The Jailhouse

[NoMoDo]

here is a story on the subject from the globe:

http://www.globeinvestor.com/servlet/ArticleNews/story/GAM/20020619/RVALE

News from The Globe and Mail


Broker hit with cease-trade order

00:00 GMT-04:00 Wednesday, June 19, 2002


The Ontario Securities Commission has slapped a cease-trade order on Mark Valentine, who was chairman of Toronto brokerage Thomson Kernaghan & Co. until last Thursday when he was suspended from the company.

The OSC said yesterday that it put the temporary order in place because Mr. Valentine is under investigation by the OSC and the Investment Dealers Association of Canada for his role as general partner of some limited partnerships "and his trading of shares in certain over-the-counter securities."

The OSC also suspended Mr. Valentine's registration to work in the securities business.

Yesterday, Thomson Kernaghan and another Toronto brokerage, Research Capital Corp., dropped their plans to merge, the regulator said.

The OSC's cease-trade order says Thomson Kernaghan suspended Mr. Valentine on June 13 "as a result of an internal investigation," and that the firm "took steps to exclude him from TK's premises."

The cease-trade order is in place for 15 days, but can be renewed if the commission holds a hearing. A hearing will also be held if the OSC levels specific allegations against Mr. Valentine.

The limited partnerships in question include the Canadian Advantage LP and the VC Advantage Fund partnership, the OSC said. Mr. Valentine, "acting through private companies," is the general partner, they said, and he is the registered representative authorized to trade securities on the partnerships' behalf.

Mr. Valentine's lawyer, Joseph Groia, said yesterday his client has co-operated with the OSC and the IDA. He was interviewed by the IDA about a month ago, Mr. Groia said, and has provided information they asked for.

Thomson Kernaghan asked Mr. Valentine to step down from his job as chairman for 30 days "to allow the investigation to continue," Mr. Groia said, and "he left on amicable terms."

Consequently, "we don't understand what the justification was for a temporary cease-trade order," Mr. Groia said. "Mark has been completely open and above board with the regulators."

Mr. Groia would not say what the OSC is investigating, and suggested that it is up to the OSC to spell out what it is looking at.

However, OSC director of enforcement Michael Watson declined to reveal any details of the investigation. Neither would Mr. Watson say why the commission put the temporary order in place, or whether it would follow with a statement of allegations against Mr. Valentine.

In January, Thomson Kernaghan announced plans to merge with Research Capital, and under the terms of that deal the only segment that was not to become part of the new venture was Thomson Kernaghan's Nasdaq trading operation, run by Mr. Valentine. He was to buy that business and run it himself.

Regulatory approval of the merger was delayed when some Thomson Kernaghan clients complained to the OSC that the new company might not have the assets to settle pending lawsuits. Still, the OSC gave the merger its blessing, and only yesterday did the two firms drop their application to combine.

Research Capital president Patrick Walsh said yesterday that he could not make any comment on the situation, and Thomson Kernaghan president Lee Simpson could not be reached for comment.

Thomson Kernaghan has been the subject of a number of lawsuits in recent years, several from companies that alleged stock manipulation in convertible debenture financings.

One Toronto investor sued the firm for $5.75-million, alleging his broker transferred $29,000 out of his accounts without authorization.

The company and Mr. Valentine have also been sued by a Toronto widow who is trying to recover more than $600,000 in losses she claims to have suffered because of unsuitable investments.

Mr. Valentine and the company have denied all the charges against them.

Copyright © 2002 The Globe and Mail


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