Broker fined $83,000 for breaches

McDouall Stuart chief executive Andrew McDouall. Photo / Martin Sykes

Wellington brokerage McDouall Stuart Securities has been fined $83,000 and publicly censured by the stock exchange's disciplinary tribunal for five breaches of market rules.

In the first breach the tribunal found McDouall Stuart had broken the rules on nine occasions between January 8 and March 8 by failing to have enough liquid capital as prescribed by a waiver granted to the company. For that breach it was fined $25,000.

The tribunal also found the company breached another rule by including a subordinated loan of securities in its liquid capital calculation despite the NZX telling it it did not approve of the loan being used for that.

In the third breach McDouall Stuart was found guilty of not holding enough client assets in excess of its obligations on 13 occasions between September 2008 and February 2010. For that it was fined $13,000.

The largest breach and fine of $30,000 was handed out for failing to hold client assets on trust at all times and for not obtaining written notice from its bank of the trust status of the account. The breach related to an account held by an American client called Charles Schwab.

The tribunal also found McDouall Stuart breached an amended waiver by failing to ensure excess client funds were paid to clients where possible and for that it was fined $15,000.

McDouall Stuart chief executive Andrew McDouall said that while the firm was guilty and it accepted the breaches, there were mitigating circumstances.

McDouall said his company had taken over the account two years ago when it acquired another business yet it had been audited by the NZX for the past eight years.

It was the only account out of 19 it had taken over where it had been unable to supply the paperwork to the exchange, he said.

"The stock exchange had audited it for eight years. However the ultimate responsibility should be on the participant and I accept that - it would be wrong for that not to be the case."

The 13 occasions on which there were not enough client assets were related to foreign currency timing issues as the money was being transferred from the US, McDouall added. He said the capital breaches were not good but it had been a tough year.

McDouall Stuart resigned from being an NZX trading and advising firm on March 15.