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by Mike Caswell
The Investment Industry Regulatory Organization of Canada has permanently banned Christopher Everest, the chief financial officer of now-defunct brokerage Octagon Capital Corp., for disclosure failures. Among other things, he did not accurately report Octagon's risk-adjusted capital, a measure of a firm's solvency. Octagon's troubled financial picture did not become apparent until an IIROC audit, by which time the firm was just days from going out of business.
The sanctions for Mr. Everest are contained in a settlement agreement that IIROC released on Monday, May 27. The settlement, which Mr. Everest accepted to avoid a hearing into his misconduct, imposes a permanent ban from acting in a registered capacity. In addition, Mr. Everest must pay a fine of $10,000, which would have been significantly higher were it not for his inability to pay.
The penalty comes over three years after the demise of Octagon Capital, a smaller Toronto brokerage. IIROC closed the firm in December, 2015, after discovering a $4.7-million deficiency in "client free credits," or money that Octagon owed to clients. The Canadian Investor Protection Fund took control of client accounts and had Octagon declared bankrupt. At the time, IIROC said that Octagon had avoided triggering any early warning by incorrectly reporting its risk-adjusted capital, or RAC.
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