Stung by media criticism over its role in a scam that saw United Services Funds of San Antonio, Tex., defrauded out of millions of dollars, the Vancouver Stock Exchange has approved a “broad action plan” to strengthen its enforcement and compliance programs. Just over a month ago, two promoters, Edward Carter and David Ward, were assessed damages of $16 million in a civil lawsuit initiated by United Services Funds.
Under the plan, evidence in the Carter/Ward case will be reviewed by the exchange and the British Columbia Superintendent of Brokers with strong emphasis on broker involvement. The two bodies will also review the timing and procedures for continuing investigations by the VSE when matters are taken to court; this could see the exchange take action before a court decision is handed down.
The handling of enforcement activities by VSE staff will be examined and systems support for market surveillance will be upgraded as well. The “off the floor” trading rule, where trades are not included in daily volume statistics, will be revised and some of the rules governing broker client dealings will be rewritten. An attempt will be made to more accurately define the roles and responsibilities of the Vancouver Stock Exchange and its regulating body, the B.C. Securities Commission.
At a news conference after the VSE’s annual meeting, Donald Hudson, president, said the new compliance policy was partly in response to the Carter/Ward trial. He emphasized that the exchange was interested in bringing in “new standards and closing loopholes” and he hinted that more funds may be allocated to enforcement and compliance which could include additional staff.
Hudson complained that media criticism is directed at the VSE for not taking action but when it is taken the exchange is still portrayed as being culpable. “The taking of enforcement action is the system working,” he argued.
For the fiscal year ended March 31, the exchange reported a profit of $7.9 million before extraordinary items, compared to $6.7 million a year earlier. Trading volume over the period was ahead 17% to 4.5 billion and the value was $5.9 billion, a rise of 18%.
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