IIROC sanctions National Bank EVPBy Kate McCaffery | February 13 2018 01:30PM
National Bank Financial’s (NBF) head of fixed income in Toronto is on the hook to pay fines and costs related to an Investment Industry Regulatory Association of Canada (IIROC) investigation, after admitting he failed to act fairly in executing and administering trades in the domestic debt market.
Sean St-John, NBF executive vice president, managing director and co-head of fixed income was fined $90,000 plus costs of $10,000.
IIROC first began investigating St-John’s conduct in February 2015. According to the settlement agreement, St-John failed to act fairly, contrary to IIROC Dealer Member Rule 2800, in September 2012 when NBF was co-lead of a syndicate issuing new debentures for an undisclosed company.
According to the settlement agreement, St-John was aware that one of the firm’s institutional clients would be allocated a certain number of company debentures, with the common expectation that the client would resell a portion of those to NBF for trading in the secondary market. Demand for issuance of the company debentures exceeded those available.
The institutional client, known as “Client A” indicated that it was not pleased with the allocation it was receiving – only 75 per cent of its original request – and suggested that it might not be willing to sell the debentures back to NBF. The client’s allocation was subsequently increased from $22-million to $30-million and the client informed NBF that would sell $10-million back for trading in the secondary market. Of the 45 accounts involved, only four received full allocation.
Following this, St-John personally purchased 250,000 Company A debentures on the secondary market, without obtaining pre-approval for the trade from NBF’s compliance department.
Rule 2800 describes the standards for trading by market participants in wholesale domestic Canadian debt markets. The policy was developed jointly with the Bank of Canada and Department of Finance to ensure the integrity of debt securities markets, to encourage liquidity, efficiency and to promote public confidence in such debt markets. An IIROC hearing panel accepted the settlement agreement and sanctions against St-John on February 1.