MGI Securities, president fined $400,000

MGI Securities and its president, Crawford Gordon, have been fined a total of $400,000 by the IDA for a variety of compliance-related deficiencies.

In a settlement agreement announced on Thursday, both MGI and Gordon agreed that they violated IDA regulations by failing to establish and maintain procedures and controls to effectively supervise trading by clients who were insiders of public issuers, or were in control positions of public issuers.

No illegal insider trading resulted from the Toronto-based firm’s failures to set up controls, so there was no harm to clients, the IDA noted.

Still, the IDA hearing panel opted to impose steep penalties — $250,000 against the firm and $150,000 against the president, plus an additional $45,000 in costs — to reflect “concerns about the risk of harm that may be caused by insider trading.”

The IDA points out that MGI has had a number of compliance problems since becoming a member firm in 2000, and despite four audits, did little to remedy those issues until December 2004, when it hired a consultant to provide professional advice to review all compliance systems.

“The respondents failed to consider the importance of controls surrounding insider trading, which we consider to be a serious omission,” the IDA said. “Further, it is clear that promises to correct the situation were not kept. It could be said the respondents were not taking their responsibilities seriously.”

In July 2005, MGI implemented new procedures for documenting, maintaining, and monitoring the trading of insiders and control persons. The same consultant was re-hired in 2006 to review those systems.

Gordon will be allowed to continue as company president, but will not be allowed to hold any position with supervisory compliance responsibilities.

MGI, formerly known as McFarlane Gordon, is a full-service wealth management firm and a subsidiary of Jovian Capital.

Filed by Doug Watt, Advisor.ca, doug.watt@advisor.rogers.com