B.C. Securities Commission - Street Wire
BCSC hearing features Pyper grilling Deans
B.C. Securities Commission BCSEC
Shares issued
Thu 13 Jan 2000 Street Wire
by Brent Mudry
Vancouver fund manager Wayne Deans confirms that personal trading at his
firm was not a rare event, but former protege John Pyper, fighting a
frontrunning prosecution, failed to establish that anyone else besides him
violated securities regulations. In a drilling grilling, Mr. Pyper has
tried to turn the focus of a British Columbia Securities Commission hearing
from himself to Mr. Deans, although it is not clear if any attempts to
impeach others will vindicate him from the commission's frontrunning
allegations. Mr. Deans, the co-founder of Deans Knight Capital Management,
and his partner Doug Knight fired Mr. Pyper in June of 1997 after the young
trainee admitted to selling and shorting ahead of client trades.
Mr. Pyper has succeeded in showing a culture of personal trading existed at
Deans Knight, but failed to pinpoint any glaring violations. While Mr.
Deans confirmed that he knew that several employees, including himself, had
personal trading accounts, he portrayed it as a personal matter. "I did not
encourage anybody to trade in stocks," he told the panel.
"Did you trade personally in stocks held in client accounts?" Mr. Pyper
asked his former boss. "From time to time that could have happened, yes,"
Mr. Deans replied. In the first specific question, Mr. Deans confirmed he
had personally owned shares of Robert Friedland's Diamond Fields Resources,
but no evidence of timing, circumstances or profits was asked by Mr. Pyper.
When BCSC staff lawyer Patrick Robitaille objected, asking about the
relevance of any Deans Knight personal trading details, Mr. Pyper's father
Terry quickly reassured the panel the line of questioning was not sinister
or unfounded. "This is not an attempt to throw mud on the floor and see if
it sticks ... we don't think Wayne told the truth," the elder Mr. Pyper
told the hearing. "We will hear the evidence," panel chairman John Graf
replied.
In quick succession, John Pyper asked Mr. Deans if he personally held
various stocks, but asked for few further details. Mr. Deans confirmed he
held shares of Diamond Fields, LionOre Mining and Arequipa Resources, and
testified he could not recall if he owned shares of Capricorn Resources,
Cinram, YBM Magnex International and two Autralian companies later merged
into LionOre: Forrestania and Australian Resources.
Mr. Pyper asked if Mr. Deans had ever made the comment of getting his "feet
wet" (from a Stockwatch article on Veronika Hirsch.) "I don't recall, but I
could have," the fund manager replied. "Have you ever bought first, then
later for a fund?" asked Mr. Pyper. "Yes," replied Mr. Deans.
The Deans Knight partner told the panel that he had invested in one company
personally before he knew enough to be confident to put it in client
accounts, and bought at a lower price for his clients later. "I paid $1 a
share, and subsquently much later when I knew much more I bought for our
clients at 85 cents a share ... the clients bought at a lower price," Mr.
Deans told the panel. The stock was not identified, and Mr. Pyper missed
the opportunity to ask any further questions about other potential similar
situations.
"Have you ever purchased for yourself first and not offered the opportunity
to clients?," asked Mr. Pyper. "I don't recall," Mr. Deans replied. "Did
you buy a private placement of Natraceuticals?," asked Mr. Pyper. Mr. Deans
confirmed he did, and told the panel the stock was very speculative and
unsuitable for clients.
"Did you buy Cartaway flow-through shares?," asked Mr. Pyper. "I don't
recall ever buying it," replied Mr. Deans.
"I hear of nothing from my friends that indicates Mr. Deans has done
anything wrong," Mr. Robitaille told the panel, after another of many
objections.
Mr. Pyper later alleged that Mr. Knight personally sold shares of Bre-X at
$3 before clients sold at pennies. Mr. Knight was not present at the
hearing and no further evidence emerged on the point.
(Readers wishing more details of the BCSC's Pyper prosecution may refer to
Streetwires, under the symbol "BCSEC," dated June 29, July 2 and Dec. 15 in
1999, and Jan 11 and 12.)
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