The Ontario District Council of the Investment Dealers Association has terminated the membership of First Delta Securities Inc.

The IDA said the firm violated the Know Your Client rule by allowing several of its clients use the firm as a “boiler room” to manipulate the price of a U.S. Over-the-Counter Bulletin Board stock.

The decision follows a successful investigation and prosecution conducted with the assistance of the U.S. Securities and Exchange Commission the Royal Canadian Mounted Police and the Ontario Securities Commission

The IDA has also imposed discipline penalties on three of the firm’s current or former directors and officers.

As part of a settlement agreement reached today, First Delta acknowledged that between August 1998 and June 1999, the firm failed to know the identity of several of its clients who used the firm to operate a “boiler room” and to manipulate the price of a U.S. OTCBB stock.

As well First Delta acknowleged that between January 1999 and June 1999, it opened accounts and conducted transactions for several non-resident clients without verifying their identities as required under the Proceeds of Crime (Money Laundering) Act).

In addition to these violations of the Know Your Client rule, First Delta also acknowledged failing to adequately supervise a registered employee who assisted clients to operate the boiler room and manipulate the price of the OTCBB stock in question.

First Delta has paid a $600,000 fine and its membership in the Association will be terminated in 90 days.

George Trusler is fined $50,000, suspended from holding any supervisory position for six months and must rewrite and pass the examination for Partners, Directors and Officers prior to being reinstated in any supervisory position.

Frederick Meredith is fined $30,000, suspended for 30 days from any supervisory position and must re-write and pass the examination for Partners, Directors and Officers prior to being reinstated in any supervisory position.

Gail Stopforth is fined $30,000, suspended for 30 days from any compliance position and must rewrite and pass the examination for Partners, Directors and Officers prior to being reinstated in any compliance position.

“The severity of these penalties reflects the gravity of the infractions. We require effective supervision at Member firms and expect full compliance with the Know Your Client rules”, said Alex Popovic, IDA vice president, Enforcement.

Effective immediately and pending termination of its membership, First Delta will not be able to purchase securities for client accounts or reduce its capital.

First Delta clients will, however, be able to transfer their accounts to other investment dealers prior to termination. First Delta clients requiring additional information may contact the IDA at (416) 943-6983.