The British Columbia Securities and Exchange Commission (BCSC) has reprimanded the Bank of Montreal for failing to oversee its former employee’s misuse of the bank’s signature guarantee program.
The commission identified that a former Bank of Montreal employee engaged in conduct that was “contrary to the public interest.” From 2013 to 2017, the now-retired employee facilitated illegitimate securities transfers through the bank’s Securities Transfer Agents Medallion Program (STAMP).
According to the regulatory body, the former employee used STAMP “to guarantee signatures on approximately 100 security transfer forms related to six small cap venture issuers” without verifying that the signatures were authentic. More significantly, it was allegedly used to to allow public company directors from six companies to hide their holdings via nominees.
The employee also did not verify the signature owner’s identity, record their names and details of the transfers, and retain copies of the documents examined.
“BMO knew that the Medallion guaranteed share transfers, but did not adequately supervise how the Employee used it. The inadequate supervision permitted the Employee to engage in conduct that was abusive to the capital markets because it facilitated illegitimate securities transfers,” the agency wrote.
The Bank of Montreal agreed to enter into a settlement agreement with the regulatory body “to avoid a potentially lengthy hearing to prove the conduct.”
However, the agency did not tie the incident to any stock market schemes so far and is treating the situation as an isolated case.
While the two parties entered into an agreement to settle the dispute, the agreement also identifies possible reasons why there’s a lack of penalty for the employee and Bank of Montreal. Among these include: the fact that BMO has improved its supervisory practices and policies with respect
to medallions since 2017, it has not been issuing medallion guarantees since 2020, the employee has since retired from the company, and the bank has cooperated fully with BCSC’s investigation.
Information for this briefing was found via the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.