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Anither Case of Scotia Using SRO's to Defame Employee?

Postby Guest » Wed Jul 13, 2005 6:43 am

In defence of David Berry

Barry Critchley
Financial Post

July 13, 2005

When David Berry, the former head of the preferred share group at Scotia Capital, was dusted on June 30, he achieved a special distinction: He became the last person at the firm to have a compensation scheme based on direct drive -- which is also known as "eat what you kill."

Berry was the beneficiary of a contract that paid him a fixed percentage of the action: The larger the profits, the larger his payout. In recent times such contracts -- at least in bank-owned firms -- have been largely eliminated.

Not only was Berry, who declined comment for this column, punted out the door, his firm took the highly unusual step of reporting some of his alleged trading transgressions to Market Regulation Services. And for good measure, after declining to comment the day before on Berry's departure to this newspaper, the story, in lurid detail, appeared in Canada's other national newspaper.

"It's sneaky and cheap.'' noted one market participant.

Many who contacted this columnist were less than impressed with the actions of the bank, given Berry has made Scotia a ton of dough.

"Their objective was clear. They wanted to get him off that contract," said one source. "If they wanted to get Dave off the deal they should have paid him what they had to pay him including a bonus and severed him properly. That's the only way to do it."

This source said Berry -- who has been with Scotia Capital for about a decade -- had a deal that paid him, at least in the early years, 20% of the group's profits. When Berry signed that deal, Scotia Capital was a bit player in preferred shares. One competitor estimates Scotia Capital captured 60% of the business with Berry behind the wheel.

"He had a better grasp of all the market players and how to put buyers and sellers together."

"If you can make $80-million for the company, why shouldn't they pay him 20%? That's a good deal for everybody. And sure it means that Berry makes more than [senior management] which ruffles their feathers," added another.

"They never were happy with the direct drive."

Another market participant said: "It's very odd for a company to find one of their own employees in violation of some very minor stuff and then tell RS about it. If they find some minor transgression through their internal audits you'd think they would give the employee the opportunity to clean up and not just finger him to RS."

Adds another participant: "Scotia has to realize that it bears some responsibility for having allowed for these transactions to take place. It's not clear to us that any clients suffered any injury as a result of Berry's supposed transgressions."

As for the alleged transgressions, it's not known whether they are new or whether this has been part of the way he did business for years. If the latter is the case, then why did the bank decide to take action now?

"In my mind, it was the contract that got the ball rolling. That was the impetus for compliance to start looking for any violation. And I guess they kept looking before they found something," said one observer.

Another participant disagreed with the characterization, in a recent newspaper article, that Berry was overly flashy. "He is very low key. Sure he makes a s---load of money. And he does have a fancy car which he rarely took to work. Normally he takes the subway. In the summer he rides his bike," he added, noting that one of the so-called fancy parties mentioned in the article was the annual Charity Toy Tea.

One person who has been to the Berry household estimated it occupies about 5,000 square feet -- half the size noted in the other paper. "How many guys live in $5-million houses in Toronto? The guy made a lot of money."

"Who gives a s--- that he drives a Ferrari and paid cash for his house," said another.

"Do you think his boss has a mortgage and drives a Hyundai?"

We asked Scotiabank the following questions:

- Was the bank trying to get Berry to unwind or cancel his contract?

- Was the matter of Berry's compensation ever discussed at the board level?

- Were the transgressions Berry is alleged to have made something he has done for years or something new?

- Has RS, as part of its regular audit of the firm, ever uncovered any of Berry's transgressions?

- Has Scotia ever tipped off another employee to RS?

Scotia declined comment on the first two questions. For the next two questions, it said it will await the outcome of the RS investigation. "We will let them do their work," said a spokesperson. For the fifth question, the bank said it has provided the regulators "with information about possible breaches."

© National Post 2005
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Postby urquhart » Tue Jul 12, 2005 1:04 pm

Executives need not fear any consequences for insider trading, but if they dare to fish illegally a jail sentence is likely. Clearly, Canada is not providing much determent to white collar crime, when all you need to do is co-operate when you are caught and show some remorse. The CP Ships settlement is a prime example of how the OSC negotiates with Bay Street lawyers and their delinquent high profile executive clients. The securities enforcement system does not work this way with the lesser miscreants who cannot afford the backroom legal representation.


TORONTO STAR
Jul. 12, 2005. 06:53 AM

21 days in jail for fish poacher
Penalty unusually severe, officials say
'Like he killed a person, not a fish'


SCOTT ROBERTS
STAFF REPORTER

A 21-day jail sentence levied against an Aurora man for poaching fish was unusually stiff, conservation officials say.

In addition to the jail time, Sergei Homiakov was slapped with an $8,500 fine and had his fishing licence suspended for five years after pleading guilty last month to over-fishing, fishing during a closed time and unlawfully transporting fish.

Homiakov, 30, was released Friday after serving 12 days in Lindsay's Central East Correctional Centre.

The sentence was handed down by Justice of the Peace Robert Boychyn and relates to a Feb. 14 incident, when Durham police found Homiakov with bags containing 23 rainbow trout at Wilmot Creek in Clarington at about 1:30 a.m. Ministry conservation officers were called and seized the catch, which contained 15 female and eight male trout.

"Jail time is certainly rare in these cases," said Bill Lafferty, natural resources ministry enforcement supervisor for the Aurora district. "I've seen fines that high but ... I have not seen the additional jail time."

Boychyn's decision was well within his legal means, ministry officials said. Under the Federal Fisheries Act, jail time of up to one year and fines topping $100,000 can be issued.

But Crown prosecutor Veronica McGuire was not seeking the maximum penalty. In fact, she was not asking that Homiakov be jailed at all. She only sought an $8,500 fine and the forfeiture of equipment involved in the capture and the fish.

"The judge basically ordered the fine and further sentenced Mr. Homiakov to 21 days in jail," said Brendan Crawley, an attorney-general's office spokesman.

Homiakov, who immigrated to Canada from Belarus five years ago, could not comment because he does not speak English. But his wife, Irina Homiakov, lashed out at the justice system for jailing her husband.

"They acted like he killed a person, not a fish," she said, insisting her husband did not know the provincial regulations. "I was shocked. I wasn't expecting them to put him in jail. I don't know how they can do that."

Homiakov, who has no previous convictions, represented himself in court and pleaded guilty because he could not afford a lawyer, his wife said.

"I understand now that he was wrong to fish then. But to leave a wife without a husband and a child without a father is wrong, too," said Irina Homiakov.

Mitch Phinney, the conservation officer who handled the case, could not recall the last time he has seen jail time allotted for such an offence. "The sentence was hefty. It's rare."

The conviction was likely tougher because it was spawning season for rainbow trout, said Phinney. The 15 female trout captured would have represented about 80,000 lost eggs, which would have directly reduced the population.

Boychyn could not be reached for comment.

Although poaching incidents have decreased since the late 1980s, Lafferty said the sentence would "send a strong message" to anyone thinking of illegally catching fish.
urquhart
 
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Location: Mississauga

Postby Guest » Sun Jul 10, 2005 8:26 am

May 31, 2005

To: Ontario Securities Commission
20 Queen Street West, Suite 1903
Toronto ON M5H 3S8

Fax 416-593-8122

Re: Town Hall Question

Further to your invitation to submit questions to the OSC Town Hall, I look forward to seeing this question addressed on the public web site for same. Copies are also sent to the media in attendance in case they wish to follow up.

Thank you very much for taking the time to help improve the public interests.

Questions will remain anonymous in attempts to leave personality and/or turf politics out.

Question:

Robert Kyle’s question about serious cover-up occurring at As......... is not going to go away. Authorities (OSC included) have tried to avoid this issue at all costs as it is serious and contentious. One whistleblower who tried to tell the truth is already dead, and another following in his footsteps is under contempt of court for failing to stop speaking out on this. RCMP letters have stated they will only look into this if asked to by the OSC, so the catch 22 is, which regulator will step to the plate and ask for public inquiry?
Perhaps none.
Will the OSC investigate the allegations surrounding this firm or will these be pushed under the carpet?


Cc: CBC’s Mike Hornbrook
Toronto Sun’s Linda Leatherdale
Toronto Star’s James Daw
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Postby Guest » Sun Jul 10, 2005 8:24 am

May 31, 2005

To: Ontario Securities Commission
20 Queen Street West, Suite 1903
Toronto ON M5H 3S8

Fax 416-593-8122

Re: Town Hall Question

Further to your invitation to submit questions to the OSC Town Hall, I look forward to seeing this question addressed on the public web site for same. Copies are also sent to the media in attendance in case they wish to follow up.

Thank you very much for taking the time to help improve the public interests.

Questions will remain anonymous in attempts to leave personality and/or turf politics out.

Question:

Many times I have witnessed an abused client write to the firm who took advantage of them……..only to be brushed aside. Then if they are still able to, they may write to the firm compliance officer………only to be brushed aside. Then if they are still able to, they may write to the OSC…………only to be brushed aside and directed to the IDA………only to be brushed aside since the IDA is the industry trade association.

Where does the buck stop? Who is responsible for abuses, and fraud, and why are so many, many regulators working when all they seem to be able to do and say is , “we see no securities act violations, when standing directly in front of them are clients who have been double dipped, overcharged commissions, sold unsuitable investments, and misled into placing a professional level of trust in commission salespersons?

Cc: CBC’s Mike Hornbrook
Toronto Sun’s Linda Leatherdale
Toronto Star’s James Daw
Guest
 

Postby Guest » Sun Jul 10, 2005 8:23 am

May 31, 2005

To: Ontario Securities Commission
20 Queen Street West, Suite 1903
Toronto ON M5H 3S8

Fax 416-593-8122

Re: Town Hall Question

Further to your invitation to submit questions to the OSC Town Hall, I look forward to seeing this question addressed on the public web site for same. Copies are also sent to the media in attendance in case they wish to follow up.

Thank you very much for taking the time to help improve the public interests.

Questions will remain anonymous in attempts to leave personality and/or turf politics out.

Question:

Diane Urquart’s question suggested that the OSC (through the securities act) has ability to seek compensation for investors who have suffered malfeasance, while this has only been used in one high profile case, that of mutual fund timing.

David Brown’s answer suggested a different wording, that of calling it a “settlement process”, which sounded as if he was using different words to mean the same thing. Does the OSC have ability to cause clients to be compensated or other “settlement” arrangements and aside from the mutual fund timing issue, how many individual clients have the OSC caused compensation for?

Cc: CBC’s Mike Hornbrook
Toronto Sun’s Linda Leatherdale
Toronto Star’s James Daw
Guest
 

Postby Guest » Sun Jul 10, 2005 8:22 am

May 31, 2005

To: Ontario Securities Commission
20 Queen Street West, Suite 1903
Toronto ON M5H 3S8

Fax 416-593-8122

Re: Town Hall Question

Further to your invitation to submit questions to the OSC Town Hall, I look forward to seeing this question addressed on the public web site for same. Copies are also sent to the media in attendance in case they wish to follow up.

Thank you very much for taking the time to help improve the public interests.

Questions will remain anonymous in attempts to leave personality and/or turf politics out.

Question:

How many written complaints about IDA registered firms were received by the OSC in the latest year statistics are kept?

How many of those complaints are investigated by the OSC, and how many referred to the IDA?

What legislation allows the IDA self regulatory authority to investigate its industry members, especially since the IDA itself states that no such delegation of authority exists?

Paul Bourque
SVP Regulation, IDA
"First, let's get the facts straight. The only legislative power the provincial governments "delegate" to the IDA is registration of brokers -- and even that is only delegated in B.C., Alberta and Ontario. The provincial governments do not "delegate" securities industry compliance and enforcement."
Paul C. Bourque
Financial Post

November 1, 2004

Re: "Investors Need Faith in SROs," Oct. 15.

Cc: CBC’s Mike Hornbrook
Toronto Sun’s Linda Leatherdale
Toronto Star’s James Daw
Guest
 

OSC Town Hall Questions unanswered so far........

Postby Guest » Sun Jul 10, 2005 8:21 am

May 31, 2005

To: Ontario Securities Commission
20 Queen Street West, Suite 1903
Toronto ON M5H 3S8

Fax 416-593-8122

Re: Town Hall Question

Further to your invitation to submit questions to the OSC Town Hall, I look forward to seeing this question addressed on the public web site for same.

Thank you very much for taking the time to help improve the public interests.

Questions will remain anonymous in attempts to leave personalities out.

Question:

Why does the NASD (National Association for Securities Dealers) in the US have an investor alert or warning on its web site about the “unsuitability” of an advisor selling the highest compensating class of a particular mutual fund to a client……….and if this behavior is inappropriate in the United States why is there no similar warning or action on this type of advisor behavior in Canada? Is the OSC deliberately overlooking the some 80% of mutual funds sold by advisors that are sold using the DSC option when other lower costs alternatives are available?

Or is the OSC intending similar action to that taken by US market regulators on this particular form of client abuse by investment salespeople?

Cc: CBC’s Mike Hornbrook
Toronto Sun’s Linda Leatherdale
Toronto Star’s James Daw
Guest
 

Postby Guest » Fri Jul 08, 2005 7:09 pm

it is a good thing that the law did not apply to those nice people. When we start applying the law to nice people, then you know that things have really gotten out of hand........................

If they would have been handicapped immigrant crack addicts, then make sure we hit em hard, but thank god these respectable executives are protected from such hardship by our OSC.
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OSC lets insider-trader off the hook

Postby Paul Store » Fri Jul 08, 2005 3:16 pm

"The Globe and Mail reports in a Canadian Press dispatch Friday that the Ontario Securities Commission has let CP Ships off with a warning about timely disclosure after an insider-trading mishap that engulfed the freight shipping giant's chief executive officer. The unbylined item says the commission decided that the actions by CP Ships and four company insiders, including CEO Ray Miles, "could have formed the basis of proceedings against them." However, in light of "the high level of co-operation received from CP Ships" and the circumstances of the case, the OSC concluded that "it is possible to adequately protect the public interest by issuing a caution rather than commencing formal proceedings."
Paul Store
 

Postby Guest » Wed Jul 06, 2005 9:11 pm

todays post writes of the ASC hiring its own private auditor which will undoubtedly report in private to the ASC.

I expect the next announcement from the ASC will be that they will be buying their own newspaper, so they can fully disseminate how well they are functioning.

What a bunch of bumbling bureaucrats. They are giving the best demonstration of selfish butt covering I have witnessed since Hollinger.

By thier overly protective and evasive actions are we able to conclude anything other than we are dealing with white collar criminals?
Guest
 

Postby Guest » Tue Jul 05, 2005 11:42 pm

I am convinced that the OSC is nothing but a "paper" tiger regulator. Canada has no effective securities regulation, and should receive a buyer beware label for accuracy.............foreigners maybe already have given Canada this label. Bank of Canada Governer David Dodge has called Canada the "wild west" of securities markets.

Our securities regulators are dysfunctional and the first step towards solution is to accept nothing less than full, "Gomery" style of open audit of the Alberta Securities Commission, followed by the same for the OSC, followed by complete reform of these organizations.
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More Skeletons Coming Out of the Scotia Closet

Postby urquhart » Wed Jun 29, 2005 7:34 am

Globeandmail.com > Today’s Paper > National
Flashy Bay St. trader faces probeBy SINCLAIR STEWART AND ANDREW WILLIS

Wednesday, June 29, 2005 Page A1

David Berry is the richest banker you've never heard of. He drives to work in a $300,000 black Ferrari, throws lavish parties at his $5.5-million Toronto mansion, and single-handedly dominates the country's small but lucrative market for trading preferred stock.

Estimates vary on how much he earned last year at Scotia Capital Inc. -- they range anywhere from $7-million to $20-million -- but one thing is clear: Despite his low public profile, Mr. Berry's pay package would put most of his Bay Street peers to shame.

Now that's under a cloud.

Market Regulation Services Inc. (RS), Canada's stock-market cop, is investigating the 39-year-old trader after it was alerted to a possible breach of securities rules, according to people familiar with the matter. The whistle-blower was Mr. Berry's employer, the investment banking arm of the Bank of Nova Scotia, which suspended him with pay last Thursday and forwarded the matter to regulators.

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Sources close to the probe say Mr. Berry is alleged to have traded some securities "off-book" rather than through the Toronto Stock Exchange, without proper approval. The TSX has to give special permission if a brokerage house wants to execute a trade without doing so in the open market, something that is known as an off-book transaction.

The sources say Mr. Berry is also alleged to have engaged in "undisclosed shorts," essentially short-selling some of these preferred shares without giving the required notice to regulators. Preferred stock is a type of security that pays investors a fixed dividend, but does not provide them with the same voting rights as common stock.

Tom Atkinson, chief executive officer of RS, and Frank Switzer, a spokesman for Scotiabank, declined to comment on the matter. Mr. Berry could not be reached at his home yesterday.

Mr. Berry is known for his extravagant lifestyle.

He would sometimes show up at work in his Ferrari 612 Scaglietti, a rare and flashy sports car.

He was also known for playing host to popular Christmas parties at his sprawling Georgian home in Rosedale, an exclusive area of Toronto, where he lives with his wife and their three young children. The 12,000-square-foot, eight-bathroom home, once dubbed Caverhill, and formerly owned by billionaire David Thomson, boasts a 25-metre tunnel that connects it to a coach house on the same property.

The investigation into his trading comes amid a turbulent month for Scotia Capital. Last week, the firm released two newly hired traders, veterans Glen Grossmith and Zoltan Horcsok, as RS is preparing to wrap up a probe into their past activities at UBS Securities Canada Inc.

Mr. Berry's de facto boss, meanwhile, Scotiabank vice-chairman David Wilson, announced Thursday he was resigning from Scotia Capital to head up the Ontario Securities Commission, the country's largest securities watchdog.

Born in Milton, Ont., Mr. Berry grew up on a farm before enrolling in Queen's University and earning a Bachelor of Science degree in mathematics. He is widely regarded as a jock, an avid squash player and mountain biker who also starred with his university rugby team.

By the time he joined Scotiabank as an assistant to an airline analyst in the early 1990s, he had graduated from the University of Toronto's MBA program and picked up his chartered accountant designation.

Ten years ago, he asked to move onto the trading floor and quickly took charge of the brokerage's preferred-share operations, which now account for 50 per cent of the Canadian market. While other banks have gradually de-emphasized preferred trading, viewing it as a declining market, Scotia Capital increased its stranglehold on the business, thanks in part to a legacy inherited from McLeod Young Weir Ltd., the brokerage it acquired in 1988.

Mr. Berry parlayed his command of the market into a sweet deal, successfully bargaining for what is called "direct drive" compensation. This means that he earns a percentage of the estimated $45-million to $60-million in annual profit Scotia Capital makes on preferred-stock trading -- the only person at the bank who is awarded that kind of treatment.

The bank struck the unusual arrangement about eight years ago, when Mr. Berry was fielding job offers from several competitors, but it had grown uncomfortable with the antiquated pay scheme, sources said.

"The preferred market can be very thin, and Berry was the market," said the head of trading at a rival brokerage house.

Industry sources say Mr. Berry recently phoned some contacts and clients and explained he would be leaving the bank because the two sides could not agree on compensation issues.

Those who have worked with him say he is "very intense and very focused," although not one prone to flashes of temper. In a newspaper interview last year, Mr. Berry's wife Fiona said he reminded her of a bulldog because of his determination and loyalty.

"He's not a bad guy, not a yeller," said one person who knows Mr. Berry, pointing out his activity in various charities, including the United Way.

"[But] his lifestyle was a bit over the top."

Property records show that the Berrys purchased their home for $5.5-million in the summer of 2002, but it does not appear they took out a mortgage.
urquhart
 
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Joined: Tue Jun 14, 2005 3:43 pm
Location: Mississauga

Postby admin » Tue Jun 28, 2005 10:30 pm

ASC Review, Will it be public?
I would wish for full, true, and plain public disclosure as to what happens at the ASC. This will be the very first step towards a better and more trustworthy investment industry in Canada.

No more hiding the truth behind closed doors. Does anyone remember the Gomery inquiry?

For example, if the truth is that 90% or 100% of complaints about IDA firms get referred to the IDA, I want it disclosed to investors. (The IDA is another story entirely and will be addressed in due time)

If from 10,000 complaints received the ASC has the time, money and resources to investigate only 90 cases, I would hope it is disclosed to the public.

I want the public to be informed, rather than misinformed, misled, and mistreated. They should know full well what they are getting into when they place their lives in the hands of a government agency that says it is there to protect them. This agency should have to be upfront with them just as investment dealers should have to be upfront with thier clients.

If the ASC selectively picks and chooses which cases get looked at, and which get passed over due to internal limitations or biases, I would like it known and stated that they are picking and choosing when to enforce the law, and when not to. I would also like full disclosure as to what constitutes a case valuable enough to them to decide to enforce the law, and how they justify the ruined lives left behind from small investors who do not warrant the "case time". Do they not deserve the same protection under the law?

It might be discovered that the ASC is like a police agency, where the only speeding drivers on deerfoot trail who are given tickets are those with Mazda's and Toyota's, and those driving Nissans, Honda's and Ford's are automatically given a free pass. I think the public deserves to know such information so we can know what the rules of the game are and what to expect out of our enforcement agencies.

They are today telling the public that they do a complete job of protecting the public, and I have in twenty years, yet to see a member of the public, made whole by the ASC, after being wronged by my industry. The law is the law, and some members of the industry are really tired of watching this agency speak of high standards while selectively enforcing (or ignoring) the law.
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Postby admin » Tue Jun 28, 2005 10:26 pm

ASC carries out rapid investigation, well done
despite allegations of impropriety and dysfuncion at the Alberta Securities Commission, you have to give them credit for acting quickly to investigate.

The problem is that they acted quickly to launch an investigation into catching the scared employees who actually risked their careers to speak out about management........................when they were supposed to launch the investigation into the improprieties. Oooops! Sorry guys.

Instead of hiring KPMG to do a complete check of who was saying what over the e-mail system( to seek out those with dissenting views of management?), they should have used the time, energy and resources to reassure the public that they were looking into the allegations of impropriety.

Where do they get managers like this? At the school of sociopathic corporate climbing? To immediately initiate an internal witch hunt (sorry, but that is the appearance in the eyes of this observer) to feret out the bastards who dared to tell the truth as they see it, is so typical of bad management with something to hide.
What employees did is called blowing the whistle, and it is well documented in social studies and human behavior studies. Others call it telling the truth in the public interest. The reaction is all to often the same and the ASC does not dissapoint in this regard. They take well rehearsed and well documented steps to threaten, intimidate, scare, and otherwise bully and retaliate against those who dare speak out against them.

How sad.
How typical.
Last edited by admin on Fri Nov 18, 2005 10:56 pm, edited 1 time in total.
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