The Ontario Securities Commission on Tuesday imposed $200,000 in penalties on Mark Bonham and imposed a three-year trading ban on him as part of a two-year-old case of mutual fund price manipulation.

Bonham acted as the portfolio manager of several mutual funds managed by Bonham & Co. and SVC O’Donnell Fund Management Inc. Between July 31, 1997 to June 30, 1998, Bonham manually priced certain shares held by three mutual funds, namely, the Strategic Value Fund, the Canadian Equity Value Fund and the Dividend Fund.

The manual pricing resulted in the funds being materially overvalued by approximately $377,652.70.

As part of the settlement, Bonham admitted that he “failed to act in good faith and in the best interest of the mutual funds, failed to exercise the degree of care, diligence and skill that a reasonably prudent person would exercise in the circumstances.” Bonham & Co. admitted that it failed to properly supervise Bonham’s actions.

The respondents also admitted that they did not apply a specific, consistent or appropriate methodology in manually pricing the shares held by the funds, and that they did not maintain proper records of the methods used to manually price the shares.

Both respondents were reprimanded and surrendered their registrations as investment counsel/portfolio managers for a period of three years.

Mark Bonham must cease trading in securities, except on his own account, for a period of three years. He is also prohibited from acting as a director or officer of a registrant for a period of three years;

Both respondents agreed to pay $150,000 to cover the costs of the OSC’s investigation. As well, both respondents agreed to make a voluntary payment of $50,000 to the OSC, to be allocated to purposes that will benefit investors in Ontario.

Speaking on behalf of the settlement panel, vice chairman Paul Moore stated that while the manual pricing of securities held in mutual funds may be appropriate in limited circumstances, to do so without proper supervision, documentation or a consistent methodology poses a risk to the investing public.

SVC O’Donnell (now StrategicNova Funds Management Inc.) entered into a settlement agreement with the OSC in November 2000 regarding its role in supervising Bonham and Bonham & Co.

Full restitution was paid by StragicNova into the funds in late 2000, and investors have been fully compensated for any potential losses.