A hearing committee panel of the Toronto Stock Exchange has approved a settlement between TSE Regulation Services and Michael Gallo, Jr., a trader at Yorkton Capital Inc., a wholly owned subsidiary of Yorkton Securities Inc.

Gallo admitted that on May 22, 2001, he engaged in conduct that was inconsistent with just and equitable principles of trade, and detrimental to the interests of the exchange and the public, when he executed a prohibited trade in a stock at a time when Yorkton was involved in a distribution of the stock and had restricted trading in the stock.

He will pay a fine of $10,000 and pay $1,000 towards the cost of the investigation. On June 4, a hearing panel approved a settlement between Yorkton and RS, in which Yorkton was fined $300,000 for failing to ensure that its employees complied with exchange requirements, and for engaging in conduct unbecoming. The June Settlement related to a number of matters, including two of the trades executed by Gallo.

Under the terms of the June settlement, Yorkton admitted that between February 1998 and July 2000, Yorkton failed to ensure that its employees, directors and officers complied with exchange requirements, and between March 1998 and July 2000, Yorkton engaged in conduct, business or affairs that were unbecoming.

The violations related to failures to make customer-principal trade disclosures, restricted trading while involved in a distribution, failure to respond to directions of RS and systemic general supervisory failures. Yorkton was required to pay a fine of $300,000 and pay $60,000 towards the cost of the investigation.

The restricted trading by Gallo at a time when RS was finalizing the June settlement with Yorkton, has prompted further concerns regarding the supervision of trading at Yorkton. As a result, it requested that Yorkton hire an independent third party to conduct a comprehensive review of the trade desk compliance and supervision functions of the firm and to make recommendations to Yorkton. The review was conducted and recommendations made.

Yorkton responded with an acceptable plan of action and timetable for the plan’s implementation. The plan of action has been endorsed and adopted. The independent third party will revisit Yorkton within three months to ensure satisfactory implementation. It will also advise Yorkton in relation on a trade desk audit to be conducted in early 2002.