IDA Hearing Panel fines National Bank Financial Inc. $795,000



    MONTREAL, Sept. 20 /CNW/ - A Hearing Panel appointed pursuant to IDA
By-law 20 has imposed discipline penalties on National Bank Financial Inc.
(National Bank), which was at all material times a Member of the IDA.
    Following a settlement hearing held on August 17, 2007, a Hearing Panel
accepted a Settlement Agreement between National Bank and staff of the IDA.
Pursuant to the Agreement, National Bank has acknowledged violating By-law
4.9, By-law 29.1 and 29.27, By-law 38.10 and 38.11, Regulation 1300.1 and
1300.2, Regulation 1900.2 and 1900.4 and Policy No. 2, in that National Bank:

    
    -  from 1990 to 2002, unjustifiably tolerated the known and repeated
       misconduct of a representative at its Joliette branch and, from 1999
       to 2002, tolerated the misconduct of a team of representatives at its
       head office branch, and failed to ensure that its Compliance
       Department had sufficient means to intervene adequately, without
       interfering, in monitoring the compliance of the activities of such
       representatives.

    -  failed to ensure that adequate procedures were in place and being
       maintained to allow the Ultimate Designated Person to monitor options
       accounts and further failed to ensure that the handling of customer
       business relating to options was compliant.

    -  failed to ensure adequate supervision of the opening of numerous
       options accounts and the numerous trades effected in such accounts by
       a team of representatives at its head office branch.

    -  allowed two representatives, who were not approved to trade in options
       contracts, to open options accounts on behalf of clients and trade in
       options contracts therein.

    -  failed to inform the IDA for a two-year period that its head office
       branch manager no longer occupied that position and had been replaced
       by a person who lacked the qualifications for such position and for
       whom no approval had been sought nor received from the IDA, thus
       leaving the IDA with the impression that the formerly approved branch
       manager continued in office.

    -  failed to keep adequate records of the supervision of accounts at the
       head office branch and to ensure that supervisory and follow-up
       actions were well documented.

    -  failed to ensure that adequate procedures were in place and being
       maintained for the monitoring of client and non-client accounts at its
       Joliette branch.

    -  failed to ensure the proper supervision of account openings and
       handling of the business of numerous clients by a representative at
       its Joliette branch.

    -  was imprudent in allowing a representative at its Joliette branch,
       known for habitual serious misconduct over many years, to pursue his
       activities with the knowledge that he was no longer directly
       supervised by the manager of that branch, and subsequently appointing
       him interim branch manager and then placing him under the indirect
       supervision of a branch manager located in another region.

    -  did not terminate a co-branch manager's practice of supervising and
       approving his own client account openings by countersigning forms
       which he himself had completed in his capacity as representative, nor
       did it do so subsequently when, from 1996 to 2001, although he was no
       longer registered as a co-manager, he continued to approve his own
       client account openings by countersigning as branch manager although
       he was not approved in that capacity.

    -  accepted the opening of many accounts in which it knew or should have
       known that the representative had a personal interest, without
       identifying such accounts as professional accounts to ensure that they
       would be specifically monitored as such, and even failed to change the
       codification of such accounts subsequently.

    -  was culpable of negligence and imprudence towards the clients of a
       representative in that it allowed such representative to pursue his
       activities despite repeated admonitions and formal recommendations
       from the Compliance Department and a documented history of misconduct
       on the part of such representative.
    

    National Bank cooperated fully with the investigation of the matters
which are the subject of this Agreement, fully acknowledged its responsibility
in respect of the failures identified, and has shown itself willing to correct
the weaknesses which gave rise to the violations. Its new management has made
significant and important efforts to correct the serious shortcomings in the
control and supervisory mechanisms monitoring the activities of its branch
offices and has taken the necessary measures to remedy the situation. The
improvements are noteworthy and now ensure more controlled supervision of the
activities of the representatives at the branch offices. In the circumstances,
the IDA considers that there is little risk that a situation similar to the
one which occurred at the time of the violations will reoccur. National Bank
has paid substantial amounts to compensate the clients of the representatives
that it failed to supervise adequately. All of the aforementioned factors were
taken into consideration in the determination of the penalty.
    For its misconduct, National Bank has been fined $795,000.00 and is
required to pay $50,000.00 in costs.
    For a complete summary of facts, please see IDA Bulletin 3673 at
www.ida.ca or www.accovam.ca.

    The Investment Dealers Association of Canada (IDA) is the national
self-regulatory organization of the securities industry. The IDA's mission is
to protect investors, foster market integrity and enhance the efficiency and
competitiveness of the Canadian capital markets. The IDA enforces rules and
regulations regarding the sales, business and financial practices of its
Member firms and their approved persons. Investigating complaints and
disciplining Members and approved persons is part of the IDA's regulatory
role.





For further information:

For further information: Claudyne Bienvenu, Regional Director,
Regulation, (514) 392-3435 or cbienvenu@ida.ca; Jeffrey Kehoe, Director,
Enforcement Litigation, (416) 943-6996 or jkehoe@ida.ca

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