Clients with 12,000 accounts at Rampart Securities Inc. branches across the country had their money frozen yesterday after market regulators alleged that the troubled retail stock brokerage didn't have enough capital to keep running.
The Investment Dealers Association of Canada suspended Rampart from its ranks yesterday and ordered the firm to stop doing business with investors, who sources say likely have several million dollars at the firm.
IDA officials said they were "working with provincial securities commissions to identify appropriate arrangements on behalf of clients of Rampart."
Late yesterday, the Ontario Securities Commission followed the IDA moves by suspending Rampart's registration. It "cease-traded" the company so Rampart could no longer do business with other brokerages. In addition, the OSC froze all client assets under Rampart's control for at least seven days.
IDA and OSC officials would not say how much money investors had entrusted to Rampart, and executives at the brokerage house did not return calls yesterday. Several sources said that, while many clients had pulled their savings in recent weeks, there were still millions of dollars in Rampart accounts.
Some clients at Rampart are former clients of bankrupt penny stock dealer Marchment & Mackay Ltd., who lost access to their money for more than a year after the company shut in 1999. Those accounts were reopened last August.
Market regulators have been examining Rampart's operations for several months. Two weeks ago, the IDA announced that four of the company's senior executives faced hearings on allegations of "systemic failures as well as sales compliance and regulatory capital deficiencies."
The IDA documented nine cases of Rampart Securities being undercapitalized over the past five years, with the shortfalls ranging from $211,000 to $12.4-million.
Yesterday, an IDA official said that as regulatory staff went through Rampart's books, "it became clear we just couldn't rely on their reporting."
Dominique Monardo, president and chief executive officer of parent company Rampart Mercantile Inc., has disputed the IDA's allegations and says all is well at his firm. In a press release two weeks ago, he maintained that, as recently as June, the brokerage house had more than $6-million in capital.
Rampart has three retail offices in Toronto, and five other branches in Alberta, Quebec and New Brunswick.
Two weeks ago, Rampart saw a proposed merger with BayStreetDirect.com fall apart over the regulatory issues. That deal would have seen Rampart receive a substantial cash injection.
Rampart executives face an IDA hearing on Sept. 10 in Toronto.
Rampart Securities opened its doors in 1962 under the name N.L. Sandler Ltd. The founder was Nat Sandler, and the company's Web site notes "he became the first Jewish person to gain Toronto Stock Exchange membership." From the 1970s until 1998, the firm operated under the name Merit Investment Corp.
The brokerage house is now a subsidiary of Rampart Mercantile Inc., a publicly traded corporation, which trades under the symbol YRH on the Canadian Venture Exchange. The stock was halted yesterday.
Andrew Willis