A hearing panel of the Investment Dealers Association of Canada has fined Research Capital Corp. $160,000 and its CEO $40,000 for failing to supervise a broker and failing to correct compliance shortcomings.

Patrick Walsh, at all material times, an approved person (CEO, President and Ultimate Designated Person) with the Toronto office of Research Capital.

On Nov. 25, 2005, the panel accepted a settlement agreement negotiated between IDA staff and Research Capital and Patrick Walsh. The respondents admitted to two counts of conduct detrimental to the public interest.

On the first count, they failed to ensure effective or adequate supervision of a registered representative by the appropriate officers or employees between September 2001 and September 2004. The IDA said this employee’s overall pattern of business conduct should have raised concerns and his business should therefore have been subject to closer scrutiny and tighter control. The respondents failed to effectively identify, record or curtail the employee’s misconduct.

On the second count, they failed to adequately address and correct compliance shortcomings identified by the IDA and to provide reasonable assurance that IDA standards governing compliance and supervision were met between 2002 and June 2004. IDA sales compliance reviews in 2002 and 2004 had identified significant deficiencies.

After delivery of the 2004 report, Research Capital retained a consulting expert in sales compliance to evaluate their compliance program and make recommendations to their board with a view to addressing issues identified in the sales compliance report. Implementation of these recommendations, at a cost in excess of $100,000, has resulted in substantial improvement in Research Capital’s sales compliance performance.

The IDA said the penalty assessed would have been significantly higher without this mitigating factor.