A former head trader has agreed to pay $670,000 in fines, disgorgement and costs after admitting to violating securities rules by allocating new issues intended for retail investors to his pro trading accounts, the Investment Industry Regulatory Organization of Canada (IIROC) announced Thursday.
An IIROC hearing panel accepted a settlement agreement with Carlos Manuel Vargas, a former head trader and head of syndication at Global Maxfin Capital Inc. and Chippingham Financial Group Inc., in which Vargas agreed to a $620,000 fine (including disgorgement of ill-gotten gains) and $50,000 in costs, along with a one-year suspension, and six months of close supervision when he returns to the industry.
The sanctions follow Vargas’ admission that he violated IIROC rules in trading new issues. Specifically, the panel found Vargas engaged in improper trading by allocating new issues that were acquired from underwriting syndicates for retail investors to his firm’s pro-trading accounts, or his own personal trading accounts.
“[Vargas] distributed new issue allocations to actual retail clients on limited occasions. The vast majority of new issue shares were allocated to his firms’ pro-trading inventory accounts and traded… in his capacity as head trader,” the IIROC panel stated in the settlement agreement.
“New issues are intended for broad retail distribution and selling group members should not take them into their pro-trading inventory accounts or personal trading accounts. [Vargas] knew, or ought to have known, that his practice of doing so was improper and he thereby contravened [IIROC rules],” the [ame; stated.