Northern suspended over deficient internal controls

Read: Northern Securities to “limit its activities”

Over the period from November 21, 2012, to January 25, 2013, IIROC says Northern admitted to the following violations:

• It had risk-adjusted capital in an amount less than zero on 38 days, contrary to Dealer Member Rules 17.1 and 2600 (Policy Statement 2); and

• It failed to have adequate internal controls in that it failed to have an approved CFO in place, other than from January 7 to 22, 2013, contrary to Dealer Member Rules 17.2A and 2600 (Policy Statement 2).

Pursuant to the settlement agreement, Northern has agreed to these terms:

(a) Northern’s membership is immediately suspended and Northern remains subject to IIROC Dealer Member Rules as a suspended Member.

(b) During the period of the suspension, Northern will be required to report weekly to IIROC staff on its risk-adjusted capital. It will not be required to obtain or provide evidence that it has obtained an audit.

(c) Northern is directed to immediately cease dealing with the public as a Dealer Member, including removing any websites from public access.

(d) Northern shall preserve $100,000 of its remaining assets until June 30, 2013, at which time it shall be authorized to disburse those funds to its creditors, including any former clients with a valid claim. For greater certainty, it is agreed that the $100,000 shall be preserved from receivables owing to Northern from Penson Financial Services Canada Inc.

(e) Northern is restricted from undertaking several activities without first obtaining the written consent of IIROC’s VP Financial and Operations Compliance. These include:

• reducing its capital in any manner including redemption, repurchase or cancellation of any of its shares;

• reducing or repaying any indebtedness which has been subordinated with the approval of IIROC;

• directly or indirectly making any payments by way of loan, advance, bonus, dividend, repayment of capital or other distribution of assets to any director, officer, partner, shareholder, related company or affiliate; and

• increasing non-allowable assets, unless a prior binding commitment to do so exists, or entering into any new commitments which would have the effect of materially increasing the non-allowable assets of the firm;

(f) Northern shall make arrangements with its parent company, Northern Financial Corporation to preserve Northern books and records for a period of no less than seven years from the date on which each record is created. The records shall be maintained at head office or an accessible storage location and shall be made available to former clients of Northern and/or to IIROC staff on request.

Northern must comply with the terms of the agreement.

Also, IIROC staff or Northern shall be at liberty to apply to a hearing panel to terminate the company’s membership at any time after six months following the date of approval of this settlement agreement—as long as termination doesn’t put public interest at risk.

Read the settlement agreement.

Also read: Northern launches an appeal with the OSC