Tuesday, July 6, 1999
Money News
Fined executive to stay on ASE board
Timbuktu deal didn't hurt clients, exchange chief says
By CLAUDIA CATTANEO and CAROL HOWES
The Financial Post
CALGARY - The former head of Yorkton Securities Inc. in Calgary will stay on the Alberta Stock Exchange's board of governors despite being heavily fined for trading irregularities, some of them involving the Timbuktu Gold Corp.
Tom Cumming, president and chief executive of the ASE, said yesterday there's no pressure to ask Michael Prew to step down because his infraction, while serious, did not put clients at risk.
"It's a significant fine, but at the same time he's settled his fine and he's been an upstanding supporter and member of the exchange," Mr. Cummings said. "We don't have a rule that we fire everyone who has a disciplinary problem. Obviously it depends on the extent and the kind of the problem."
Mr. Prew, former Calgary branch manager for the national investment dealer, was one of four executives fined a combined $500,000 by the exchange plus almost $90,000 to cover the costs of a three-year investigation. The fines, announced last week, were among the heaviest ever imposed by the Calgary-based exchange because, according to Mr. Cumming, the infractions were committed by people in a position of authority and at least one of them had already been reprimanded in the past.
Mr. Prew was chairman of the Alberta Stock Exchange in 1995 and also a director of the Canadian Investor Protection Fund in the same year.
Mr. Cumming said the investigation related in part-- but not exclusively -- to the group's heavy trading in the stock of Timbuktu, the gold-mining company found to be a scam in 1996.
The company claimed a fantastic gold find in West Africa after buying a vague end-of-the-road property in western Mali.
Yorkton, a penny-stock underwriter, with branches across the country and abroad, was Timbuktu's official sponsor. Senior employees took positions in the stock at an early stage before the stock was widely traded among the public, raising questions about a conflict of interest.
Investors pushed the stock up to $30 a share in the spring of 1996 from a six-month's low of $1.60. A subsequent ASE investigation found that Timbuktu had no gold and that its drilling samples had been enhanced from other sources. It was also discovered that Oliver Reese, Timbuktu's president, had run afoul of U.S. securities regulators years earlier.
Mr. Prew was fined $100,000, while Allan Frame, assistant branch manager at the time, was fined $50,000. Ronald Brimacombe, a former vice-president at Yorkton was fined $150,000 and Colin Larson, the designated compliance officer, was fined $50,000.
The firm was also fined $150,000 and has agreed to recruit an acceptable candidate to replace the branch manager at the Calgary office.
Mr. Cumming said the fines resulted from a three-month review of heavy trading activities that found the group failed to properly label transactions made for Yorkton's inventory accounts and for the employees' personal accounts with "pro" in order to distinguish them from a client's account.
Mr. Prew and Mr. Frame subsequently stepped down from their positions at Yorkton and agreed to take some courses prior to reapproval in any supervisory capacity. Charles Blakey, director of market standards for the Alberta Securities Commission, said it is unusual for a person of Mr. Prew's standing on the ASE board to be sanctioned. He said he could not recall a similar case in the more than 12 years he has been in his position.
While the ASC regulates the securities market in Alberta, he said it would not intervene in a settlement between the exchange and a board member.
"We're not in the habit of telling them what to do," he said. "That's the board's decision."
Mr. Cumming would not say whether the fines conclude an investigation into the Timbuktu scandal.
Mr. Cumming defended Mr. Prew's continued role on the ASE board which he has held for at least 10 years. He was re-elected in March for a one-year term.
"Why wouldn't he be? Mr. Prew absented himself when issues were discussed," he said.
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