X hits on this document





3 / 18


Moreover, CIHI provided leverage to its hedge fund customers that violated the

margin requirements. CIHI financed market timing hedge funds purportedly through the use of

total return swaps (“TRSs”). These TRSs were extensions of credit in excess of 50% of the margin

stock’s value. Thus, CIHI violated Section 7(d) of the Exchange Act and Regulation U promulgated by the Federal Reserve Board. In addition, because World Markets helped arrange this financing, World Markets violated Section 7(c) of the Exchange Act and Regulation T promulgated by the Federal Reserve Board. Moreover, because World Markets effected transactions in mutual funds for hedge funds in connection with which it arranged this financing, World Markets violated Section 11(d) of the Exchange Act.


Finally, from at least 1999 until January 2003, World Markets received over 1,000

letters and emails from mutual funds complaining about abusive trading by a team of RRs at World Markets. This team of RRs, led by an RR (hereinafter described as “Broker Doe”), used, among other tactics, multiple accounts, multiple RR numbers, and small trade size broken up across related accounts to deceive mutual funds and “stay under the radar” of the mutual funds’ internal timing monitors. Senior World Markets officials knew about this team of RRs’ deceptive market timing activities and took steps to assist them, ensuring that this team of significant business producers could continue to facilitate market timing. In addition, some of these RRs knowingly accepted numerous mutual fund orders from at least one of their timing customers after 4:00 p.m. ET, and processed those orders as though the customer had placed the order prior to 4:00 p.m. ET.

As a result of these acts, World Markets violated the antifraud provisions of the federal securities laws and Rule 22c-1, as adopted under Section 22(c) of the Investment Company Act.

  • B.


    • 6.

      CIHI is a New York-based company, incorporated in Delaware, that is not

registered with the Commission. It is a subsidiary of CIBC, a Canadian financial and bank holding company. CIHI financed market timing hedge funds through the use of TRSs and loans. It also supported and provided financing for customers of World Markets, the broker-dealer subsidiary of CIBC. Both CIHI and World Markets, the broker-dealer, are wholly-owned subsidiaries of CIBC. As such, CIHI is a "person . . . under common control with a broker-dealer," making it a "person associated with a broker-dealer" subject to the Commission's jurisdiction under Section 15(b)(6) of the Exchange Act. See Section 3(a)(18) of the Exchange Act.


World Markets is a New York-based broker-dealer subsidiary of CIBC. World

Markets, through its CIBC Oppenheimer retail division, serviced high-net-worth individuals,

money managers, and small corporations, including market timing hedge funds. In January 2003, World Markets sold its Oppenheimer retail division to Fahnestock & Co., Inc. (“Fahnestock”). World Markets is registered with the Commission as both a broker-dealer and investment adviser.

C. Facts


Document info
Document views30
Page views30
Page last viewedFri Oct 21 17:19:25 UTC 2016