The Manitoba Securities Commission is set to hold a disciplinary hearing against BMO Nesbitt Burns Inc. to deal with allegations of improper supervision of a trio of Nesbitt brokers.

The MSC alleges that BMO Nesbitt Burns and the manager of the firm’s Winnipeg branch, Thomas Waitt, acted improperly and contrary to the public interest in supervising three of the firm’s brokers, Randy McDuff, Michael Sidiropoulos and Charles Edward Griffith. It will hold a hearing into the case tomorrow.

McDuff’s registration was suspended on June 13, 2000. The registration of Sidiropoulos was suspended when he ceased to be employed by Nesbitt Burns in July 1998, and it subsequently expired on April 1999. Griffith’s registration as a salesman in the employ of Nesbitt Burns was suspended in January 1999.

The MSC says that Nesbitt Burns and Waitt failed to detect on a timely basis the extent of unsuitable securities, over-concentration of securities and the unacceptable use of margin in certain of the accounts of clients of McDuff.

The MSC also alleges Nesbitt and Waitt failed to detect the actions of Sidiropoulos in a timely manner; and that they failed to act in a timely and effective manner when potential problems regarding the accounts of each of McDuff, Sidiropoulos and Griffith were identified.

The commission notes that Waitt continues to have a role in the ongoing monitoring of client accounts as well as the monitoring of the activities of salesmen at Nesbitt.

In its allegations the MSC says, that back in 1996 Nesbitt Burns compliance staff determined that some of the investments in the accounts of McDuff clients raised the question whether those investments were suitable. McDuff was asked by Waitt to review the accounts in question, but no further action was taken by either Nesbitt or Waitt.

Nesbitt’s compliance staff raised questions about the level of commissions generated in some of McDuff’s client accounts, as well as the use of margin in some of the accounts, again in 1997. McDuff was told by Waitt to pursue these matters with the clients that were affected.

In 1998, Waitt raised the question of unsuitable investments in certain of McDuff’s client accounts, but it was left with McDuff to deal with the matter. In 1999, McDuff agreed to pay a penalty to Nesbitt Burns and to absorb losses in an account after the firm discovered that McDuff had been conducting trades in the account of a U.S. client without being registered in the United States.

In 2000, Nesbitt learned that McDuff had offered a settlement to a client without advising the firm. Nesbitt required McDuff to rewrite the Conduct and Practices Handbook examination and pay the client the amount offered as settlement, but took no other action. McDuff began an extended medical leave on June 15, 2000.

The MSC held a hearing in October 1999 relating to the conduct of Sidiropoulos in his handling of a client account while he was employed with Nesbitt Burns. It found unsuitable investments were made in the account, and that the client was not advised of risks of certain investments. It also found that the broker failed to act in the client’s best interest, failed to properly diversify the investments in the account, traded excessively, and engaged in unauthorized trading.

The MSC says that on seven occasions between 1993 and 1998 it was determined that Griffith has been flipping new issues of securities contrary to Nesbitt Burns policies. In each instance where Nesbitt identified flipping, Griffith was approached by Waitt or another official from Nesbitt and reminded of the policy, but in each case no further action was taken by Nesbitt against Griffith. By January 1999, Nesbitt received three client complaints alleging Griffith had been involved in discretionary trading. He was then terminated.