David Berry Saga Continues

The story so far … David Berry was an extremely successful preferred share trader at Scotia, made all kinds of money for them and took a large chunk of it home.

Then things went sour and you can take your choice of stories:

(i) Scotia found out that he was being naughty and fired him

(ii) Scotia decided they were paying him too much and made mountains out of regulatory molehills to avoid paying severance when they fired him

Berry now has a $100-million-plus lawsuit outstanding against the bank, which has now filed a statement of defense:

The 18-page statement said “Berry engaged in serious misconduct in his trading, including violating securities rules.”

“He successfully hid his conduct from Scotia for a period of time. His misconduct breached fundamental terms of his employment with Scotia and was just cause for his termination.”

It also says that from “June, 2004, through April, 2005, RS requested that Scotia provide information to it in respect of specific trades Berry had made.”

In May, 2005, the statement said RS issued a “warning letter to Berry in respect of the specific trading it had reviewed. While RS determined at that point that there was insufficient evidence to support breaches and so no formal proceedings were commenced, RS specifically warned Berry that it was concerned about a particular instance of trading ‘as it contains elements of manipulative and deceptive trading …’ “

Mr. Berry was suspended on June 20. The statement said that on that day there were “18 trading transactions that did not comply with UMIR [uniform market integrity rules].”

RS has yet to file any allegations against Mr. Berry.

Today’s Financial Post has a summary of the differences between the parties.

I have no idea where the truth lies. It would not surprise me to learn that a trader bloated with hubris and a desire to execute his clients’ wishes to earn a fat fee would break some rules. It would also not surprise me to learn that Scotia put an army of lawyers on the paperwork and ecstatically screamed “Gotcha!” when it found an uncrossed T.

For the duration of his tenure as King of Pref Traders, Berry was blessed with huge amounts of capital. You could call Scotia at any time of the trading day and ask to know a price for any block of any size of any preferred and a price would be put on it. An extremely lousy price, way off market, to be sure, but a price at which you could trade – instantly.

2 Responses to “David Berry Saga Continues”

  1. johnross says:

    This unfortunately is a terrible example of the power Canadian Banks have over all of us in this country. Dave Berry as an employee at the Bank and made the bank 4x’s what they paid Dave. If a problem existed with his trading habits in the past, then before they ask for a cent back from Dave and his bonus they should return the 100’s of millions of dollars Dave made the bank in profits during this period. For the crap Dave has been put through, I hope he’s awarded every cent he made the bank during this period and that people think twice before supporting any channel of Scotiabank. If this was sports, would you not honour Gretky’s contract after he was the League MVP and made your franchise 10x’s more then your next best player b/c you felt his contract was too much?
    On a secondary note, please also keep in mind that regardless how much money he’s made for himself, how about the negative crap they have put in the papers about him that his friends and family have to defend? I’m glad I found this site, I hope after you’ve read this comment you’ll pull all your financial support away from Scotia until they do the right thing and remove the people giving them a negative perception.

  2. […] Regulation Services has released a Settlement Agreement between itself and Scotia Capital regarding the continuing David Berry Saga: Specifically, in the Relevant Period, Berry and McQuillen solicited 39 client orders in 16 new issues during the distribution period at the distribution price. In respect of 15 of the solicitations, on or about the first day of trading, Berry and McQuillen conducted off-marketplace trades in the newly listed shares by selling them short from the Inventory Account at the distribution price. In respect of 24 of the solicitations, the trades to clients from the Inventory Account took place before the security was listed, in the “grey market.” Berry and McQuillen covered their short positions in the Inventory Account by buying shares in the marketplace. The majority of the new issues shares involved in the trading traded in the secondary market at prices lower than the distribution price paid by clients and never reached the distribution price before the short positions in the Inventory Account were covered. The profit to the Inventory Account from shorting the shares was $731,959.00, of which Berry received 20% ($142.792.00) and Scotia Capital received 80% ($571,161.00).  […]

Leave a Reply

You must be logged in to post a comment.