The head of a Canadian fund management company which used a Bermuda subsidiary and Bank of Bermuda services to operate has been reprimanded by the Ontario Securities Commission for losing investors more than $120 million after one of the company's hedge funds collapsed.

The Phoenix Fixed Income Arbitrage Limited Partnership (PFIA) collapsed in January 2000 after Phoenix Canada, the fund manager, discovered that one of its fixed income traders accumulated $3.3 billion of US Treasury notes, but did not hedge them to reduce exposure to a downturn, in violation of the fund's investment guidelines. The fund ran a $50 million overdraft position at the Bank of New York and the fund was forced to liquidate its assets.

The staff of the commission, which drew up a settlement agreement, alleged that the company's chair, Mark Kassirer, failed to adequately monitor the business of Phoenix Canada.

The Bank of Bermuda was the fund's administrator, providing accounting and other support services based on figures provided by Phoenix. Commission documents said Phoenix reported incorrect information to the Bank of Bermuda and Phoenix Bermuda, a local subsidiary which allowed the company to process transactions through Bermuda.

As part of the settlement, Kassirer Asset Management Corporation, an investment company of which Kassirer is the sole officer, was ordered to submit documentation of its current controls and procedures respecting its trading and accounting systems for review by Deloitte & Touche and fix any deficiencies by October 31. Kassirer was also ordered to pass the Partners, Directors and Officers examination to maintain his registration with the commission and pay $10,000 for the cost of the commission's investigation.