Industry ban for Valentine
Barred for life by OSC pact, ex-chairman of brokerage can't trade stocks for five years
Wojtek Dabrowski
Financial Post
Friday, December 24, 2004
Mark Valentine, the former chairman of the bankrupt Thomson Kernaghan & Co. Ltd. brokerage, has been permanently barred from Canada's securities industry as part of a settlement struck with the Ontario Securities Commission.
Mr. Valentine, who has been ordered to pay $100,000 to the OSC for investigation costs, was also handed a five-year trading ban.
The pact to settle numerous securities-laws violations also prohibits Mr. Valentine from ever serving as a director or officer of any private or public company.
"We believe this is probably the most serious sanction the commission has ever meted out in a proceeding," Kelley McKinnon, the OSC's manager of litigation, said in an interview. "That's because Mr. Valentine will never be registered anywhere in Canada again."
Mr. Valentine's agreement to never seek securities registration or recognition of any kind applies nationally. He also agreed to never again seek membership in the Investment Dealers Association, the brokerage industry's self-regulatory body.
In addition, he has agreed not to serve as a director or an officer of any company as well as subject himself to a trading ban in other Canadian jurisdictions if other provincial regulators demand it.
After five years of an outright trading ban, Mr. Valentine will be allowed to trade only Toronto Stock Exchange- and New York Stock Exchange-listed stocks in an account solely in his name. He will not be able to own more than 1% of any class of securities he trades. Those restrictions apply for a further 10 years.
The settlement ends a saga that began in the spring of 2001 with financial troubles at Thomson Kernaghan.
Thomson Kernaghan collapsed into bankruptcy in July, 2002, about a month after Mr. Valentine was suspended following an internal investigation at the brokerage.
Separately, Mr. Valentine was arrested in 2002 in Operation Bermuda Short, a lengthy undercover sting conducted jointly by the RCMP and the U.S. Federal Bureau of Investigation.
In March of this year, Mr. Valentine pleaded guilty in the United States to a count of securities fraud and was sentenced to nine months' house arrest to be served in Canada.
Mr. Valentine had no comment yesterday. However, Edward Greenspan, the litigator retained by Mr. Valentine, said yesterday his 35-year-old client finished serving his detention last week.
"With this settlement agreement, all of the matters over the last several years of his life are now behind him," Mr. Greenspan said in an interview yesterday. "This is the last of it."
The OSC's allegations against Mr. Valentine included creating a "culture of conflict of interest and non-compliance" at Thomson Kernaghan through his position as general partner of a number of hedge funds.
He also failed to deal fairly and honestly with his clients and placed his interests ahead of theirs, the OSC said. For instance, he sold his clients shares of Chell Corp. for US$2 each, even though he originally received them at US$1 a share a short time before.
Mr. Valentine orchestrated "Chell Corp. transactions which provided a substantial benefit to [Thomson Kernaghan's] risk adjusted capital and to his own accounts and which had a corresponding detrimental effect on his clients' account," according to the settlement agreement made public yesterday.
Mr. Greenspan said his client will now spend some time to "move forward and reflect in terms of what he wants to do."
Asked whether there are civil lawsuits outstanding against Mr. Valentine, Mr. Greenspan responded: "As I understand it, whatever is left is not significant or material."
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