The Ontario Securities Commission has published the reasons for its decision to accept a settlement agreement between the commission and Mark Kassirer, chair of Phoenix Research and Trading Corp., an investment counsel and portfolio management firm.

The case arose after a hedge fund, Phoenix Fixed Income Arbitrage LP, lost more than $120 million after finding itself exposed to a huge unhedged position in U.S. treasury notes. OSC staff alleged that Kassirer failed to monitor adequately, and provide appropriate general oversight of, the business of Phoenix Canada.

Under the settlement, the OSC reprimanded Kassirer and ordered that Kassirer Asset Management Corp. submit to an independent review of its current controls and procedures and rectify any deficiencies. Kassirer must also pass the Partners, Directors and Officers exam as a term of his continued registration. He also paid $10,000 in costs to the commission.

The OSC’s decision revealed a combination of bad luck and slack management, rather than malfeasance by Kassirer. The OSC said that Kassirer thought there was an adequate system of controls in place, although he now realizes it was inadequate.

“Mr. Kassirer’s conduct was not that of someone who did not care whether or not there were controls. We also saw no evidence of moral culpability or dishonesty on anyone’s part, and we’re not exactly sure why the unauthorized investing activity took place. But we certainly are satisfied that there is no evidence that Mr. Kassirer profited in any way from it,” said the OSC .

The OSC said that the crucial public interest issue is that Kassirer take courses and submit to an examination to ensure that prudent controls are now properly in place.

But the commission also took pains to note the importance of holding senior management responsible. “The buck stops at the top. Accordingly, we really have to look right up the chain to senior management and ask what went wrong.”