Settlement Agreement: In the Matter of RT Capital Management Inc. et al.

Settlement Agreement

IN THE MATTER OF THE SECURITIES ACT,
R.S.O. 1990, c. S.5, as amended

AND

IN THE MATTER OF
RT CAPITAL MANAGEMENT INC., K. MICHAEL EDWARDS, TIMOTHY K. GRIFFIN, DONALD E. WEBSTER,JENNIFER I. LEDERMAN, PETER B. LARKIN, PETER A. RODRIGUES,GARY N. BAKER, PATRICK SHEA AND MARION GILLESPIE

SETTLEMENT AGREEMENT

I. INTRODUCTION

1. By Notice of Hearing, dated June, 29, 2000 (the "Notice of Hearing"), the OntarioSecurities Commission (the "Commission") announced that it proposed to hold a hearing toconsider whether, pursuant to sections 127(1) and 127.1 of the Securities Act, R.S.O. 1990, c.S.5, as amended (the "Act"), it is in the public interest for the Commission to make an orderthat:

(a) the registration of RT Capital Management Inc. ("RT Capital"), Peter B.Larkin ("Larkin") and Gary N. Baker ("Baker") be suspended or restrictedpermanently or for such time as the Commission may direct;

(b) terms and conditions be imposed on the registrations of RT Capital, Larkin andBaker;

(c) Larkin, Baker, Patrick Shea and Marion Gillespie cease trading in securitiespermanently or for such period as the Commission may direct;

(d) RT Capital submit to a review of its practices and procedures and institutesuch changes as may be ordered by the Commission;

(e) K. Michael Edwards, Timothy K. Griffin, Jennifer I. Lederman, Donald E.Webster, Peter A. Rodrigues and Larkin be prohibited from becoming oracting as a director or officer of an issuer;

(f) the Respondents be reprimanded;

(g) the Respondents pay the costs of the Commission's investigation;

(h) the Respondents pay the Commission's costs of this hearing; and

(i) contains such other terms and conditions as the Commission may deemappropriate;

and to consider such other matters as the Commission might consider appropriate.

II. JOINT SETTLEMENT RECOMMENDATION

2. Staff of the Commission ("Staff") agree to recommend settlement of the proceedinginitiated in respect of the Respondents by the Notice of Hearing in accordance with the termsand conditions set out below. The Respondents consent to the making of an order againsteach of them in the form attached as Schedule "E" on the basis of the facts set out below inPart III.

III. STATEMENT OF FACTS

3. The Respondents agree, for the purposes of this proceeding, with the facts set out inthis Part III.

4. RT Capital is an indirectly, wholly owned subsidiary of Royal Bank of Canada and wasestablished in 1986. RT Capital is registered under the Act as an Investment Counsel andPortfolio Manager and provides investment management services for approximately 700 clientaccounts, the majority of which are institutional pension funds. RT Capital currently hasapproximately $38 billion in assets under its management in both pooled and segregatedfunds, as well as cash funds.

5. During the period October 30, 1998 to March 31, 1999 (the "material time"), therewere six members of the Board of Directors of RT Capital. The Respondents in thisproceeding, more particularly described in paragraphs 6 to 11 below, were directors of RTCapital at the times specified herein.

6. K. Michael Edwards ("Edwards") was appointed as a director and the Chairman of RTCapital on December 7, 1998. Edwards is approved as a Non-Trading Officer of RT Capital.During and after the material time, Edwards was also the President and CEO of RTInvestment Management Holdings Inc. ("RTIM"), the sole common shareholder of RTCapital. RTIM is, indirectly, a wholly owned subsidiary of the Royal Bank of Canada and isnot a market participant. RT Capital reported to RTIM.

7. Timothy K. Griffin ("Griffin") was appointed as a director of RT Capital on January 1,1991. Griffin has been an employee of RT Capital or an RT Capital affiliate for approximately15 years. Griffin was appointed President of RT Capital on January 17, 1996 and CEO onDecember 7, 1998. Prior to being appointed President, he held the position of ExecutiveVice-President and before that, Vice-President. Griffin is approved as a Non-Trading Officerof RT Capital.

8. Larkin has been an employee of RT Capital or its predecessor since its inception in1986. Larkin was appointed as a director and officer of RT Capital on August 22, 1990.Larkin is the Senior Vice-President, Canadian Equities and in that capacity was responsibleduring the material time for approximately $13.5 billion in assets under management. Larkinwas the senior portfolio manager in the Canadian Equities section to whom the six otherportfolio managers in that section reported. Larkin is registered as a counselling officer of RTCapital. Larkin has been employed in the securities industry in one capacity or another inexcess of thirty years.

9. Donald E. Webster ("Webster") was appointed as a director and officer of RT Capitalon August 22, 1990. Webster was an employee of RT Capital or its predecessor since itsinception in 1986 until his retirement on March 31, 2000. During the material time, Websterwas the Senior Vice-President, Fixed Income and a portfolio manager in that department.Webster was registered with the Commission as a counselling officer of RT Capital.

10. Peter A. Rodrigues ("Rodrigues") was appointed as a director and officer of RTCapital on August 22, 1990. Rodrigues is the Vice-President, Finance and Operations.Rodrigues has been an employee of RT Capital or its predecessor since its inception.Rodrigues was responsible for the operational aspects of RT Capital's business, including thetaping system used to record calls to and from RT Capital's order executioners. Rodrigues isapproved as a Non-Counselling Officer of RT Capital.

11. Jennifer I. Lederman ("Lederman") was appointed as a director and officer of RTCapital on August 30, 1994. During the material time, Lederman was Corporate Secretaryand Senior Vice-President, Compliance. Lederman is approved as a Non-Trading Officer ofRT Capital. Lederman is also an officer of RTIM.

12. During the material time, Baker was a Vice-President, Canadian Equities and in thatcapacity acted as a portfolio manager and analyst. Baker has been an employee of RT Capitalfor approximately ten years. Baker is registered as a counselling officer of RT Capital. Bakerwas solely responsible for managing RT Capital's Canadian Equity Small Capitalizationpooled fund, in addition to managing approximately 16 to 17 pooled and segregated regularCanadian Equity portfolios. After Larkin, Baker was the second longest serving CanadianEquities portfolio manager at RT Capital. Baker has been employed in the securities industryeither as an analyst or a portfolio manager in excess of twelve years.

13. During the material time, the Respondent Patrick Shea ("Shea") was an "orderexecutioner" at RT Capital. Shea's job title was that of "Senior Equity Trader" but he wasnot a registrant. Shea has been an employee of RT Capital for approximately 13 years.

14. During the material time, the Respondent Marion Gillespie ("Gillespie") was an"order executioner" at RT Capital. Gillespie's job title was that of "Senior Equity Trader" butshe was not a registrant. Gillespie has been an employee of RT Capital for approximately 12years.

15. During the material time, Shea and Gillespie were responsible for carrying out all ofthe trading activity of the portfolio managers in the Canadian Equities section of RT Capital.

16. During the material time, RT Capital engaged in trading activity to create or maintainan uptick in the closing price of a security; or, alternatively, to prevent or rectify a downtick inthe closing price of a security. A total of 26 different Canadian equity securities, all listed onthe Toronto Stock Exchange (the "TSE"), were the subject of this high-closing activity on atleast one occasion.

17. The high-closing activity occurred on 53 occasions over the following eight dates :

  • Friday, October 30, 1998
  • Monday, November 30, 1998
  • Wednesday, December 30, 1998
  • Thursday, December 31, 1998
  • Friday, January 29, 1999
  • Friday, February 26, 1999
  • Tuesday, March 30, 1999
  • Wednesday, March 31, 1999

18. Each of the foregoing dates was the last trading day of a month, with the exception ofWednesday, December 30, 1998 and Tuesday, March 30, 1999, which were the next-to-lasttrading days of the month. Nineteen of the 53 high-closings occurred on December 30 and31, 1998 (year-end); ten of the high-closings occurred on March 30 and 31, 1999(quarter-end).

19. Of the fifty-three occasions referred to above, Larkin was responsible on forty-threeoccasions for instructing either Shea or Gillespie to carry out a trade, or engage in a tradingstrategy, designed to create or maintain an uptick, or prevent or rectify a downtick, in theclosing price of a security.

20. Of the remaining ten high-closings, Baker was responsible for instructing either Sheaor Gillespie to carry out a trade or engage in a trading strategy that created or maintained anuptick, or prevented or rectified a downtick, in the closing price of a security.

21. On each of the fifty-three occasions, either Larkin or Baker discussed the high-closingwith either Shea or Gillespie, who was then responsible for instructing a broker to execute atrade, or a trading strategy, which created or maintained an uptick, or prevented or rectified adowntick, in the closing price of a security. On eight occasions, Larkin instructed Shea tocarry out cross-trades of that nature involving RT Capital client accounts in order to effect thedesired closing price.

22. The cumulative total increase in the value of the Canadian Equities component of RTCapital's portfolios as a result of the high-closings carried out on the eight dates identifiedabove was $38,562,278, more or less.

23. The high-closing trading activities of Larkin and Baker are summarized in Schedules"A" ("Larkin") and "B" ("Baker") appended hereto.

24. The cumulative total increase in the market capitalization of the 26 issuers as a resultof the high-closings was $412 million, more or less. This figure is arrived at by taking each ofthe incremental changes to the market capitalization of the issuers which resulted from thehigh-closings and adding them together, as set out in Schedule "C" attached hereto.

25. The high-closings carried out by Larkin by way of cross-trades involving RT Capitalclient accounts are summarized in Schedule "D" appended hereto.

26. During the material time, almost all of RT Capital's Canadian Equities funds, whetherpooled or segregated, were run on the basis of a "model portfolio" comprised ofapproximately 75 securities selected from all sectors of the economy. Each security wasassigned a specific weighting within the model portfolio. One of the investments included inthe model portfolio was units of the Canadian Equities Small Capitalization pooled fund. As aresult, every security in the Canadian Equities Small Capitalization pooled fund was also heldindirectly in the model portfolio. There were approximately 80 securities held in that pooledfund. The Canadian Equities Small Capitalization Fund was managed exclusively by Bakerand was not subject to the constraints of the model portfolio.

27. Larkin was responsible for determining which securities were included in the modelportfolio and the weighting to be assigned to each. Larkin updated the model portfolio everytwo weeks, either adding or deleting securities from the model portfolio, or changing theweighting of a given security. The revised model portfolio was then distributed to the othersix portfolio managers in the Canadian Equities section.

28. Each of the Canadian Equities portfolio managers was required to re-balance theportfolios under his management to ensure that they were consistent with the composition ofthe revised model portfolio, in terms of both content and weighting, subject to a narrowdiscretion: approximately 7% of the value of any portfolio was permitted to be composed ofsecurities not contained in the model portfolio.

29. All of the securities which were the subject of the high-closings were either held in themodel portfolio directly, or indirectly through the model portfolio's inclusion of units in theCanadian Equities Small Capitalization pooled fund. As a result, the high-closings affected allof RT Capital's Canadian Equities portfolios which followed the model portfolio. Theperformance of RT Capital's Canadian Equities Small Capitalization pooled fund itself wasalso affected by the high-closing of the securities included in it.

30. RT Capital determined the value of the Canadian equity component of any givenportfolio by multiplying the number of shares of a particular security in the portfolio by theclosing price of the security as posted on the TSE for each of the securities held in theportfolio.

31. RT Capital measured the performance of its Canadian Equities portfolios bycomparing the portfolios' performance against certain benchmark indices, most commonly theTSE 300 index.

32. RT Capital operated on a calendar year for the purpose of: (i) calculating its annualportfolio performance measures, which were provided to existing clients and were alsopublished generally; (ii) reporting to its clients quarterly on portfolio performance; and (iii)invoicing its clients quarterly for management fees.

33. The management fees which RT Capital charged its clients each quarter werecalculated on the basis of agreed upon percentages of the average value of the client's assetsunder management, as set out in an "Investment Counselling Agreement" executed by RTCapital and its clients. The standard Investment Counselling Agreement provided that theaverage value of a client's assets during any given quarter was calculated by taking theaverage of: the value of the client's assets on the first day of the quarter and the value of theclient's assets on the last day of the quarter.

34. The Canadian Equities portfolio managers and order executioners at RT Capital eachreceived a base salary and participated in a profit sharing plan based on the company'sprofitability. Each portfolio manager and Shea were allocated a certain number of "phantomequity" shares annually, which entitled each to a proportionate share of the company's profits.The allocation of phantom equity shares was based on, among other factors, the performanceof each during the preceding year. Gillespie was not allocated "phantom equity" shares butreceived an annual bonus based on the company's profitability.

35. The Compliance Manual (March 1999) of RT Capital provided that:

The President and RT Capital's Directors are responsible forensuring that investments for client accounts are appropriatelymade and that practices within the organization do notviolate securities regulations. In addition, they are responsiblefor ensuring that the Compliance Manual and Employee Codeof Conduct and Privacy Code are adhered to in all respects.(emphasis added)

36. The Compliance Manual further provided that every employee of RT Capital wasrequired to sign a consent form on an annual basis acknowledging his or her agreement tocomply with the terms of the Compliance Manual and to confirm his or her compliance for theprevious year. In March 1999, Larkin, Baker, Shea and Gillespie, among others, eachexecuted the consent form applicable to the material time.

37. While RT Capital had compliance procedures in place for certain matters, such asmonitoring compliance with RT Capital's soft dollar policy and with the investmentparameters set out in clients' "SIP& G's", as well as for monitoring employee personaltrading, obtaining annual client consents, "early warning" filings and monitoring investmentsin pooled funds, RT Capital did not in fact monitor the practices of its Canadian Equitiesportfolio managers and order executioners to ensure high closing activities did not occur.

38. The investigation conducted by Staff did not disclose any evidence that Griffin,Rodrigues, Webster, Ledermen and Edwards were aware of the high-closing activities untilthey were brought to their attention by a TSE inquiry made of RT Capital in July of 1999.

39. Larkin, Baker, Shea and Gillespie were able to effect high-closings of securities onmonth-, quarter-, and year-end dates which affected the appearance of portfolio performance.The high closing activities described above were not detected by RT Capital because of a lackof procedures to monitor trading activities to check for high-closings. On no occasion didLarkin, Baker, Shea or Gillespie attempt to conceal, alter or destroy the internal records oftheir trading activity. Due to the failure to detect the high closings, none of the fifty-threehigh-closings was ever "red flagged" or made the subject of scrutiny by RT Capital.

40. During the portion of the material time specified above, the Board of Directors of RTCapital (the "Board") consisted of six members, namely, Edwards, Griffin, Larkin, Webster,Rodrigues and Lederman. The Board of Directors of RT Capital (the "Board") performedlargely administrative functions, mostly relating to the passing and signing of resolutions andthe execution of other corporate documents as needed from time to time. The Board did notconvene on a regular basis and rarely, if ever, met formally in person as a group. The Boarddid not monitor, or ensure that systems were in place to monitor, the trading activities andpractices of RT Capital's portfolio managers and order executioners to ensure that highclosings did not occur.

41. During the material time, Griffin, Larkin, Webster and Rodrigues sat on a"management committee". The management committee met approximately every two weeks,to deal with matters pertaining to the management, operation and performance of RT Capital.In addition, Griffin met with Edwards and Lederman once per month to review themanagement, operation and performance of RT Capital. The management committee did notmonitor, or ensure that systems were in place to monitor, the trading activities and practicesof RT Capital's portfolio managers and order executioners to ensure that high closings did notoccur.

42. Larkin, Baker, Shea and Gillespie were aware that TSE Market Surveillance wasmonitoring end of day trading for the purpose of detecting high-closing activity. Attemptswere made by some of the respondents to avoid detection by TSE Market Surveillance.

43. Shea and Gillespie had discussions with the brokers engaged by them to effect thehigh-closings. In some of those discussions, the brokers advised Shea and Gillespie that thebroker had misled TSE Market Surveillance, or would mislead TSE Market Surveillance if theneed arose, to ensure that RT Capital's trades were processed before the close of trading.

44. Commencing October 2, 1998, as a matter of routine business practice, RT Capitalrecorded all telephone calls between its order executioners and the brokers engaged by themto carry out trades on behalf of RT Capital. Some of the respondents were not aware that thetaping system also recorded all internal telephone calls of the portfolio managers to and fromthe order executioners. On June 30, 1999, the TSE made inquires of RT Capital concerningRT Capital trading activity on December 31, 1998. In August 1999, members of theManagement Committee decided to reconfigure the taping system so that the telephone callsbetween the portfolio managers and the order executioners were no longer recorded. Due todelays in obtaining the necessary hardware, the internal lines to the order executioners couldnot be disconnected until November 4, 1999. Prior to that date, on October 5, 1999, theCommission formally requested that RT Capital produce copies of its trading records andtelephone tapes relating to dates under investigation.

45. At no time did RT Capital stop recording telephone conversations between its orderexecutioners and brokers. In July 1999, after receiving a request from the TSE for certaintrading records, RT Capital took steps to secure the existing tapes relating to the dates underinvestigation.

Admission of all Respondents

46. By engaging in the conduct set out above, the Respondents admit that they acted in amanner contrary to the public interest.

Admission of RT Capital

47. RT Capital admits that it failed to establish written procedures for dealing with clientswith respect to high-closings that conformed with prudent business practice and enabled RTCapital to serve its clients adequately, contrary to section 1.2 of Rule 31-505 under the Act.

IV. TERMS OF SETTLEMENT

48. The Respondents and Staff agree to the following terms of settlement:

RT Capital

(a) RT Capital will submit to a review of its trading practices and procedures, suchreview to be carried out by Deloitte & Touche (the "expert") at RT Capital'sexpense, and will implement such changes as are recommended by the expert,within reasonable time frames set out by the expert after consultation with RTCapital. RT Capital will provide Staff with a copy of the report andrecommendations of the expert and with progress reports concerning theimplementation of the expert's recommendations;

(b) RT Capital will submit to a review of its trading activities on the last andsecond to last trading day of the month during the period October 30, 1998 toMarch 31, 1999 inclusive. Such review is to be carried out by the expert at RTCapital's expense, and will determine the impact, if any, on RT Capital's clientsof the high-closings trading activity of RT Capital during the aforementionedperiod. RT Capital will advise any clients so affected of the outcome of thisreview and will resolve discrepancies, including fee overpayments, to itsclients' satisfaction. RT Capital will provide Staff with a copy of the reviewcarried out by the expert.

(c) RT Capital will submit to a review of its trading activities on the last andsecond to last trading day of the month during the period of April 1, 1999 andMay 31, 2000. Such review is to be carried out by the expert at RT Capital'sexpense, to determine whether the type of high-closings trading activities thatform the basis of this proceeding were repeated during this time period. As apart of this review, RT Capital agrees to produce to the expert, at RT Capital'sexpense, all of the tapes of the telephone recording system at RT Capital forthis period. If it is determined that RT Capital engaged in high-closings tradingactivity during this period, then the expert will determine the impact, if any, onRT Capital's clients as a result of the high-closings trading activities. RTCapital will advise any clients so affected of the outcome of this review andwill resolve discrepancies, including fee overpayments, to its clients'satisfaction. RT Capital will provide Staff with a copy of the review carriedout by the expert.

(d) if, as a result of the reviews set out in paragraphs (b) and (c), it is determinedthat the fund values and/or published results, communicated either to the publicor to individual clients, were materially misstated, then RT Capital will restatesuch fund values and/or re-publish such results to the public or to theindividual clients, as the case may be;

(e) as soon as practicable, RT Capital will configure its telephone taping system sothat all calls between an RT Capital portfolio manager and an RT Capital orderexecutioner are recorded and hereby undertakes to maintain this system,including copies of the tapes themselves, until such time as the Commissionagrees to its modification;

(f) upon the approval of this settlement, RT Capital will make a payment of$3,000,000 to the Commission, to be allocated to such third parties as theCommission may determine for purposes that will benefit investors in Ontario;

(g) upon the approval of this settlement, RT Capital will make a payment of$75,000 to the Commission as its contribution to the Commission's costs withrespect to the investigation of this matter and the costs of the hearing; and

(h) RT Capital's registration will be amended by suspending the approval of:i) Edwards as a Non-Trading Officer for a period of 1 month; ii) Lederman as aNon-Trading Officer for a period of 3 months; iii) Rodrigues as aNon-Counselling Officer for a period of 6 months; and (iii) Griffin as aNon-Trading Officer for a period of 18 months. All of the aforesaidsuspensions are to be effective from the date of approval of this SettlementAgreement by the Commission; and

(i) RT Capital will be reprimanded.

Larkin

(a) Larkin consents to an Order pursuant to clause 1 of subsection 127(1) of theAct terminating his registration permanently effective from the date ofapproval of this Settlement Agreement by the Commission, and Larkin herebyagrees not to apply thereafter for registration in any capacity under the Act;

(b) Pursuant to clause 2 of subsection 127(1) of the Act, commencing August 2,2000, Larkin will cease trading permanently in all securities, with the exceptionof securities within his RRSP. Commencing August 2, 2002, Larkin will bepermitted to resume trading in all securities for his personal account;

(c) Larkin will be permanently prohibited from becoming, acting as or holding thetitle of a director or officer of any market participant, effective from the date ofApproval of this Settlement Agreement by the Commission;

(d) Upon the approval of this Settlement Agreement by the Commission, Larkinwill make a payment of $8,000 to the Commission in respect of a portion ofthe Commission's costs with respect to this matter; and

(e) Larkin will attend the hearing in person.

Baker

(a) Pursuant to clause 1 of subsection 127(1) of the Act, Baker's registration willbe suspended for a period of three years, effective from the date of approval ofthis Settlement Agreement by the Commission;

(b) Pursuant to clause 2 of subsection 127(1) of the Act, commencing August 2,2000, Baker will cease trading in all securities for a period of 3 years, with theexception of securities within his RRSP. Commencing February 2, 2002,Baker will be permitted to resume trading in all securities for his personalaccount;

(c) Baker will be prohibited from becoming, acting as or holding the title ofdirector or officer of any market participant for a period of three years,effective from the date of Approval of this Settlement Agreement by theCommission;

(d) As a condition precedent to the reinstatement of his registration, Baker willsuccessfully complete the second year of the Chartered Financial Analyst'sCourse and an ethics course agreed upon by Baker and Staff;

(e) Upon the approval of this settlement, Baker will make a payment of $8,000.00to the Commission in respect of a portion of the Commission's costs withrespect to this matter; and

(f) Baker will attend the hearing in person.

Shea

(a) Pursuant to clause 2 of subsection 127(1) of the Act, commencing August 2,2000, Shea will cease trading in all securities for a period of 2 years, with theexception of securities within his RRSP. Commencing February 2, 2001, Sheawill be permitted to resume trading in all securities for his personal account;

(b) Upon the approval of this settlement, Shea will make a payment of $8,000.00to the Commission in respect of a portion of the Commission's costs withrespect to this matter;

(c) As a condition precedent to the resumption of trading by Shea in all securitieson or after August 2, 2002, Shea will attend and successfully complete theCanadian Securities Course, the Conduct and Practices Handbook Course, andan ethics course agreed upon by Shea and Staff; and

(d) Shea will be subject to close supervision for a total period of two yearsfollowing his return to employment by any employer(s) who, after expiration ofthe cease trading order referred to in subparagraph (a) above, employs him totrade in securities, or to carry out any act in furtherance of a trade, as definedin the Act. Shea agrees to notify any such prospective employer of this term ofthe settlement prior to commencing his employment.

(e) Shea will attend the hearing in person.

Gillespie

(a) Pursuant to clause 2 of subsection 127(1) of the Act, commencing August 2,2000, Gillespie will cease trading in all securities for a period of 1 year, withthe exception of securities within her RRSP. Commencing February 2, 2001,Gillespie will be permitted to resume trading in all securities for her personalaccount;

(b) Upon the approval of this settlement, Gillespie will make a payment of$4,000.00 to the Commission in respect of a portion of the Commission's costswith respect to this matter; and

(c) As a condition precedent to the resumption of trading by Gillespie in allsecurities on or after August 2, 2001, Gillespie will attend and successfullycomplete the Canadian Securities Course, the Conduct and PracticesHandbook Course, and an ethics course agreed upon by Gillespie and Staff;and

(d) Gillespie will be subject to close supervision for a total period of one yearfollowing her return to employment by any employer(s) who, after expirationof the cease trading order referred to in subparagraph (a) above, employs herto trade in securities, or to carry out any act in furtherance of a trade, asdefined in the Act. Gillespie agrees to notify any such prospective employer ofthis term of the settlement prior to commencing her employment.

(e) Gillespie will attend the hearing in person.

Griffin

(a) Griffin will be prohibited from becoming, acting as, or holding the title of adirector or officer of any market participant for a period of eighteen months,effective from the date of approval of this Settlement Agreement by theCommission;

(b) Upon the approval of this settlement, Griffin will make a payment of $8,000.00to the Commission in respect of a portion of the Commission's costs withrespect to this matter; and

(c) Griffin will attend the hearing in person to be reprimanded by the Commissionunder clause 6 of subsection 127(1) of the Act.

Rodrigues

(a) Rodrigues will be prohibited from becoming, acting as, or holding the title of adirector or officer of any market participant for a period of six months,effective from the date of approval of this Settlement Agreement by theCommission;

(b) Upon the approval of this settlement, Rodrigues will make a payment of$8,000.00 to the Commission in respect of a portion of the Commission's costswith respect to this matter; and

(c) Rodrigues will attend the hearing in person to be reprimanded by theCommission under clause 6 of subsection 127(1) of the Act.

Lederman

(a) Lederman will be prohibited from becoming, acting as, or holding the title of adirector or officer of any market participant for a period of three months,effective from the date of approval of this Settlement Agreement by theCommission;

(b) Upon the approval of this settlement, Lederman will make a payment of$8,000.00 to the Commission in respect of a portion of the Commission's costswith respect to this matter; and

(c) Lederman will attend the hearing in person to be reprimanded by theCommission under clause 6 of subsection 127(1) of the Act.

Edwards

(a) Edwards will be prohibited from becoming, acting as, or holding the title of adirector or officer of any market participant for a period of one month,effective from the date of approval of this Settlement Agreement by theCommission;

(b) Upon the approval of this settlement, Edwards will make a payment of$8,000.00 to the Commission in respect of a portion of the Commission's costswith respect to this matter; and

(c) Edwards will attend the hearing in person to be reprimanded by theCommission under clause 6 of subsection 127(1) of the Act.

Webster

(a) Webster will be prohibited from becoming, acting as, or holding the title of adirector or officer of any market participant for a period of six months,effective from the date of approval of this Settlement Agreement by theCommission;

(b) Upon the approval of this settlement, Webster will make a payment of$8,000.00 to the Commission in respect of a portion of the Commission's costswith respect to this matter; and

(c) Webster will attend the hearing in person to be reprimanded by theCommission under clause 6 of subsection 127(1) of the Act.

V. STAFF COMMITMENT

49. If this settlement is approved by the Commission, Staff will not initiate any complaintto the Commission or request the Commission hold a hearing or issue any other order inrespect of any conduct or alleged conduct of the Respondents or any of them in relation to thefacts set out in Part III of this agreement.

50. If this settlement is approved by the Commission, Staff will not initiate any otherproceeding against the Respondents or any of them in relation to the facts set out in Part III ofthis agreement.

VI. PROCEDURE FOR APPROVAL OF SETTLEMENT

51. Approval of the settlement set out in this agreement shall be sought at the publichearing of the Commission scheduled for Wednesday, July 19, 2000, or such other date asmay be agreed to by Staff and the Respondents, in accordance with the procedures describedin this agreement.

52. Staff and the Respondents agree that if this agreement is approved by the Commission,it will constitute the entirety of the evidence to be submitted respecting the Respondents inthis matter, and the Respondents agree to waive their right to a full hearing and appeal of thematter under the Act.

53. Staff and the Respondents agree that if this settlement is approved by the Commission,neither Staff nor any of the Respondents will make any public statement inconsistent with thisagreement.

54. If, at the conclusion of the settlement hearing, and for any reason whatsoever, thissettlement is not approved by the Commission, or an order in the form attached as Schedule"E" is not made by the Commission:

(a) this Settlement Agreement including all discussions and negotiations leading upto its presentation at a hearing, and all negotiations between Staff and counselfor the Respondents concerning the matter of the penalty proposed for each ofthe Respondents, shall be without prejudice to Staff and to all of theRespondents. Staff and each of the Respondents will be entitled to all availableproceedings, remedies and challenges, including proceeding to a hearing of theallegations in the Notice of Hearing and Statement of Allegations, unaffectedby this agreement or the settlement negotiations;

(b) the terms of this agreement will not be referred to in any subsequentproceeding, or disclosed to any person, except with the written consent ofStaff and the Respondents or as may be required by law; and

(c) the Respondents agree that none of them will, in any proceeding, refer to orrely upon this agreement or the negotiation or process of approval of thisagreement as the basis for any attack on the Commission's jurisdiction, allegedbias, appearance of bias, alleged unfairness or any other remedies or challengesthat may otherwise be available.

VII. DISCLOSURE OF AGREEMENT

55. Counsel for Staff or for Respondents may refer to any part or all of this agreement inthe course of the hearing convened to consider this agreement. Otherwise, this agreement andits terms will be treated as confidential by all parties to the agreement until approved by theCommission, and forever if, for any reason whatsoever, this settlement is not approved by theCommission, except with the written consent of all parties or as may be required by law.

56. Any obligations of confidentiality concerning the terms of their settlement agreementshall terminate upon approval of this settlement by the Commission.

III. EXECUTION OF AGREEMENT

57. This agreement may be signed in one or more counterparts which together shallconstitute a binding agreement.

Dated this 20th day of July 2000.

RT CAPITAL MANAGEMENT INC.
Peter B. Larkin
Gary Baker
Patrick Shea
Marion Gillespie
Timothy K. Griffin
Peter A. Rodrigues
Jennifer I. Lederman
K. Michael Edwards
Donald E. Webster

STAFF OF THE ONTARIO SECURITIES COMMISSION
Per:
Michael Watson
Director of Enforcement

Schedule"A":
Trades Initiated by Peter Larkin		 Schedule"B":
Trades Initiated By Gary Baker		 Schedule "C":
Increase in Market Capitalization		 Schedule"D":
Cross Trades Made