisions and reasons will be made available at www.iiroc.ca.

Specifically, the agreement concerns allegations that NBDB:

(a) failed in its duty to provide supervision and in its duty to establish and maintain adequate internal controls, contrary to IIROC Rules 17.2A, 29.27, 1300.2, 2500 and 2700, when it allowed its representative Thi Sen Chher:

(i) to obtain a proxy for the brokerage accounts of a member of his family, without registering these accounts as Pro accounts or ensuring that they were registered as such;

(ii) to make additions, without supervision or verification, to that client’s mailing address and investment profile without their authorization; and

(iii) to self-approve transfers of funds, without supervision or verification, between his personal accounts and those of that client, a member of his family, without the client’s consent or approval.

(b) failed to keep adequate records, contrary IIROC Rules 17.2, 200 and 2500, section D , particularly:

(i) the keeping of physical acknowledgements confirming the receipt, reading and understanding of the 2005 Compliance Manual by the employees of NBDB.

(c) engaged in conduct unbecoming by continuing the registration of its Chief Compliance Officer with the regulatory authorities even though this person was no longer in the employ of NBDB, thereby contravening the provisions of IDA By-law 38.12 (now IIROC Rule ), and IDA Policy number 6 (now IIROC Rule 2900) and Policy number 8 (now IIROC Rule 3100).

IIROC began the investigation into NBDB’s conduct on October 24, 2007. The alleged violations occurred between November 2002 and May 2007. NBDB is an IIROC-regulated firm.

(10/08/10)