The Ontario Securities Commission on Thursday approved a settlement reached by staff of the Commission and the respondent John Blair Taylor.

From July 1997 to October 1999, Taylor was director of operations and finance at Phoenix Research and Trading Corp. In November 1999, he was appointed the CFO. Taylor never was a registered officer of Phoenix Canada.

The Phoenix Fixed Income Arbitrage Limited Partnership was a hedge fund managed by Phoenix Canada. The partnership collapsed in early January 2000 when Phoenix Canada discovered that one of its fixed income traders had accumulated a $3.3 billion U.S. long position in U.S. 6% treasury notes due August 15, 2009. The notes were not hedged and resulted in a significant overdraft position at the Bank of New York. The partnership was forced to liquidate its assets, resulting in a loss of more than US$120 million

Taylor agreed that he acted contrary to the public interest by failing to: keep the proper books and records; establish and implement the appropriate controls and procedures; and adequately supervise his staff.

The commission reprimanded Taylor and ordered that he be prohibited from becoming or acting as a director or officer of any issuer for two years. As terms of the settlement, Taylor must also pass the Partners, Directors and Officers examination and pay $7,500 in costs to the commission.

The Commission expressed the view that it was appropriate for staff to bring this proceeding since it is in the public interest that senior management be accountable for investment activities. The settlement approval acknowledges the importance of vigilance in the accurate capture, recording and accounting of trading activities. “It is important that members of senior management, whether registered or acting in a professional capacity, ensure that the firm establishes suitable systems of internal control,” said Brian Butler, Manager of Investigations, Enforcement Branch in a news release