Securities regulators in Ontario sanctioned the former directors and underwriters of YBM Magnex International in a stock disclosure case dating back three-and-a-half years.

The Ontario Securities Commission fined a pair of brokerages and ordered that five of 10 former directors of YBM should be barred from serving on the boards of other public Canadian firms for anywhere from three years to indefinitely.

The two brokerages – National Bank Financial, formerly known as First Marathon Securities Ltd., and Griffiths McBurney & Partners – were each hit with $400,000 fines to cover the regulator's investigation costs.

Adding in the penalties levied against the former directors of the company, the OSC handed out a total of $1.2 million in fines.

YBM's board included David Peterson, the former premier of Ontario. The OSC did not sanction Peterson but said he should have shown more leadership.

"While Peterson meets the legal test of due diligence, the panel remains disappointed that he did not offer more insight and leadership to the board in these circumstances," the OSC said as it released its decision.

YBM president and CEO Jacob Bogatin and director Igor Fisherman received the stiffest penalty. Both have been permanently barred from acting as directors or executives.

Former director Owen Mitchell received a five-year ban and was fined $250,000.

Kenneth Davis and Harry Antes, both outside directors on the company's board, were each hit with a three-year ban and a $75,000 fine.

In allegations released in November 1999, the OSC said YBM and its advisors failed to disclose that U.S. authorities were investigating the firm for money-laundering and ties to the Russian mob before it began raising money on the Toronto Stock Exchange in 1997.

YBM was incorporated in Alberta in 1994 and listed on the TSE in 1996, trading until its halt in May 1998, when the FBI raided YBM's offices in the U.S.

The OSC said the company a preliminary prospectus dated May 30, 1997, and a final prospectus dated Nov. 17, 1997, that failed to contain "full, true and plain disclosure of all material facts relating to the securities offered."

Documents filed in a U.S. court suggested that Canada was chosen for the scam because company officials believed securities regulations here are more lenient.

Peterson, now a partner with a prominent Toronto law firm, denied at the time that directors of the company knew about a police investigation.

When trading in its shares was halted, the company had raised about $890 million – and Canadian individuals and institutional investors had ended up with 40 per cent of the company's shares.

Unable to trade its shares, YBM went into receivership.

National Bank Financial said it accepts the OSC decision and is pleased to put the case behind it.

"A number of policies, procedures and resources have been in place for some time to address issues that arose in this matter," the brokerage said.

"Additionally, all compliance operations are under the oversight supervision of a board-level compliance committee that is composed exclusively of independent directors," the firm said.