IIROC reaches decision for Nott, et al

A Hearing Panel of the Investment Industry Regulatory Organization of Canada (IIROC) has found that five employees at TD Securities Inc. violated the Universal Market Integrity Rules (UMIR) by entering artificial closing bids in 322 instances over a six-month period.

The panel dismissed an allegation that TD Securities failed to comply with its trading supervision obligations. IIROC staff intends to file a Notice of Request for Hearing and Review to the Ontario Securities Commission seeking a review of the decision of the IIROC Hearing Panel, dated November 30, 2010, relating to TD Securities. Further information about the review will be available once filed at www.osc.gov.on.ca.

In its decision, the panel found that Kenneth Nott, Aidin Sadeghi, Christopher Kaplan, Robert Nemy and Jake Poulstrup entered orders without the intent of executing them, but rather to create artificial closing prices that would misrepresent the performance and actual demand for securities in the market, contrary to UMIR 2.2(2)(b) and UMIR Policy 2.2.

After reviewing the five individuals’ trading activity in five stocks, the panel found that each had entered artificial closing bids for one or more of the five stocks as follows:

• Kenneth Nott, 230 times between May 2, 2005 and October 26, 2005;
• Aidin Sadeghi, three times between June 1, 2005 and October 27, 2005;
• Christopher Kaplan, 37 times between May 12, 2005 and October 27, 2005;
• Robert Nemy, 39 times between May 2, 2005 and October 31, 2005; and
• Jake Poulstrup, 14 times between May 10, 2005 and August 29, 2005.

The panel emphasized that its findings are “buttressed by direct evidence of instant messages and telephone calls between the Respondents.”

The panel will hold a separate hearing to consider the appropriate penalties for the five employees. The panel’s decision will be made available at www.iiroc.ca when it is released.

Market Regulation Services Inc. (now part of IIROC) began the formal investigation into the individuals’ conduct in January 2006. The violations occurred while the five individuals were Registered Representatives at TD Securities, an IIROC-regulated firm. Christopher Kaplan and Jake Poulstrup are currently Registered Representatives with W.D. Latimer Co. Limited, an IIROC-regulated firm. Kenneth Nott, Aidin Sadeghi and Robert Nemy are no longer with an IIROC-regulated firm.

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