R.S.O. 1990, c.S.5, AS AMENDED


1.1 Staff of the Ontario Securities Commission ("Staff") and Altamira Management Ltd. ("Altamira") agree that the statement of facts set out herein is correct.

1.2 The matters leading up to the issuance of this Notice of Hearing arose from a referral by The Toronto Stock Exchange ("TSE") to the Staff at the end of1994.

1.3 As a result of the referral by the TSE, Staff reviewed trading in the common shares (the "Dorset shares") of Dorset Exploration Ltd. ("Dorset") by accountsmanaged by Altamira during the period April 1, 1993 to October 31, 1994 (the "Period"). Altamira cooperated fully and voluntarily with the Staff in its review.This cooperation included providing the Staff with any and all documents that were requested, meeting with the Staff on several occasions voluntarily to providethem with information relating to the trading review, responding to any questions or concerns and generally dealing promptly and responsibly with matters raisedby the Staff.

1.4 The purpose of Staff's review was to determine whether there were circumstances that might raise concerns about Altamira's trading in Dorset shares.

1.5 Staff acknowledges that Altamira has not been the subject of any previous proceedings before the Commission.

1.6 Staff and Altamira agree that they have entered into this agreement in order to resolve any remaining concerns which the Staff may have had as a result of itsreview of Altamira's trading practices.


2.1 Staff of the Commission ("Staff") agrees to recommend a full and final settlement of the proceedings initiated in respect of Altamira in accordance with theterms and conditions set out below. Altamira agrees to the making of an order against it as hereinafter provided.

2.2 Staff and Altamira agree that if, as and when settlement is approved by the Commission, this settlement agreement (the "Settlement Agreement") and theorder of the Commission, a draft of which is attached hereto as Schedule "F" will be released to the public.



3.1 Altamira is a corporation incorporated pursuant to the laws of Ontario. Altamira has established and is the investment manager for a family of 27 no-loadmutual funds known as the Altamira Funds. In such capacity Altamira is a "market participant" as that term is defined in subsection 1(1) of the Securities Act,R.S.O. 1990 c.S.5., as amended (the "Act").

3.2 Altamira has over 200 institutional accounts. As at December 31, 1996 the aggregate market value of the advisory and managed assets managed by Altamiraand its subsidiaries was approximately $17 billion.


3.3 At all material times, various accounts managed by Altamira held common shares of Dorset. Dorset carries on an oil and gas exploration business and is areporting issuer in Ontario. The common shares of Dorset (symbol DXL) are listed and posted for trading on the TSE. As of December 31, 1992, Dorset hadapproximately 25 million common shares outstanding. During the period between December 31, 1992 and December 31, 1994, approximately 3 millionadditional common shares were issued.

3.4 In April, 1993 various accounts managed by Altamira held approximately 5 million Dorset shares in aggregate. By late 1993, this position had increased toapproximately 8 million Dorset shares. Altamira's trading records disclose that its managed accounts were net sellers of the Dorset shares between September,1993 and October, 1994. Significant dispositions of Dorset shares were transacted in September, 1993, March 1994 and September - October, 1994. By October31, 1994, the aggregate position of Altamira's managed accounts in Dorset shares had been reduced to just over 2 million shares.

3.5 Dorset shares traded from a range of $12 in early 1993 to a high of $19.50 in June 1993. After June 1993 Dorset shares began a gradual decline to $19 inOctober 1993 before declining to a low of $8 in December of 1994. There were particularly sharp declines in September and October 1993 and in January andSeptember of 1994.

Attributes of the Purchases and Trades of Dorset Shares by Altamira

3.6 During the Period, Altamira traded in Dorset shares in a number of different managed accounts. In aggregate Altamira traded Dorset more than 1,400 timesduring the Period which is consistent with its active trading in Dorset and other securities.

3.7 Accounts managed by Altamira completed the final daily trade in Dorset shares at a price in excess of the previous trade on 137 of the 304 days on whichAltamira's managed accounts traded in the securities during the Period. Altamira thereby established the closing price for Dorset shares on the "up-tick" on thesedates. On at least 50 occasions, these "up-ticks" were effected by low volume trades of less than 500 Dorset shares.

3.8 On 17 additional trading days during the Period, Altamira transacted the second to last trade of the day at a price in excess of the previous trade incircumstances where the subsequent final trade of the day was transacted at the same price. In such circumstances, Altamira also in effect, established the dailyclosing price for the shares.

3.9 Of the 137 final daily trades discussed in paragraph 3.7, 64 were executed on the "up-tick" that established the "high" price for the day or a price that washigher than the close of the preceding day.

3.10 Of the 137 final daily trades discussed in paragraph 3.7 the remaining 73 were executed on the "up-tick" at a price that did not exceed the previous day'sclosing price (or the current day's opening price). These trades, however, had the effect of reversing a decline in the trading price of the shares that had occurredthrough third party trading during the day.

3.11 Attached as Schedules "A" and "B" are examples of trades in Dorset shares illustrating (a) the "up-ticks" described in paragraph 3.9 above; and (b) the"up-ticks" described in paragraph 3.10 above.

3.12 Forty-five of Altamira's orders to purchase Dorset shares (434,000 shares in aggregate) were filled by sell orders of other Altamira accounts (known as"cross trades"). These trades were reported through the TSE by one of its member firms in accordance with exchange requirements. Over half of these crosstrades among Altamira accounts (examples of which are set out on Schedule "C") were "up-tick" transactions establishing a closing price that exceeded the valueof the second to last trade of the day. Percentage of Ownership and Trading

3.13 During the Period, Altamira accounts in aggregate held as much as 29% of the outstanding Dorset shares and accounted for 54% of the total volume oftrading in Dorset shares. These trades were executed through various members of the TSE. No single Altamira mutual fund ever held more than 10% nor did thefamily of Altamira mutual funds ever hold, in aggregate, more than 20% of the outstanding voting shares of Dorset during the Period.

3.14 During the Period there were 394 trading days. Altamira traded in Dorset shares for its managed accounts on 304 of these days. On 58 of these daysAltamira accounts were responsible for 90% or more of one side of the trading volume.


4.1 For purposes of this settlement, Staff accepts that it was not Altamira's intention to mislead or to manipulate the market for Dorset shares.

4.2 Staff contends that the large number of purchase transactions observed in which Altamira accounts acquired Dorset shares on the "up-tick" at or near theclose of trading contravened the public interest because such trades can give a misleading impression of the value of publicly-traded securities (such as the Dorsetshares) to investors and other market observers.

4.3 The internal cross trades (between related funds) on the "up-tick", that Staff observed, give rise to a concern as to the establishment of the price at whichthese trades were executed. Staff contends that such transactions should be priced strictly in accordance with independently negotiated market transactions (suchas prior trades between third parties) and should not be made at prices that are decided upon "in-house". In the view of Staff, such transactions may bemisleading to securities advisers, salesmen and the public concerning the negotiated value of the shares because they are reported through the TSE's marketinformation system. Given the small volume of many of the internal crosses made staff questions whether the trades were effected solely to shift positions amongAltamira managed accounts.

4.4 Staff is further concerned about the level of market dominance that Altamira exhibited in its trading in Dorset shares. In the view of Staff, such dominancecan skew the trading value of securities and may also impair liquidity.

4.5 Staff considers that Altamira's trading in the Dorset shares may have had the effect of misleading market observers and the public as to the closing value ofthe Dorset shares on many of the trading days during the Period.


5.1 With respect to the up-tick trades referred to in Part III, in Altamira's view, there is nothing inherently inappropriate about an "up-tick" if the purchase ismade within the context of the market (the bid and ask). According to Altamira all of its trades in Dorset shares during the Period were within the bid/ask spread.

5.2 In the view of Altamira, institutional investors engage in market transactions to enhance the overall value of assets under management. In some cases this willinvolve longer term "buy and hold" investment strategies. While in other cases this will involve shorter term trading strategies. The objective of these shorterterm strategies is to take advantage of superior research, market analysis or market volatility to make incremental gains on specific trades over a short period oftime. These strategies are influenced by a variety of factors such as market conditions, industry and company specific information, and the trading activity ofother market participants. Altamira states that its trading in Dorset shares was for the benefit of its clients.

5.3 In some cases these strategies may involve small volume purchases to avoid signaling a buying interest which may push up the price of the securities to beacquired. In other situations, in order for Altamira to accumulate securities, it may take out the offer, which incidentally up-ticks the security, but which alsoencourages others to offer their securities for sale.

5.4 Altamira further states that it was difficult to avoid the purchase of small quantities of securities at the end of the day on the up-tick if the subject securitiesare relatively thinly traded and a large institutional investor accounts for more than 50 percent of the volume of the trading in the securities. As stated, in thepresent circumstances, Altamira accounted for more than 54 percent of the total trading in the Dorset shares during the Period.

5.5 Dorset shares are a thinly traded security. While average daily trading in Dorset shares on the TSE in 1994 was approximately 104,000 shares compared with112,000 shares for the average TSE 300 security, this average figure for trading in Dorset shares is skewed to the high side because of a few days of abnormallyhigh trading. As evidence of the lack of trading, on some days during the Period no Dorset shares traded on the TSE, while on other days during the Periodvolumes were as low as a few hundred shares.

5.6 Dorset shares traded from a range of $12 in early 1993 to a high of $19.50 in June 1993. After June 1993 Dorset shares began a gradual decline to $19 inOctober 1993 before declining to a low of $8 in December 1994. There were particularly sharp declines in September and October 1993 and in January andSeptember 1994.

5.7 Coinciding with these declines in stock price was a drop in the price of oil from $19 (U.S.) to $14 (U.S.) in the fall of 1993; poor financial results for thefourth quarter of 1993, which were released in January 1994; and the announcement of poor summer drilling results in September 1994.

5.8 As to Staff's concern related to this level of trading, Altamira states that given the increasing dominance of large institutional investors in the Canadian capitalmarkets, it is not unusual for situations of trading concentration to arise in thinly traded securities such as Dorset. This is simply a feature of the Canadianmarketplace.

5.9 Altamira engages in cross trades between managed accounts for a number of legitimate reasons, including because such trades are an efficient and costeffective way of shifting positions between accounts to meet the changing investment requirements of the accounts.

5.10 At the beginning of 1993 Altamira managed accounts held a large cumulative position in Dorset of approximately 7.5 million shares. From Altamira'sperspective there were a number of reasons for the size and concentration of its investment, including:

(i) prospects for the company were favourable;

(ii) the company was a low cost exploration company with little debt and with a pattern of increasing production and revenues; and

(iii) the stock was favoured by a number of independent research analysts.

5.11 In Altamira's view, its trading activity in Dorset shares, while substantial, had no material effect on the price of Dorset shares. The price of Dorset shares fellsubstantially during the Period, and according to Altamira this price activity related directly to Dorset's performance and the price of oil. As the price of Dorsetshares declined, so too did the value of Altamira's position in Dorset shares.

5.12 Altamira has not received any complaints from any person indicating that they have been harmed or misled by Altamira's trading in Dorset shares.

5.13 Altamira acknowledges that, while unintended, certain of the trades described herein may have been contrary to accepted TSE trading practices and certainof the TSE's policies concerning trading at the end of the day.

5.14 Altamira also says, however, that trading at the end of the day has been the subject of considerable policy review and discussion by the TSE, most recentlygiving rise to the TSE notice to members number 96-015 dated January 5, 1996. Altamira also notes that "high" and "low" closings due to program trading andnormal market trading are very common and the TSE in the past has published warnings to its members to monitor such trading activity. Even though Altamira isnot a TSE member, Altamira believed, at all material times herein, that it was complying with the requirements of the TSE and all other regulatory requirementsconcerning its trading practices at the end of the day. Altamira now recognizes that certain of its trading activities may have been inconsistent with acceptabletrading practices.

5.15 Altamira has developed trading procedures which deal with the process of entering orders with brokers and with the aim of avoiding the placement oforders that are contrary to TSE trading rules. These procedures include:

(i) the daily monitoring of trades by compliance personnel to ensure that end of day market transactions comply with TSE rules;

(ii) the preparation and distribution of daily control reports which detail any unusual trades and possible violations;

(iii) a requirement that all crosses be pre-cleared by compliance personnel and priced off of the last independent trade in the market; and

(iv) the implementation of electronic surveillance systems to monitor unusual trading patterns by Altamira.

5.16 Altamira has prepared a trading procedures manual to which all Altamira trading staff must agree to adhere to and which contains the procedures outlinedabove.

Altamira Advisory Council Review of Altamira's Trading Procedures

5.17 As part of this settlement, Altamira consented to a review of its trading practices and procedures by the Altamira Advisory Council (the "Council"), anindependent council established to monitor the interests of Altamira's unitholders. The Council is chaired by Stanley Beck, former chairman of the Commission.The Council retained Mr. Charles Caty, a former Chairman of the Investment Dealers' Association, to report to it on such trading practices. Mr. Caty focussedhis review on the Altamira trading and procedures manual, which Altamira voluntarily developed during the course of Staff's review of the trading in Dorsetshares. Mr. Caty carried out his review pursuant to the terms of reference set out in Schedule "D" hereto and prepared a report "(the "Report") setting out hisrecommendations. A copy of the Report is attached as Schedule E.


6.1 Altamira agrees to make a voluntary payment of $75,000 to the Government of Ontario to defray the Commission's review costs.

6.2 Altamira agrees to an order of the commission under section 127(4) to implement the changes recommended by the Council in the Report.

6.3 Altamira consents to a reprimand by the Commission under clause 6 of subsection 127(1) of the Act.


7.1 Altamira hereby consents to an order in the form attached as Schedule "F".


8.1 If the Commission accepts the Settlement Agreement, Staff will not initiate any complaint to the Commission or request that the Commission hold a hearingor issue any order in respect of any conduct or alleged conduct of Altamira in relation to facts set out in Part III of the Settlement Agreement or the subjectmatter of this trading review.

8.2 If the Commission accepts the Settlement Agreement, Staff will not initiate any prosecutions or other proceedings against Altamira in respect of allegedbreaches of the Act in relation to the facts set out in Part III of the Settlement Agreement.


9.1 The approval of the settlement as set out in the Settlement Agreement shall be sought at a public hearing before the Commission on a date to be agreed to byStaff and Altamira, in accordance with the procedures described herein and such further procedures which may be agreed upon between Staff and Altamira.

9.2 If the Settlement Agreement is approved by the Commission, it will constitute the entirety of the evidence to be submitted respecting Altamira in this matter,and Altamira agrees to waive its rights to a full hearing and appeal of this Hearing.

9.3 Staff and Altamira agree that if the Settlement Agreement is approved, they will not make public statements that are inconsistent with the SettlementAgreement.

9.4 If the Settlement Agreement is not approved by the Commission:

(a) Staff and Altamira will each be entitled to all available remedies and challenges, including, proceeding to a hearing of the allegations in the Notice of Hearingand Statement of Allegations, unaffected by this Settlement Agreement or the settlement negotiations;

(b) The terms of the Settlement Agreement will not be raised in any other proceeding or disclosed to any person except with the written consent of Altamira andStaff or as may be otherwise required by law; and

(c) Altamira further agrees that it will not raise in any proceeding the Settlement Agreement or the negotiation or process of approval thereof as the basis for anyremedies in or challenges to this proceeding that may otherwise be available.

9.5 If, prior to the approval of this settlement, there are new facts or issues of substantial concern, in the view of Staff, regarding Altamira or the facts set out inPart III of the Settlement Agreement, Staff will be at liberty to withdraw from the Settlement Agreement. Notice of such intention to withdraw will be providedto Altamira in writing. In the event of such notice being given, the provisions of paragraph 9.4 will apply as if the Settlement Agreement had not been approvedin accordance with the procedures set out herein.


10.1 The terms of the Settlement Agreement will be treated as confidential by all parties hereto until approved, and forever if, for any reason whatsoever, theSettlement Agreement is not approved by the Commission.

10.2 Any obligations as to confidentiality shall terminate upon the approval of this Settlement Agreement by the Commission.


11.1 The Settlement Agreement may be signed in one or more counterparts which shall constitute a binding agreement.

Dated this 12th day of September 1997.


"Teresa Messina" "Peter Rizakos"

"Jeff Norman" "Brenda Eprile"

Schedule A
Date Time Price BuyingBroker Volume Tick Comment
Previous day's close$10.50 Today's open $10.00
Mar 1.94 15.40 10.00 79 1200 0-
15.55 10.125 79 500 1+
HI - 10.25 15.55L 10.25 79 500 1+
LO - 10.00
Total Volume = 6560
AML Buy =2200 Sell =NIL
Date Time Price BuyingBroker Volume Tick Comment
Previous day's close $9.75 Today's open $9.00
Mar 3.94 15.58 8.875 7 2500 0-
15.58 9.00 7 3200 1+
HI - 9.00 15.59 9.00 7 1700 0+
LO - 8.875 15.59L 9.25 7 800 2+ cleared 9.00offering
Total Volume = 92,930
AML Buy - 48,250 Sell = 40,000
Date Time Price BuyingBroker Volume Tick Comment
Previous day's close$12.25 Today's open $12.25
June 22.94 10.58 12.25 80x 167,400 takes out offering
14.31 12.375 77 4,000 1+ up 0.25 from
HI - 12.50 15.19L 12.50 2(Quantex) 200 1+ preceding close
LO - 12.25
Total Volume = 174,158
AML Buy - 54,200 Sell =NIL
Date Time Price BuyingBroker Volume Tick Comment
Previous day's close$11.875 Today's open$11.875
July 12.94 9.54 11.50 85indep 100 -3 trading opened
14.45 11.875 39(Quantex) 200 3+ with AML
HI - 12.00 15.20 11.625 79 300 -2 purchase at 11.875by
LO - 11.875 15.38 12.00 77 1000 3+ 77 of 1000 and day
ended with same
Total Volume = 2640 but at a new high
AML Buy -2200 Sell =NIL
Schedule B
Date Time Price BuyingBroker Volume Tick Comment
Previous day's close$10.50 Today's open $10.00
Mar 2.94 15.30 9.50 7 500 4+
15.30L 9.75 7 200 2+
HI - 10.00
LO - 9.00
Total Volume = 27,700
AML Buy -2200 Sell = -
Date Time Price BuyingBroker Volume Tick Comment
Previous day's close $9.25 Today's open $9.25
Mar 4.94 15.39L 9.25 2(Quantex) 175 2+ DFI bought 150 at
opening at 9.25
HI - 9.25 At close Quantex
LO - 9.00 took 100 from
Total Volume = 35425
AML Buy - 325 Sell = -
Schedule C
Date Time Price BuyingBroker Volume Tick Comment
Previous day's close$17.00 Today's first trade $17.50
Sept 22.93 13.11 17.25 2000 0+
14.05 17.125 81 300 -1
HI -17.50 16.00L 17.375 80x 300 2+
LO - 17.00
Total Volume = 17,722
AML Buy - 13,000 Sell =300
Date Time Price BuyingBroker Volume Tick Comment
Previous day's close$13.00 Today's first trade $13.00
Jan 17.94 11.51 13.00 RT 300 0-
12.13 13.000 indep 400 0-
HI -13.375 15.58L 13.375 80x 6300 3+
LO - 13.000
Total Volume = 28,940
AML Buy -6,300 Sell = 6300
Date Time Price BuyingBroker Volume Tick Comment
Previous day's close$10.75 Today's first trade $11.00
April 6.94 12.53 11.00 indep 100 2+
14.47 11.000 77 2,000 0+
HI -11.125 15.59L 11.125 2(Quantex) 1800 1+
LO - 11.00
Total Volume = 4300
AML Buy -3800 Sell = 1800
Date Time Price BuyingBroker Volume Tick Comment
Previous day's close$11.00 Today's first trade $11.00
April 20.94 15.23 10.75 7 1,000 2+
15.23 10.75 7 500 0+ (entered by
HI -10.00 15.25 11.00 2(Quantex) 300 2+ AML)
LO - 10.50
Total Volume = 1950
AML Buy -1800 Sell =300

Schedule D

Terms of Reference

These Terms of Reference for a review of trading procedure and supervision in effect at Altamira Management Ltd. ("Altamira") were set down as part of thesettlement agreed between Altamira and Commission Staff under section 127 of the Act.

The review by the Independent Council is to include both a description of present practice and also recommendations for any changes that the IndependentCouncil determines to be advisable. The review shall result in the preparation of a procedural manual for Altamira portfolio managers and trading Staff.

The subjects for review shall include:

A. Organization Chart/Supervisory Responsibility

B. Entering Orders

- Giving Orders to Brokers

- Using Altamira Investment Services

- Using Quantex (and other Electronic Communication Networks)

C. Checking progress of orders and completed transactions.

D. Avoiding manipulative or misleading placement of orders:

- Orders at the opening

- Up-ticking and high closes

- Internal crosses

E. Identification of the Type of practices that could have the effect of creating a misleading market.

F. Documenting trades that may be questioned by regulators.

G. Periodic Review of Transactions

- Daily

- Monthly