The OSC accused Peter Beck of using a complex, repeatedly changing structure to impede regulatory oversight of the group's trading activities.Jim Ross/National Post

Canada’s largest capital markets regulator has accused the operator of former day-trading powerhouse Swift Trade Inc. of numerous “significant” breaches of securities law.

In a 21-page statement of allegations filed on Wednesday, the Ontario Securities Commission claims Peter Beck, the “directing mind” of Swift Trade, operated the multinational securities day-trading business “with a culture of regulatory non-compliance.” This exposed trading partners and the capital markets to “potential harm.”

The OSC accused Mr. Beck of using a complex, repeatedly changing structure to impede regulatory oversight of the group’s trading activities.

According to the regulator, Swift Trade expanded from a single office in Toronto in 1998 to a group operating from 190 offices around the world in locations including China, Russia, India and Panama. In 2008, the firm traded some 22 billion shares on global markets with about 4,500 unregistered traders.

A 2009 review allegedly revealed instances where Swift Trade’s records of fund transfers conflicted with contractual arrangements for the flow of funds, failures by Swift Trade to reconcile its accounting records with third parties, and business transactions that were incorrectly recorded, according to the OSC’s statement of allegations.

In July of 2009, Mr. Beck agreed to pay $20,000 in a settlement stemming from an earlier unrelated compliance review by OSC staff. In the settlement, Mr. Beck said OSC staff had been unintentionally misled about the ownership and control of one of Swift Trade’s clients.

During a compliance review that began in March of 2009, the OSC took the unusual step of bringing in a consultant to review “deficiencies” in Swift Trade’s compliance with regulations and to try to get a clearer picture of Swift Trade’s operations.

“The purpose of the consultant’s review was to obtain a comprehensive understanding of the group’s business operations and affairs,” the OSC said in its statement of allegations Wednesday.

Specific “terms and conditions” related to the review were attached to Swift Trade’s registration with the OSC on Dec. 21, 2009. However, despite repeated requests by the consultant for “critical information” about Swift Trade’s operations, “this information was not produced,” the OSC says.

In December of 2010, one week before the terms and conditions were set to expire, Swift Trade took “a series of corporate actions that resulted in its dissolution” without notice, the OSC alleges.

In a news release last December, Mr. Beck said he was dissolving Swift Trade to turn his attention to another company, Orbixa Management Services Inc., which “focuses on advanced transaction execution technology for day traders” and matching engines.

Among Orbixa's customers is Omega Alternative Trading System in Canada, another company in which Mr. Beck has been involved, and Quote MTF in Europe.

OSC staff is seeking to ban Mr. Beck from the securities industry and prohibit him from holding any positions as an officer or director.

Despite the dissolution of Swift Trade, the regulator gathered enough information to allege that Swift Trade “was deficient in the management of its financial affairs,” failed to perform adequate monitoring of client trading activities “for possible abusive or deceptive trading,” failed to maintain or produce, upon request, complete and accurate financial records, and failed to implement adequate supervisory controls.

“Since at least 2007, members of the Swift Trade group have been engaging in extensive day-trading activities in breach of the dealer registration requirement,” the OSC says. And since the fall of 2009, “certain members of the Swift Trade group have repeatedly extended credit or provided margin to their clients” contrary to registration requirements and exemptions.

A hearing at the OSC is to take place on April 13.

Mr. Beck has been the subject of two regulatory proceedings in the United States, according to the OSC. One related to an affiliate of Swift Trade and certain “wash trading activity.” It resulted in a fine and “disgorgement” of profit. The second proceeding related to Mr. Beck’s failure to investigate the employment history of an employee who was subsequently convicted of crimes committed in Ontario, the OSC said.

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