Ontario Securities Commission Bulletin
Issue 43/40 - October 01, 2020
Ont. Sec. Bull. Issue 43/40
• Epix Resource Finance Corporation
• Evolution Mentor Capital Inc. and Pasqualino (Patrick) Michael Mazza
• Pembroke Private Wealth Management Ltd. and Pembroke Concentrated Fund
• Donald Bruce Wilson -- ss. 127(1), 127(10)
• Epix Resource Finance Corporation
• Evolution Mentor Capital Inc. and Pasqualino (Patrick) Michael Mazza -- ss. 127(8), 127(1)
• Temporary, Permanent & Rescinding Issuer Cease Trading Orders
• Temporary, Permanent & Rescinding Management Cease Trading Orders
• Nasdaq CXC Limited -- Notice of Proposed Changes and Request for Comment
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FOR IMMEDIATE RELEASE
September 23, 2020
TORONTO -- The Commission issued its Reasons and Decision and an Order pursuant to Subsections 127(1) and 127(10) of the Securities Act in the above named matter.
A copy of the Reasons and Decision and the Order dated September 22, 2020 are available at www.osc.gov.on.ca.
For Media Inquiries:
For General Inquiries:
FOR IMMEDIATE RELEASE
September 24, 2020
TORONTO -- Take notice that a First Attendance in the above named matter is scheduled for October 2, 2020 at 10:00 a.m.
For Media Inquiries:
For General Inquiries:
Epix Resource Finance Corporation
FOR IMMEDIATE RELEASE
September 25, 2020
TORONTO -- The Commission issued an Order in the above named matter.
A copy of the Order dated September 25, 2020 is available at www.osc.gov.on.ca.
For Media Inquiries:
For General Inquiries:
FOR IMMEDIATE RELEASE
September 25, 2020
TORONTO -- Take notice that the hearing with respect to the hearing and review in the above named matter scheduled to be heard on September 29 and 30, 2020 will not take place as scheduled, and will proceed by way of an attendance only on September 30, 2020 at 10:00 a.m.
For Media Inquiries:
For General Inquiries:
Evolution Mentor Capital Inc. and Pasqualino (Patrick) Michael Mazza
FOR IMMEDIATE RELEASE
September 28, 2020
TORONTO -- The Commission issued an Order in the above named matter.
A copy of the Order dated September 28, 2020 is available at www.osc.gov.on.ca.
For Media Inquiries:
For General Inquiries:
FOR IMMEDIATE RELEASE
September 29, 2020
TORONTO -- The Commission issued an Order in the above named matter.
A copy of the Order dated September 28, 2020 is available at www.osc.gov.on.ca.
For Media Inquiries:
For General Inquiries:
Pembroke Private Wealth Management Ltd. and Pembroke Concentrated Fund
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted from 15.3(2), 15.6(1)(a)(i) and 15.6(1)(d) of NI 81-102 to permit a mutual fund, that has not distributed securities under a simplified prospectus in a jurisdiction for 12 consecutive months, to include in their sales communications performance data for the period when the fund was not a reporting issuer -- relief also granted from section 2.1 of NI 81-101 for the purposes of the relief requested from Item 5 of Part I of Form 81-101F3, to permit the mutual fund to include in its fund facts, the past performance data for the period when the fund was not a reporting issuer.
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted from section 4.4 of NI 81-106 for the purposes of the relief requested from Form 81-106F1, items 3.1(7), 4.1(1), 4.1(2), 4.2(1), 4.3(1) and 4.3(2) of Part B of Form 81-106F1, and Items 3(1) and 4 of Part C of Form 81-106F1, to permit a mutual fund to include in annual and interim management reports of fund performance the financial highlights and past performance of the fund that are derived from the fund's annual financial statements that pertain to time periods when the fund was not a reporting issuer.
National Instrument 81-102 Investment Funds, ss. 15.3(2), 15.6(1)(a)(i), 15.6(1)(d) and 19.1.
National Instrument 81-101 Mutual Fund Prospectus Disclosure, s. 2.1.
Form 81-101F3 Contents of Fund Facts Document, Item 5 of Part I.
National Instrument 81-106 Investment Fund Continuous Disclosure, s. 4.4.
Form 81-0106F1 Contents of Annual and Interim Management Report of Fund Performance, Items 3.1(7), 4.1(1), 4.1(2), 4.2(1), 4.3(1) and 4.3(2) of Part B and Items 3(1) and 4 of Part C.
March 30, 2020
The securities regulatory authority or regulator in each of the Jurisdictions (the Decision Maker) has received an application (the Application) from the Filer on behalf of the Fund for a decision under the securities legislation of the Jurisdictions (the Legislation) exempting units of the Fund from:
a) Sections 15.3(2), 15.6(1)(a)(i) and 15.6(1)(d) of Regulation 81-102 respecting Investment Funds, CQLR, c. V-1.1, r. 39 (Regulation 81-102) to permit the Fund to include performance data in sales communications notwithstanding that:
i) the performance data will relate to a period prior to the Fund offering its securities under a simplified prospectus, and
ii) the Fund has not distributed its securities under a simplified prospectus for 12 consecutive months,
b) Section 2.1 of Regulation 81-101 respecting Mutual Fund Prospectus Disclosure, CQLR, c. V-1.1, r. 38 (Regulation 81-101) to meet the requirements from Form 81-101F3 Contents of Fund Facts Document (Form 81-101F3),
c) Items 5(2), 5(3) and 5(4) and Instructions (1) and (5) of Part I of Form 81-101F3 in respect of the requirement to comply with sections 15.3(2), 15.6(1)(a)(i) and 15.6(1)(d) of Regulation 81-102 to permit the Fund to include in its fund facts the past performance data of the Fund notwithstanding that:
i) such performance data relates to a period prior to the Fund offering its securities under a simplified prospectus, and
ii) the Fund has not distributed its securities under a simplified prospectus for 12 consecutive months,
d) Section 4.4 of Regulation 81-106 respecting Investment Fund Continuous Disclosure, CQLR, c. V-1.1, r. 42 (Regulation 81-106) from Form 81-106F1 Contents of Annual and Interim Management Report of Fund Performance (Form 81-106F1), and
e) Items 3.1(7) and 4.1(1) in respect of the requirement to comply with section 15.3(2) of Regulation 81-102, 4.1(2), 4.2(1), 4.3(1) and 4.3(2) of Part B of Form 81-106F1 and Items 3(1) and 4 of Part C of Form 81-106F1 to permit the Fund to include, in its annual and interim management reports of fund performance (MRFPs), past performance data notwithstanding that such performance data relates to a period prior to the Fund offering its securities under a simplified prospectus,
(collectively, the Exemption Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):
a) the Autorité des marchés financiers is the principal regulator for this Application,
b) the Filer has provided notice that section 4.7(1) of Regulation 11-102 respecting Passport System, CQLR, c. V-1.1, r. 1 (Regulation 11-102) is intended to be relied upon in Alberta, British Columbia, Prince Edward Island, Manitoba, New Brunswick, Nova Scotia, Saskatchewan and Newfoundland and Labrador (the Notified Passport Jurisdictions), and
c) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.
Terms defined in Regulation 14-101 respecting Definitions, CQLR, c. V-1.1, r. 3 and Regulation 11-102 have the same meaning if used in this decision, unless otherwise defined.
This decision is based on the following facts represented by the Filer:
1. The Fund is an open-ended mutual fund trust created under the laws of Ontario on January 31, 2018.
2. The Filer's head office is in Québec.
3. The Filer is registered under securities legislation in Quebec, Ontario and Newfoundland and Labrador as an investment fund manager and in Quebec, Ontario, Alberta, British Columbia, Prince Edward Island, Manitoba, New Brunswick, Nova Scotia, Saskatchewan and Newfoundland and Labrador as a dealer in the category of mutual fund dealer. The Filer is the investment fund manager, promoter and trustee of the Fund.
4. Pembroke Management Ltd., a registered portfolio manager in Quebec, Ontario, Alberta, British Columbia and Manitoba, has been appointed as the portfolio manager of the Fund. Since the Fund commenced operations, Pembroke Management Ltd. has been the portfolio manager of the Fund.
5. Units of the Fund were previously only distributed to investors in the Jurisdictions and Notified Passport Jurisdictions on a prospectus-exempt basis in accordance with Regulation 45-106 respecting Prospectus Exemptions, CQLR, V-1.1, r. 21.
6. In order to commence distributing its units pursuant to a simplified prospectus, the Fund filed on March 9, 2020 a preliminary simplified prospectus, a preliminary annual information form and preliminary fund facts. Upon the issuance of a receipt for the final simplified prospectus (the Prospectus), the Fund will become a reporting issuer in each of the Jurisdictions and the Notified Passport Jurisdictions and will become subject to the requirements of Regulation 81-102 and Regulation 81-106.
7. The Filer and the Fund are not in default of securities legislation in any of the Jurisdictions and the Notified Passport Jurisdictions.
8. Since the Fund commenced operations as a mutual fund, it has complied with its obligation to prepare and send audited annual and unaudited interim financial statements to all holders of its securities in accordance with Regulation 81-106.
9. Since the Fund commenced operations, it has complied with the investment restrictions and practices contained in Regulation 81-102, including not using leverage in the management of its portfolio.
10. Since the Fund commenced operations, the Fund has not paid any management fees to the Filer. Such fees have been paid directly by investors in the Fund, which will continue to be the case after the Fund becomes a reporting issuer.
11. The Fund will be managed substantially similarly after it becomes a reporting issuer as it was prior to becoming a reporting issuer. As a result of the Fund becoming a reporting issuer:
a) the Fund's investment objectives will not change, other than to provide additional detail as required by Regulation 81-101;
b) the day-to-day administration of the Fund in respect of its units will not change other than to comply with the additional regulatory requirements associated with being a reporting issuer (none of which impact the portfolio management of the Fund) and to provide additional features that are available to investors of mutual funds managed by the Filer, as described in the Prospectus; and
c) the intention of the Filer is to absorb expenses of the Fund to maintain the existing management expense ratio (MER) of the Fund at approximately the same level of the Fund prior to becoming a reporting issuer. Any such expense absorption may be discontinued in the future, however the Filer does not expect any material increase in MER once the absorption stops.
12. The Filer proposes to present the performance data of the Fund in sales communications and fund facts for a period prior to it becoming a reporting issuer.
13. Without the Exemption Sought, the sales communications and fund facts pertaining to the Fund cannot include performance data that relates to a period prior to the Fund becoming a reporting issuer.
14. Without the Exemption Sought, sales communications pertaining to the Fund would not be permitted to include performance data until the Fund has distributed securities under a simplified prospectus in a jurisdiction for 12 consecutive months.
15. The Filer proposes to include in the fund facts for the Fund past performance data in the chart required by items 5(2), 5(3) and 5(4) of Part I of Form 81-101F3 under the sub-headings "Year-by-year returns", "Best and worst 3-month returns" and "Average return" related to periods prior to the Fund becoming a reporting issuer in a jurisdiction.
16. Without the Exemption Sought, the MRFP of the Fund cannot include financial highlights and performance data that relates to a period prior to the Fund becoming a reporting issuer.
17. The past performance data and other financial data of the Fund for the time period before it became a reporting issuer is significant and meaningful information that can assist existing and prospective investors in making an informed decision whether to purchase units of the Fund.
18. The Filer submits that the Exemption Sought is not detrimental to the protection of investors.
Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.
The decision of the Decision Makers under the Legislation is that the Exemption Sought is granted provided that:
1. any sales communication and any fund facts that contain performance data of the Fund relating to a period prior to when the Fund was a reporting issuer discloses:
a) that the Fund was not a reporting issuer during such period;
b) that the expenses of the Fund would have been higher during such period had the Fund been subject to the additional regulatory requirements applicable to a reporting issuer; and
c) performance data of the Fund for 10, 5, 3 and one year periods when applicable;
2. the information contained under the heading "Fund Expenses Indirectly Borne by Investors" in Part B of the simplified prospectus of the Fund based on the MER for the Fund for the financial year ended December 31, 2019 be accompanied by disclosure that:
a) the information is based on the MER of the Fund for its last completed financial year when its units were offered privately; and
b) the MER of the Fund may increase as a result of the Fund offering its units under the simplified prospectus.
3. any MRFP that includes performance data of the Fund relating to a period prior to when the Fund was a reporting issuer discloses:
a) that the Fund was not a reporting issuer during such period;
b) that the expenses of the Fund would have been higher during such period had the Fund been subject to the additional regulatory requirements applicable to a reporting issuer;
c) that the financial statements of the Fund for such period are posted on the Fund's website and are available to investors upon request; and
d) performance data of the Fund for 10, 5, 3 and one year periods when applicable;
4. the Filer posts the financial statements of the Fund since it has commenced its operations on the Fund's website and makes those financial statements available to investors upon request.
National Bank Investment Inc. et al.
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted to mutual funds for extension of the lapse date of prospectus -- Extension will permit filer to include annual audited financial statements when prospectus is renewed -- Extension of lapse date will not affect the currency or accuracy of the information contained in the current prospectus.
Securities Act, R.S.O. 1990, c. S.5, as am., s. 62(5).
September 24, 2020
The securities regulatory authority or regulator in each of the Jurisdictions (each a Decision Maker) has received an application from the Filer on behalf the NBI ETFs for a decision under the securities legislation of the Jurisdictions (the Legislation) to permit the NBI ETFs to extend the time limits for the renewal of both the Non-Alternative NBI ETFs and the Alternative NBI ETF Prospectuses (collectively defined as the Prospectus) as if its lapse date was April 23, 2021 (the Exemption Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):
(a) the Autorité des marchés financiers is the principal regulator for this application;
(b) the Filer has provided notice that subsection 4.7(1) of Regulation 11-102 respecting Passport System (c. V-1.1, r. 1) (Regulation 11-102) is intended to be relied upon in the jurisdictions of Canada other than the Jurisdictions; and
(c) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.
Terms defined in Regulation 14-101 respecting Definitions (c. V-1.1, r. 3), Regulation 11-102, Regulation 41-101 respecting General Prospectus Requirements (c. V-1.1, r.14) (Regulation 41-101), Regulation 81-102 respecting Investment Funds (c. V-1.1, r. 39) (Regulation 81-102) and Regulation 81-106 respecting Investment Fund Continuous Disclosure (c. V-1.1, r. 42) (Regulation 81-106) have the same meaning if used in this decision, unless otherwise defined.
This decision is based on the following facts represented by the Filer:
The Filer
1. The Filer is a corporation amalgamated under the laws of Canada with its head office in Québec.
2. The Filer is registered as an investment fund manager in Québec, Ontario and Newfoundland and Labrador and as a mutual fund dealer in each of the jurisdiction of Canada.
3. The Filer is the investment fund manager of the NBI ETFs.
4. The Filer is not in default of securities legislation in any of the jurisdiction of Canada.
The NBI ETFs
5. Each NBI ETF is a mutual fund governed by the provisions of Regulation 81-102 and established under the laws of Ontario.
6. Securities of each NBI ETF are offered by long form prospectuses dated January 23, 2020 and prepared pursuant to Regulation 41-101 and Form 41-101F2 Information Required in an Investment Fund Prospectus, which are filed in one or more jurisdiction of Canada. Accordingly, each NBI ETF is a reporting issuer or the equivalent in one or more jurisdiction of Canada.
7. The NBI ETFs are not in default of securities legislation in any of the jurisdiction of Canada.
8. Pursuant to section 62(1) of the Securities Act (Ontario) (R.S.O. 1990, c. S.5) and section 17(2) of Regulation 41-101, the lapse date for the Prospectus is January 23, 2021 (the Current Lapse Date). In accordance with applicable securities legislation, the distribution of securities of NBI ETFs would have to cease on the Current Lapse Date unless (i) a pro forma prospectus is delivered not less than 30 days before the Current Lapse Date (i.e. by December 24, 2020); (ii) a final prospectus is filed no later than 10 days after the Current Lapse Date (i.e. by February 2, 2021); and (iii) a receipt for such final prospectus is obtained within 20 days of the Current Lapse Date (i.e. February 12, 2021).
9. Pursuant to sections 10.1(1), 10.1(1.1) and 10.1(2) of Regulation 41-101, the NBI ETFs must file a written consent provided by their auditor no later than February 2, 2021, 10 days after the Current Lapse Date.
10. The fiscal year-end of the NBI ETFs is December 31 and, pursuant to section 2.2 of Regulation 81-106, the annual financial statements and auditor's report are required to be filed on or before the 90th day after the NBI ETFs' most recently completed financial year, which for the NBI ETFs will be December 31, 2020 (the 2020 Fiscal Year-End).
11. Pursuant to section 4.3(1) of Regulation 41-101 and given the 2020 Fiscal Year-End, the NBI ETF's auditor will be required to review the NBI ETFs' unaudited interim financial statements (i.e. as at June 30, 2020).
Filing of Documents
12. The Filer must file annual financial statements for the NBI ETFs for the 2020 Fiscal Year-End by no later than March 31, 2021, which date is after the Current Lapse Date.
13. Considering the time required by the auditors and resources to prepare the Prospectus documents commencing from the 2020 Fiscal Year-End, the Filer submits that it is unworkable to have the Prospectus documents, including the auditor's written consent, audited financial statements and auditor's report, by February 2, 2021.
14. As audited financial statements will not be ready by the Current Lapse Date, the NBI ETFs currently will need to incorporate by reference unaudited interim financial information (as at June 30, 2020) into the Prospectus documents. In order to incorporate by reference the interim unaudited financial statements into the Prospectus documents, those interim unaudited financial statements must be reviewed by the NBI ETFs' auditor in accordance with the relevant standards set out in the Handbook of the Canadian Institute of Chartered Accountants for a review of financial statements.
15. Given that the audited financial statements of the NBI ETFs will be available no later than March 31, 2021, which is only a few weeks following the filing of the Prospectus documents pursuant to the Current Lapse Date, this review of the interim unaudited financial statements will incur time and expenses which will only be relevant for a short period of time.
16. Extending the Current Lapse Date to April 23, 2021 will provide the time necessary for the NBI ETF's auditor to complete the audit of the NBI ETF's financial statements for the 2020 Fiscal Year-End and provide its written consent as required by Regulation 41-101, and enable the Filer to renew the Prospectus and ETF Facts on a timeline that allows the inclusion of the most current audited financial information each year. In doing so, it will be more efficient and remove unnecessary financial burden on the NBI ETFs which is indirectly borne by the NBI ETFs securityholders.
17. There have been no material changes in the affairs of the NBI ETFs since the Prospectus dated January 23, 2020. Accordingly, the Prospectus and ETF Facts continue to provide accurate information regarding the NBI ETFs. Given the disclosure obligations of the Filer and NBI ETFs, should any changes occur, the Prospectus and ETF Facts would be amended accordingly.
18. The Filer submits that the Exemption Sought will not affect the reliability and accuracy of the information contained in the Prospectus and is not contrary to the public interest.
Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.
The decision of the Decision Makers under the Legislation is that the Exemption Sought is granted.
Donald Bruce Wilson -- ss. 127(1), 127(10)
File No. 2020-27
September 22, 2020
WHEREAS the Ontario Securities Commission (the Commission) held a hearing in writing to consider a request by Staff of the Commission (Staff) for an order imposing sanctions against Donald Bruce Wilson (Wilson), David Scott Wright (Wright) and Patrick K. Prinster (Prinster) (together, the Respondents) pursuant to subsections 127(1) and 127(10) of the Securities Act, RSO 1990, c S.5 (the Act);
ON READING the Findings of the British Columbia Securities Commission (the BCSC) dated April 30, 2019 and the order of the BCSC dated September 20, 2019 and on reading the materials filed by Staff, the Respondents not having filed any materials, although properly served;
IT IS ORDERED THAT:
1. Against Wilson:
(a) pursuant to paragraph 2 of s.127(1) of the Act, trading in any securities or derivatives by Wilson cease permanently;
(b) pursuant to paragraph 2.1 of s.127(1) of the Act, the acquisition of any securities by Wilson cease permanently;
(c) pursuant to paragraph 3 of s.127(1) of the Act, any exemptions contained in Ontario securities law do not apply to Wilson permanently;
(d) pursuant to paragraphs 7 and 8.1 of s.127(1) of the Act, Wilson resign any positions that he holds as a director or officer of any issuer or registrant;
(e) pursuant to paragraphs 8 and 8.2 of s.127(1) of the Act, Wilson is prohibited from becoming or acting as a director or officer of any issuer or registrant; and
(f) pursuant to paragraph 8.5 of s.127(1) of the Act, Wilson is prohibited from becoming or acting as a registrant or promoter.
2. Against Wright:
(a) pursuant to paragraph 2 of s.127(1) of the Act, trading in any securities or derivatives by Wright cease permanently;
(b) pursuant to paragraph 2.1 of s.127(1) of the Act, the acquisition of any securities by Wright cease permanently;
(c) pursuant to paragraph 3 of s.127(1) of the Act, any exemptions contained in Ontario securities law do not apply to Wright permanently;
(d) pursuant to paragraphs 7 and 8.1 of s.127(1) of the Act, Wright resign any positions that he holds as a director or officer of any issuer or registrant;
(e) pursuant to paragraphs 8 and 8.2 of s.127(1) of the Act, Wright is prohibited from becoming or acting as a director or officer of any issuer or registrant; and
(f) pursuant to paragraph 8.5 of s.127(1) of the Act, Wright is prohibited from becoming or acting as a registrant or promoter.
3. Against Prinster:
(a) pursuant to paragraph 2 of s.127(1) of the Act, trading in any securities or derivatives by Prinster cease permanently;
(b) pursuant to paragraph 2.1 of s.127(1) of the Act, the acquisition of any securities by Prinster cease permanently;
(c) pursuant to paragraph 3 of s.127(1) of the Act, any exemptions contained in Ontario securities law do not apply to Prinster permanently;
(d) pursuant to paragraphs 7 and 8.1 of s.127(1) of the Act, Prinster resign any positions that he holds as a director or officer of any issuer or registrant;
(e) pursuant to paragraphs 8 and 8.2 of s.127(1) of the Act, Prinster is prohibited from becoming or acting as a director or officer of any issuer or registrant; and
(f) pursuant to paragraph 8.5 of s.127(1) of the Act, Prinster is prohibited from becoming or acting as a registrant or promoter.
Epix Resource Finance Corporation
File No. 2020-29
September 25, 2020
WHEREAS on September 25, 2020, the Ontario Securities Commission held a hearing by teleconference in this proceeding;
ON HEARING the submissions of the representatives for each of Epix Resource Finance Corporation (Epix), Aberdeen International Inc. (Aberdeen) and Staff of the Commission (Staff);
IT IS ORDERED THAT:
1. Epix shall serve and file its Amended Application in Word and PDF formats, and its Application Record, by no later than 4:30 p.m. on September 29, 2020;
2. Epix shall serve each party with its written submissions by no later than 4:30 p.m. on October 19, 2020;
3. Aberdeen shall serve each party with its responding written submissions by no later than 4:30 p.m. on November 2, 2020;
4. Staff shall serve each party with its responding written submissions by no later than 4:30 p.m. on November 10, 2020;
5. Epix shall serve each party with its reply written submissions, if any, by no later than 4:30 p.m. on November 13, 2020;
6. all parties shall file with the Commission their written submissions as soon as possible after service is effected and by no later than 4:30 p.m. on November 13, 2020; and
7. a hearing with respect to Epix's motion for standing to bring this application is scheduled for November 19, 2020, at 9:00 a.m., by videoconference, or on such other date and time as may be agreed to by the parties and set by the Office of the Secretary.
Application by an issuer for a revocation of a cease trade order issued by the Commission -- cease trade order issued because the issuer had failed to file certain continuous disclosure materials required by Ontario securities law -- defaults subsequently remedied by bringing continuous disclosure filings up-to-date -- cease trade order revoked.
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 127 and 144.
WHEREAS the securities of Angus Mining Inc. (the "Applicant") are subject to a temporary cease trade order made by the Director of the Ontario Securities Commission (the "Commission") dated May 8, 2015 pursuant to paragraph 2 of subsection 127(1) and subsection 127(5) of the Act, and a further cease trade order dated May 20, 2015 made by the Director of the Commission pursuant to paragraph 2 of subsection 127(1) of the Act, ordering that trading in securities of the Applicant cease (together, the "Cease Trade Order");
AND WHEREAS additional cease trade orders were issued by the British Columbia Securities Commission ("BCSC") on May 11, 2015 and the Alberta Securities Commission ("ASC") on August 21, 2015 (collectively, the "Other Cease Trade Orders");
AND WHEREAS the Applicant has applied to the Commission pursuant to section 144 of the Act to revoke the Cease Trade Order (the "Application");
AND WHEREAS the Applicant has represented to the Commission that:
1. The Applicant was incorporated as "Golconda Capital Corp." under the Business Corporations Act (Alberta) on February 12, 2007 and was classified as a "capital pool company" pursuant to the policies of the TSX Venture Exchange (the "TSXV"). In order to effect its "qualifying transaction", on September 23, 2010, the Applicant changed its name from Golconda Capital Corp. to Angus Mining (Namibia) Inc. and on September 24, 2014, a wholly-owned subsidiary of the Applicant amalgamated with Angus Mining (Namibia) Ltd. As a result, Angus Mining (Namibia) Ltd. became a wholly-owned subsidiary of the Applicant. On September 28, 2010, the Applicant continued into the Province of Ontario under the Business Corporations Act (Ontario). On July 16, 2012, the Applicant changed its name from Angus Mining (Namibia) Inc. to Angus Mining Inc.
2. The registered and records office of the Applicant, and the Applicants head office is 333 Bay Street, Suite 4600, Toronto, Ontario M5H 2S5.
3. The Applicant is a reporting issuer in Ontario, Alberta and British Columbia. The Applicant's principal regulator, as determined in accordance with Part 3 of National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions ("NP 11-203"), is Ontario.
4. The authorized capital of the Applicant comprises an unlimited number of common shares ("Common Shares"). As of the date hereof, 38,315,580 Common Shares are issued and outstanding.
5. The Common Shares were traded on the TSXV until May 8, 2015, on which date trading was suspended. Effective August 21, 2015, the Applicant's listing was transferred from the TSXV to the NEX Board and effective at the close of business on May 19, 2016, the Common Shares were delisted from the NEX Board.
6. On July 19, 2011, prior to the Cease Trade Order, the Company issued an unsecured promissory note (the "Promissory Note") in the amount of $1,000,000 to an arm's length third party lender ("Promissory Note Lender"). The Company has been in default on the Promissory Note since July 19, 2012. The total outstanding balance of the Promissory Note as of September 30, 2019, including accrued but unpaid interest, is $1,460,000.
7. On December 11, 2019, the Company entered into a debt settlement agreement (the "Settlement Agreement") with the Promissory Note Lender, pursuant to which the Promissory Note Lender agreed to accept a cash payment of $250,000 in full settlement of the outstanding balance of the Promissory Note. The cash payment was made on December 11, 2019.
8. As a result of the Applicant's failure to file:
a. annual audited financial statements for the year ended December 31, 2014;
b. management's discussion and analysis relating to the audited annual financial statements for the year ended December 31, 2014; and
c. certification of the foregoing filings as required by National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings ("NI 52-109");
the Commission issued the Cease Trade Order and the BCSC and ASC issued the Other Cease Trade Orders. The Applicant has filed applications with each of the Commission, BCSC and ASC for a partial revocation of Cease Trade Order and the Other Cease Trade Orders, respectively.
9. Since December 1, 2014, the Applicant has not filed any continuous disclosure documents, including:
a. annual audited financial statements for the years ended December 31, 2014, 2015, 2016, 2017, 2018 and 2019;
b. management's discussion and analysis relating to the audited annual financial statements for the years ended December 31, 2014, 2015, 2016, 2017, 2018 and 2019;
c. interim financial statements for the interim periods from March 31, 2014 to June 30, 2020;
d. management's discussion relating to the interim financial statements for the interim periods from March 31, 2014 to June 30, 2020;
e. the certification of the foregoing filings as required by NI 52-109; and
f. the statements of executive compensation for the financial years ended December 31, 2014, 2015, 2016, 2017, 2018 and 2019.
10. On August 13, 2018, the Company's President, Chief Executive Officer and sole Director, advanced the Company $12,500 in the form of a shareholder loan (the "Shareholder Loan"). The Applicant used the majority of the advances made under the Shareholder Loan to meet its operational and administrative expenses. The Applicant repaid the Shareholder Loan on October 30, 2018.
11. In October 2018, the Corporation received proceeds of US$400,000 as a result of the sale of its minority ownership in a private company that held the Ondundu gold project (the "Ondundu Sale"). The proceeds were converted into $523,167 Canadian dollars on October 30, 2018. The Corporation repaid the Shareholder Loan and a prior loan outstanding (the "Chairman Loan") from the proceeds of the Ondundu Sale. The Shareholder Loan and the Chairman Loan may have each constituted a "security". As such the acceptance of the Shareholder Loan and repayment of the Shareholder Loan and Chairman Loan may have constituted a violation of the Cease Trade Order.
12. Effective November 30, 2019, each of Donn Burchill and John McBride were appointed as independent directors of the Applicant (the "Director Appointments"). Other than these appointments, the Applicant has had no changes to its directors since the date of the Cease Trade Order.
13. If the Shareholder Loan (including the repayment thereof), the repayment of the Chairman Loan, the Ondundu Sale, the settlement of the Promissory Note and the Director Appointments, were material changes, the Applicant was required to, but did not, file material change reports in connection with such transactions. Although the Applicant has been inactive during most of the period since the date of the Cease Trade Order, there may have been additional events in which a material change report may have been required, but was not filed.
14. The Applicant has failed to pay certain fees to the Commission and the securities regulatory authorities where the Other Cease Trade Orders are in effect.
15. The Applicant has now filed the following documents on SEDAR:
a. annual audited financial statements for the years ended December 31, 2017, 2018 and 2019;
b. management's discussion and analysis relating to the audited annual financial statements for the years ended December 31, 2017, 2018 and 2019;
c. unaudited interim financial statements for the three, six and nine month interim periods ended March 31, June 30 and September 30 for the years ended December 31, 2017, 2018 and 2019 and the three month interim period ended March 31, 2020 and the six month interim period ended June 30, 2020;
d. management's discussion relating to the interim financial statements for the three, six and nine month interim periods ended March 31, June 30 and September 30 for the years ended December 31, 2017, 2018 and 2019 and the three month interim period ended March 31, 2020 and the six month interim period ended June 30, 2020;
e. the certification of the foregoing filings as required by NI 52-109;
f. the statements of executive compensation for the financial years ended December 31, 2017, 2018 and 2019; and
g. the Notice of Change of Auditor, Letter of Former Auditor and Letter of Successor Auditor in connection with the change of auditors.
16. The applicant has also filed material change reports related to the Ondundu Sale, the Shareholder Loan and the Chairman Loan, the settlement of the Promissory Note and the appointment of Donn Burchill and John McBride as directors.
17. The Applicant has not filed (i) audited annual financial statements, and related management's discussion and analysis, and related NI 52-109 certificates for the fiscal years ended December 31, 2014 to December 31, 2016; (ii) unaudited interim financial statements, related MD&A, and related NI 52-109 certificates for the interim periods ended March 31, 2014 to September 30, 2019; and (iii) statements of executive compensation for the years ended December 31, 2014 to December 31, 2016 (collectively, the "Outstanding Filings").
18. Following the revocation of the Cease Trade Order and the Other Cease Trade Orders, the Applicant intends to conduct a private placement with certain insiders of the Applicant, as well as other arm's length parties (the "Private Placement"). The Applicant is of the view that preliminary discussions with potential subscribers regarding the Private Placement may have constituted an "act in furtherance of a trade" in contravention of the Cease Trade Order and the Other Cease Trade Orders.
19. Apart from the Outstanding Filings and the matters disclosed in paragraphs 9, 10, 11, 13 and 14, the Applicant is not to its knowledge, in default of any requirements of the Act or the rules and regulations made pursuant thereto. Apart from the matters disclosed in paragraph 11 and 18, the Applicant is not to its knowledge, in default of any requirements of the Cease Trade Order or the Other Cease Trade Orders. Apart from the Outstanding Filings, the Applicant is up-to-date on all is continuous disclosure obligations, except for the existence of the Cease Trade Order and the Other Cease Trade Orders.
20. The Applicant's issuer profile on the System for Electronic Document Analysis and Retrieval (SEDAR) and issuer profile supplement on the System for Electronic Disclosure by Insiders (SEDI) are current and accurate.
21. The Applicant has paid all outstanding activity, participation and late filing fees that are required to be paid to the Commission and has filed all forms associated with such payments.
22. The Applicant is concurrently being granted a revocation of the Other Cease Trade Orders by the BCSC and the ASC.
23. The Applicant is currently inactive and following the revocation of the Cease Trade Order, and the Other Cease Trade Orders, the Applicant intends to reactivate itself. The Applicant does not have any definitive plans in place for the operation of the business going forward. In particular, other than the Private Placement to fund its general working capital, and to attempt to settle with certain creditors for monies owing, the Applicant is not presently considering, nor is it involved in any discussions relating to, an acquisition, a reverse takeover or similar transaction. However, it is the intention of management of the Applicant to investigate opportunities going forward. The Applicant has provided the Commission with an undertaking that it will not complete:
a. a restructuring transaction involving, directly or indirectly, an existing or proposed, material underlying business which is not located in Canada,
b. a reverse takeover with a reverse takeover acquirer that has a direct or indirect, existing or proposed, material underlying business which is not located in Canada,
c. a significant acquisition involving, directly or indirectly, an existing or proposed, material underlying business which is not located in Canada,
unless
i. the Applicant files a preliminary prospectus and a final prospectus with the Ontario Securities Commission and obtains receipts for the preliminary prospectus and the final prospectus from the Director under the Act, and
ii. the preliminary prospectus and final prospectus contain the information required by applicable securities legislation.
24. The Applicant has given the Commission a written undertaking that it will hold an annual meeting of its shareholders within three months after the date on which the Cease Trade Order is revoked. The information circular in respect of such meeting shall include the "reporting package" (as defined in section 4.11 of National Instrument 51-102 Continuous Disclosure Obligations) for the change of auditor.
25. Upon the issuance of this revocation order and concurrent revocation orders from the ASC and the BCSC, the Applicant will issue a news release announcing the revocation of the Cease Trade Order and the Other Cease Trade Orders and concurrently file the news release and a related material change report on SEDAR.
AND WHEREAS considering this application and the recommendation of the staff of the Commission;
AND WHEREAS the Director being satisfied that it would not be prejudicial to the public interest to revoke the Cease Trade Order;
IT IS ORDERED under section 144 of the Act that the Cease Trade Order is revoked.
DATED at Toronto on this 18th day of September, 2020.
National Policy 11-206 Process for Cease to be a Reporting Issuer Applications -- Securities Act s. 1(10)(a)(ii) -- Cease to be a reporting issuer in Ontario -- The securities of the issuer are beneficially owned by more than 50 persons and are not traded through any exchange or market -- Following an arrangement, all of the issuer's common shares were acquired by another company; all of the issuer's other outstanding securities are either exercisable for securities of the acquirer or redeemable based on the value of the shares of the acquirer; the acquirer is a reporting issuer and in compliance with its continuous disclosure obligations; security holders were provided with relevant material information to make voting decisions on the arrangement; the issuer disclosed its intention to cease to be a reporting issuer; securities of the issuer are not traded through any exchange or market.
Securities Act, R.S.O. 1990, c. S.5, as am., s. 1(10)(a)(ii).
August 4, 2020
The securities regulatory authority or regulator in each of the Jurisdictions (Decision Maker) has received an application from the Filer for an order under the securities legislation of the Jurisdictions (the Legislation) that the Filer has ceased to be a reporting issuer in all jurisdictions of Canada in which it is a reporting issuer (the Order Sought).
Under the Process for Cease to be a Reporting Issuer Applications (for a dual application):
(a) the British Columbia Securities Commission is the principal regulator for this application, and
(b) the Filer has provided notice that subsection 4C.5(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in Alberta, and
(c) this order is the order of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this order, unless otherwise defined.
This order is based on the following facts represented by the Filer:
1. the Filer is a company continued pursuant to the Business Corporations Act (British Columbia) (the BCBCA) on July 11, 2016; the Filer's head office is located at 33 Whitehall Street, 8th Floor, New York, New York, 10004, USA and its registered office is located at 2900-550 Burrard Street, Vancouver, British Columbia, V6C 0A3, Canada;
2. the Filer was an SEC issuer (as that term is defined under National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102)) from August 2017 until its securities were deregistered with the SEC on April 1, 2019, from which time the Filer no longer qualified as an SEC issuer under Canadian securities laws; under National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards (NI 52-107), as an SEC issuer, the Filer was permitted to prepare its financial statements in accordance with U.S. GAAP and have them audited in accordance with U.S. PCAOB GAAS, and to file its management's discussion and analysis in accordance with requirements applicable to SEC issuers;
3. on May 8, 2020 (Effective Date), Torque Esports Corp. (formerly Millennial Esports Corp.) (Torque) acquired all of the issued and outstanding common shares of the Filer (Filer Shares), pursuant to an arrangement under the BCBCA (the Arrangement);
4. Torque is a corporation existing under the laws of the Business Corporations Act (Ontario); the authorized share capital of Torque consists of an unlimited number of common shares (Torque Shares) and an unlimited number of preference shares; the Torque Shares are listed on the TSX Venture Exchange (TSXV) under the symbol "GAME";
5. the Filer distributed meeting materials to the holders of record of the Filer Shares in connection with a special meeting of Filer shareholders to consider the Arrangement (Special Meeting), which occurred on April 23, 2020, and which meeting materials included a management information circular, notice of special meeting, and the interim order of the British Columbia Supreme Court dated March 25, 2020 in respect of the Arrangement and the Special Meeting; at the Special Meeting, the Arrangement was approved by the requisite majorities of the holders of Filer Shares;
6. prior to the Effective Date, the Filer had the following issued and outstanding securities: (i) Filer Shares; (ii) options to acquire Filer Shares (Legacy Options); (iii) restricted stock units to acquire Filer Shares (Legacy RSUs); and (iv) common share purchase warrants to acquire Filer Shares (Filer Warrants);
7. pursuant to the terms of the Arrangement, on the Effective Date, all of the issued and outstanding Filer Shares were exchanged for common shares in the capital of Torque (each such share, a Torque Share), on a one-for-one basis (the Exchange Ratio); in addition, the outstanding Legacy Options were exchanged for replacement options to acquire Torque Shares, and the outstanding Legacy RSUs were exchanged for replacement restricted stock units to acquire Torque Shares, in each case, on the same terms and conditions as the Legacy Options and Legacy RSUs, and on the basis of the Exchange Ratio;
8. under the terms of the Arrangement, Torque agreed, from the Effective Date until the respective date(s) and time(s) of expiry of the Filer Warrants (in accordance with their respective terms), that Torque will assume all of the covenants and obligations of the Filer under the Filer Warrants such that each Filer Warrant will entitle the holder to receive Torque Shares in accordance with the Exchange Ratio, and the Filer Warrants will otherwise be valid and binding obligations of Torque;
9. the Filer is not required to remain a reporting issuer pursuant to the terms of the Filer Warrants; the terms of the Filer Warrants contain adjustment provisions addressing, amongst others, a corporate merger, amalgamation, arrangement or business combination, including the Arrangement, and provide for the payment of Torque Shares in lieu of Filer Shares subsequent to such an event; as a result, no consents or approvals are required from the holders of Filer Warrants;
10. Torque is a reporting issuer in British Columbia, Alberta and Ontario and is subject to continuous disclosure requirements; Torque's continuous disclosure is relevant to holders of Filer Warrants as such holders are entitled to receive Torque Shares upon exercise of such securities;
11. Torque is not in default of its obligations as a reporting issuer under securities legislation in any jurisdiction;
12. the Filer is applying for the Order Sought that it be deemed to have ceased to be a reporting issuer in all of the jurisdictions in which it is currently a reporting issuer;
13. the Filer Shares were listed on the TSXV under the symbol "TLK" until they were delisted following the completion of the Arrangement at the close of business on May 14, 2020; no securities of the Filer, including debt securities, are traded in Canada or another country on a marketplace as defined in National Instrument 21-101 Marketplace Operation or any other facility for bringing together buyers and sellers of securities where trading data is publicly reported;
14. the Filer has relied on and, except as noted in the following paragraph, has complied with the requirements of the exemptions for market participants impacted by the COVID-19 pandemic in accordance with BC Instrument 51-515 -- Temporary Exemption from Certain Corporate Finance Requirements (BCI 51-515) and corresponding exemptions in the other jurisdictions in which the Filer is a reporting issuer, in respect of the filing of its (i) audited annual consolidated financial statements and accompanying management's discussion and analysis and related CEO and CFO certificates for the fiscal year ended December 31, 2019 (the 2019 Annual Filings) which were required to be filed on or before April 29, 2020, and which were required under BCI 51-515 to be filed by June 13, 2020 (the Extended Annual Filings Deadline); and (ii) interim financial report and accompanying management's discussion and analysis and related CEO and CFO certificates for the period ended March 31, 2020 (the Interim Filings) which were required to be filed on or before June 1, 2020, and which were required under BCI 51-515 to be filed by July 16, 2020 (the Extended Interim Filings Deadline);
15. the Filer is not in default of securities legislation in any jurisdiction, except for the following: (i) the Filer's annual financial statements for the year ended December 31, 2018 and the interim financial reports for the periods ended March 31, 2019, June 30, 2019 and September 30, 2019 were prepared in accordance with U.S. GAAP (as defined under NI 52-107), rather than Canadian GAAP applicable to publicly accountable enterprises as required in section 3.2 of NI 52-107; (ii) the corresponding management's discussion and analysis for the year ended December 31, 2018 and the interim periods ended March 31, 2019, June 30, 2019 and September 30, 2019 were prepared in accordance with Item 303 of Regulation S-K under the 1934 Act, rather than in accordance with Form 51-102F1 of NI 51-102; (iii) the annual financial statements for the year ended December 31, 2018 were audited in accordance with U.S. PCAOB GAAS (as defined in NI 52-107), rather than in accordance with Canadian GAAS as required by section 3.3. of NI 52-107; (iv) the Filer did not file its 2019 Annual Filings on or before the Extended Annual Filings Deadline; and (v) the Filer did not file its Interim Filings on or before the Extended Interim Filings Deadline;
16. the Filer is not eligible to use the simplified procedure in NP 11-206 Process for Cease to be a Reporting Issuer Applications because the Filer is in default of securities legislation, and the outstanding securities of the Filer (specifically the Filer Warrants) are not beneficially owned, directly or indirectly, by fewer than 15 securityholders in each of the jurisdictions of Canada and fewer than 51 securityholders in total worldwide;
17. the Filer has no intention to seek public financing by way of an offering of securities;
18. the Filer is not an OTC reporting issuer under Multilateral Instrument 51-105 Issuers Quoted in the U.S. Over-the-Counter Markets; and
19. upon the granting of the Order Sought, the Filer will not be a reporting issuer or the equivalent in any jurisdiction in Canada.
Each of the Decision Makers is satisfied that the order meets the test set out in the Legislation for the Decision Maker to make the order.
The decision of the Decision Makers under the Legislation is that the Order Sought is granted.
Evolution Mentor Capital Inc. and Pasqualino (Patrick) Michael Mazza -- ss. 127(8), 127(1)
File No. 2020-19
September 28, 2020
WHEREAS the Ontario Securities Commission held a hearing in writing to consider a motion by Staff of the Commission (Staff) to further extend a temporary order dated June 17, 2020, and extended on June 30, 2020, against the Respondents;
ON READING the materials filed by Staff and on considering that the Respondents consent to the making of this order;
IT IS ORDERED:
1. pursuant to subsection 127(8) and paragraph 2 of subsection 127(1) of the Securities Act, RSO 1990 c S.5 (the Act), that until December 30, 2020, all trading in any securities by the Respondents shall cease; and
2. pursuant to subsection 127(8) and paragraph 3 of subsection 127(1) of the Act, that until December 30, 2020, any exemptions contained in Ontario securities law do not apply to the Respondents.
First Global Data Ltd. et al. -- s. 152
File No. 2019-22
September 28, 2020
WHEREAS the Ontario Securities Commission held a hearing in writing to consider a request of Maurice Aziz for an order pursuant to section 152 of the Securities Act, RSO 1990, c S.5 (the Act);
ON READING Mr. Aziz's Motion Record and on considering that no party opposes the relief sought;
IT IS ORDERED THAT Mr. Aziz may initiate an application to the Ontario Superior Court of Justice pursuant to section 152 of the Act for an Order:
a) appointing the members of the panel assigned to the merits hearing in the above-named matter (the Hearing Panel) to take the evidence of Steven Roch, an individual who resides in Laval, Québec, and Michel Faille, an individual who resides in Montreal, Québec for use in the merits hearing before the Commission;
b) providing for the issuance of a letter of request directed to the judicial authorities of the Province of Québec, requesting the issuing of such process as is necessary to compel Steven Roch and Michel Faille to attend and give testimony before the Hearing Panel by video link and audio link, on oath or otherwise, in the merits hearing before the Commission;
c) providing that the testimony of Steven Roch and Michel Faille shall take place by videoconference at such location(s) as may be advised by Mr. Aziz upon reasonable notice, so that the Hearing Panel, sitting in Toronto, is able to observe and participate by video link and audio link and make any required evidentiary rulings;
d) providing that Steven Roch and Michel Faille shall give their testimony during the merits hearing before the Commission, commencing on October 5, 2020 at 10:00 a.m. Eastern Time or on such other dates and times thereafter as Mr. Aziz may advise upon reasonable notice;
e) prescribing that the procedural and evidentiary rules of Ontario will apply to the examinations of Steven Roch and Michel Faille to the extent permissible by the laws of Québec; and
f) providing for the payment by the Commission of the greater of any witness fees and travel expenses as may be required by the laws of Ontario and by the laws of Québec, as applicable.
Donald Bruce Wilson et al. -- ss. 127(1), 127(10)
Citation: Wilson (Re), 2020 ONSEC 24
September 22, 2020
File No. 2020-27
Hearing: |
In Writing |
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Decision: |
September 22, 2020 |
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Panel: |
Lawrence P. Haber |
Commissioner and Chair of the Panel |
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Submissions: |
Ryan Lapensee |
For Staff of the Commission |
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No hearing brief or written submissions were filed by or on behalf of Donald Bruce Wilson, David Scott Wright or Patrick K. Prinster |
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[1] Staff of the Ontario Securities Commission (Staff of the Commission) requests that an order under s.127(1) of the Securities Act{1} be made against Donald Bruce Wilson (Wilson), David Scott Wright (Wright) and Patrick K. Prinster (Prinster) (together, the Respondents) pursuant to the inter-jurisdictional enforcement provisions in s.127(10) of the Act.
[2] In a decision issued by the British Columbia Securities Commission (the BCSC) on April 30, 2019,{2} the BCSC found that each of the Respondents perpetrated a fraud, contrary to s.57(b) of the British Columbia Securities Act,{3} through their respective roles as directors of two corporate entities.
[3] On September 20, 2019, the BCSC ordered sanctions against the Respondents, including a $150,000 administrative penalty against Wilson, a $250,000 administrative penalty against each of Wright and Prinster, and permanent prohibitions from participating in the securities markets and acting as a director or officer for each of the Respondents.{4}
[4] For the reasons that follow, I find that it is in the public interest to issue an order substantially in the form requested by Staff.
[5] Staff filed a Statement of Allegations dated August 10, 2020 naming Wilson, Wright and Prinster as respondents in this proceeding and electing to proceed with a hearing in writing.{5} The same day, the Commission issued a Notice of Hearing commencing this proceeding.
[6] The Respondents were served with the Notice of Hearing, Statement of Allegations and Staff's written submissions, hearing brief and brief of authorities on August 11, 2020, via email. Staff filed an Affidavit of Service sworn on August 20, 2020.{6} I find that Staff properly effected service on each of the Respondents.
[7] No request for an oral hearing was made and no materials were filed by the Respondents. The Commission may proceed in the absence of a party where that party has been given notice of the hearing.{7} I am satisfied that the Respondents had adequate notice of this written hearing and that it is appropriate to proceed in their absence.
A. Background
[8] The Respondents' misconduct took place between June 2011 and August 2013 (the Material Time).{8}
[9] The Respondents were all residents of Vancouver, British Columbia. Wilson was previously registered to sell mutual funds and was a licensed mortgage broker during the Material Time.{9} Neither Wright nor Prinster have been registered under the BC Act.{10} Prinster was a lawyer called to the bar in one or more jurisdictions in the United States.{11}
[10] DominionGrand II Mortgage Investment Corporation (MIC II) was a BC company incorporated on March 30, 2011. Wright and Wilson were directors of MIC II.{12} The BCSC found that Prinster was a de facto director of MIC II.{13}
[11] DominionGrand Investment Fund Inc. (MIC III) was a BC company incorporated on August 24, 2012. Wright was a director of MIC III. Wilson did not have any role with respect to the business or affairs of MIC III.{14} The BCSC found that Prinster was a de facto director of MIC III.{15}
[12] MIC II and MIC III were respondents at the hearing on the merits at the BCSC. Both companies are now dissolved. Staff are not seeking to reciprocate the BCSC Sanctions Order as it relates to MIC II and MIC III as the two-year limitation period{16} imposed by the British Columbia Business Corporations Act on commencing proceedings against dissolved corporations has passed. MIC II was dissolved on February 16, 2015{17} and MIC III was dissolved on July 6, 2015{18}.
1. History of the Business and Organizational Structure
[13] In 2007, Wright and Prinster formed DominionGrand Development Group (DDG). The business purpose of DDG was to develop, market and manage real estate-based investment products. These investment products would ultimately include mortgage investment corporations (i.e. MIC II and MIC III).{19}
[14] DDG had a number of affiliated entities, including MIC II and MIC III. The specific business affairs and assets of DDG's affiliated entities (other than MIC II and MIC III) were not clear but appear to have included investments in hotels and other real estate assets.{20}
[15] An offering memorandum and marketing materials were prepared for the sale of shares in MIC II and at least one salesperson was retained to sell these shares to investors. All of the Respondents had input into the creation and information contained in the offering memorandum and the marketing materials.{21}
[16] Both MIC II and MIC III had managers who were licensed mortgage brokers under the British Columbia Mortgage Brokers Act.{22} DominionGrand Financial Corporation (DFC) was the manager of MIC II. Wilson and Wright were both directors of DFC during the Material Time, and Wilson was the registered mortgage broker for DFC. DominionGrand Asset Management Inc. (DAM) was the manager of MIC III, and Wright was a director of DAM during the Material Time.{23}
2. Sales of Shares of MIC II
[17] During the Material Time, there were sales of shares of MIC II which totaled $604,530 to 18 investors.{24}
[18] MIC II had a bank account at a large Canadian financial institution. Signing authorities on that account included all of the Respondents. All cheques that were issued on that account were signed by Wilson and one of the other two Respondents.{25}
[19] All of the Respondents confirmed that MIC II did not invest any of the funds raised by the sale of shares in MIC II in any mortgages.{26}
[20] A cease trade order (CTO) relating to the securities of MIC II was issued on December 3, 2012. As of April 30, 2019, that CTO had not been revoked.{27}
3. Sales of Shares of MIC III
[21] During the Material Time, there were sales of shares of MIC III which totaled $506,693 to 26 investors. Although this evidence was uncontested, BCSC investigators were only able to trace $454,375 into the bank account of MIC III.{28}
[22] MIC III also had a bank account at a large credit union that was opened in September 2012 with Wright and Prinster listed as the authorized signing authorities. All cheques that were issued on that account were signed by Wright and Prinster.{29}
[23] MIC III did not invest any of the funds raised by the sale of shares in MIC III in any mortgages.{30}
4. Marketing Materials
[24] Investors who purchased shares of MIC II and MIC III received an offering memorandum. A variety of promotional materials were also prepared in connection with the sale of these shares, including websites, term sheets, frequently asked questions and an executive summary. Investors also entered into a subscription agreement with the issuers, which included a form of risk acknowledgement (collectively, the Marketing Materials).{31}
[25] The primary representation in the Marketing Materials regarding use of investor funds was that MIC II and MIC III would be investing in mortgages secured by real estate. The Marketing Materials also included references as to how an investment in MIC II and MIC III would be less risky than other investments due to the security provided by mortgages.{32}
[26] There was no disclosure anywhere in the Marketing Materials to suggest that investor funds would be required to cover start-up costs of MIC II, MIC III or their manager. Similarly, there was no disclosure that funds would not be invested in mortgages until a certain amount of funds had been raised.{33}
[27] The BCSC concluded that a reasonable investor would believe that MIC II and MIC III represented to them, through their Marketing Materials, that they would primarily invest funds raised from investors in mortgages secured by real estate.{34}
[28] Evidence from the BCSC's review of the bank accounts for MIC II and MIC III details that the majority of investors' funds was paid by MIC II and MIC III to related companies of the Respondents. The BCSC found that the diversion of funds from investing in mortgages secured by real estate to related companies and other persons on an unsecured basis caused both the risk of loss and actual loss to investors.{35}
B. BCSC Findings
[29] The BCSC found that Wright, Wilson and Prinster, as directors and officers of MIC II and MIC III, committed fraud based on the following:
a. all of Wright, Wilson and Prinster, in the case of MIC II, and both Wright and Prinster, in the case of MIC III, were responsible for the preparation and contents of the Marketing Materials in respect of those entities. The Respondents would have had knowledge that investors were told that MIC II and MIC III were principally be investing in mortgages;
b. the Respondents, in their respective roles, were the signing authorities for the bank accounts of MIC II and MIC III. The Respondents would have had knowledge about the use of investors' funds;
c. as a consequence, the Respondents, in their respective roles, would have had knowledge of the diversion of investors' funds; and
d. any business person would know that the diversion of investors' funds from their intended use into unsecured investments mainly in related companies (primarily for start-up costs) would result in deprivation (both the risk of loss and actual loss). Each Respondent was a sophisticated business person with experience in the real estate industry as they themselves admitted and reiterated through the proceedings.{36}
[30] The BCSC concluded that:
a. each of Wright, Wilson and Prinster contravened s.57(b) of the BC Act with respect to 19 investors for $610,134; and
b. both Wright and Prinster contravened s.57(b) of the BC Act with respect to 21 investors for $506,693.{37}
C. BCSC Sanctions Order
[31] The BCSC Sanctions Order imposed the following sanctions, conditions, restrictions or requirements upon the Respondents pursuant to the BC Act:
a. Against Wilson:
i. under s.161(1)(d)(i) of the BC Act, Wilson resign any position he holds as a director or officer of an issuer or registrant;
ii. under s.161(1)(b)(ii) of the BC Act, Wilson is permanently prohibited from trading in or purchasing any securities or exchange contracts;
iii. under s.161(1)(c) of the BC Act, Wilson is permanently prohibited from relying on any of the exemptions set out in the BC Act, the regulations or a decision;
iv. under s.161(1)(d)(ii) of the BC Act, Wilson is permanently prohibited from becoming or acting as a director or officer of any issuer or registrant
v. under s.161(1)(d)(iii) of the BC Act, Wilson is permanently prohibited from becoming or acting as a registrant or promoter;
vi. under s.161(1)(d)(iv) of the BC Act, Wilson is permanently prohibited from acting in a management or consultative capacity in connection with activities in the securities market;
vii. under s.161(1)(d)(v) of the BC Act, Wilson is permanently prohibited from engaging in investor relations activities; and
viii. under s.162 of the BC Act, Wilson pay to the BCSC an administrative penalty of $150,000;
b. Against Wright:
i. under s.161(1)(d)(i) of the BC Act, Wright resign any position he holds as a director or officer of an issuer or registrant;
ii. under s.161(1)(b)(ii) of the BC Act, Wright is permanently prohibited from trading in or purchasing any securities or exchange contracts;
iii. under s.161(1)(c) of the BC Act, Wright is permanently prohibited from relying on any of the exemptions set out in the BC Act, the regulations or a decision;
iv. under s.161(1)(d)(ii) of the BC Act, Wright is permanently prohibited from becoming or acting as a director or officer of any issuer or registrant
v. under s.161(1)(d)(iii) of the BC Act, Wright is permanently prohibited from becoming or acting as a registrant or promoter;
vi. under s.161(1)(d)(iv) of the BC Act, Wright is permanently prohibited from acting in a management or consultative capacity in connection with activities in the securities market;
vii. under s.161(1)(d)(v) of the BC Act, Wright is permanently prohibited from engaging in investor relations activities; and
viii. under s.162 of the BC Act, Wright pay to the BCSC an administrative penalty of $250,000;
c. Against Prinster:
i. under s.161(1)(d)(i) of the BC Act, Prinster resign any position he holds as a director or officer of an issuer or registrant;
ii. under s.161(1)(b)(ii) of the BC Act, Prinster is permanently prohibited from trading in or purchasing any securities or exchange contracts;
iii. under s.161(1)(c) of the BC Act, Prinster is permanently prohibited from relying on any of the exemptions set out in the BC Act, the regulations or a decision;
iv. under s.161(1)(d)(ii) of the BC Act, Prinster is permanently prohibited from becoming or acting as a director or officer of any issuer or registrant
v. under s.161(1)(d)(iii) of the BC Act, Prinster is permanently prohibited from becoming or acting as a registrant or promoter;
vi. under s.161(1)(d)(iv) of the BC Act, Prinster is permanently prohibited from acting in a management or consultative capacity in connection with activities in the securities market;
vii. under s.161(1)(d)(v) of the BC Act, Prinster is permanently prohibited from engaging in investor relations activities; and
viii. under s.162 of the BC Act, Prinster pay to the BCSC an administrative penalty of $250,000.{38}
[32] Staff seeks an order imposing sanctions that substantially mirror those in the BCSC Sanctions Order.
[33] The issues for the Panel to consider are:
a. whether one or more of the circumstances under s. 127(10) of the Act apply to the Respondents, namely, are the Respondents subject to an order made by a securities regulatory authority imposing sanctions, conditions, restrictions or requirements (s.127(10)4); and
b. if so, whether the Commission should exercise its public interest jurisdiction to make an order pursuant to s.127(1) of the Act.
A. Subsection 127(10) of the Act
[34] Subsection 127(10) of the Act does not itself empower the Commission to make an order; rather, it provides a basis for an order under s.127(1). This provision facilitates cross-jurisdictional enforcement by allowing the Commission to issue protective, preventive and prospective orders to ensure that misconduct that has taken place in another jurisdiction will not be repeated in Ontario's capital markets. In exercising its jurisdiction to make an order in reliance on s. 127(10) of the Act, the Commission does not require that the underlying conduct have a connection to Ontario.{39}
[35] The BCSC is a securities regulatory authority. The BCSC Sanctions Order imposes sanctions on the Respondents. Therefore, the threshold test under s.127(10)4 of the Act is satisfied.
B. Subsection 127(1) of the Act
[36] Subsection 127(1) empowers the Commission to make orders where it is in the public interest to do so. The Commission is not required to make an order similar to that made by the originating jurisdiction. Rather, the Panel must first satisfy itself that an order for sanctions is necessary to protect the public interest in Ontario and then consider what the appropriate sanctions should be in the circumstances.
[37] Orders made under s.127(1) of the Act are "protective and preventive" and are made to restrain future conduct that is likely to be prejudicial to the public interest in fair and efficient capital markets.{40}
[38] The Commission must make its own determination of what is in the public interest. It is also important that the Commission be aware of and responsive to an interconnected, inter-provincial securities industry. The threshold for reciprocity is low.{41} A low threshold is supported by the principle found in s.2.1 of the Act, which provides that "[t]he integration of capital markets is supported and promoted by the sound and responsible harmonization and co-ordination of securities regulation regimes."
[39] Staff submits that the Respondents' fraudulent conduct warrants imposing significant protective sanctions against each of Wilson, Wright and Prinster. In determining the nature and scope of sanctions to be ordered, the Commission can consider a number of factors, including the seriousness of the misconduct, harm to the capital markets, specific and general deterrence, and any mitigating factors.{42}
[40] The Commission has consistently held that fraud is one of the most egregious securities regulatory violations. The BCSC found that "nothing strikes more viciously at the integrity of our capital markets than fraud."{43} While the BCSC distinguished the Respondents misconduct, to some extent, from more serious cases of fraud such as Ponzi schemes, direct theft of investor funds or wholly fictitious securities,{44} they ultimately concluded that those who commit fraud represent a serious risk to the capital markets.{45}
[41] The BCSC found that investors had been substantially harmed by the Respondents' misconduct. All of the approximately $1.1 million raised from investors, other than a small amount which was paid to investors as purported returns, were lost.{46} The BCSC highlighted the very specific risks that the individual Respondents pose when they act in the capacity of directors and officers of corporate entities.{47}
[42] The BCSC acknowledged that the Respondents had no history of regulatory misconduct. No other mitigating factors or aggravating factors were found.{48}
[43] The Commission has held that serious fraudulent misconduct warrants permanent removal from the capital markets to protect investors and to deliver a deterrent message to others who might contemplate similar misconduct.{49} I accept Staff's submission that the sanctions requested are proportionate to the Respondents' misconduct and it would be appropriate for me to issue an order substantially similar to that of the BCSC.
[44] As noted above in paragraph [12], Staff do not seek to reciprocate the BCSC Sanctions Order as it relates to MIC II and MIC III, as this proceeding is outside of the two-year limitation period for litigation involving dissolved companies specified by the BC Business Corporations Act for both companies.{50}
C. Differences between British Columbia and Ontario Statutes
[45] Due to differences between the Act and the BC Act, some of the sanctions I impose in Ontario differ from those imposed in British Columbia, as outlined below.
[46] First, the BCSC prohibited the Respondents from trading in or purchasing "exchange contracts". Subsection 127(1) of the Act does not expressly refer to exchange contracts. The BC Act defines "exchange contract" to mean a futures contract or option that meets certain specific requirements. As a result, Staff seeks an order prohibiting the Respondents from trading in derivatives. In my view, when considering the factors described above that support the making of an order prohibiting trading, there is no reason to distinguish between securities and derivatives. In the circumstances of this case, it is equally in the public interest to protect Ontario investors and the capital markets by prohibiting the Respondents from trading in derivatives. I will therefore make the order requested by Staff.
[47] Second, the BCSC Sanctions Order prohibits the Respondents from engaging in "investor relations activities" and from "acting in a management or consultative capacity in connection with activities in the securities market". In Ontario, the Act does not use those terms. Instead, such activities would largely be covered by the prohibitions already requested, against individuals acting as a director or officer of an issuer or as a registrant or promoter.
[48] For the reasons set out above, I find that it is in the public interest to impose the sanctions requested by Staff. This will protect Ontario's capital markets from the Respondents, as well as deter other persons who may wish to conduct similar misconduct in Ontario. I therefore order that:
a. Against Wilson:
i. pursuant to paragraph 2 of s.127(1) of the Act, trading in any securities or derivatives by Wilson cease permanently;
ii. pursuant to paragraph 2.1 of s.127(1) of the Act, the acquisition of any securities by Wilson cease permanently;
iii. pursuant to paragraph 3 of s.127(1) of the Act, any exemptions contained in Ontario securities law do not apply to Wilson permanently;
iv. pursuant to paragraphs 7 and 8.1 of s.127(1) of the Act, Wilson resign any positions that he holds as a director or officer of any issuer or registrant;
v. pursuant to paragraphs 8 and 8.2 of s.127(1) of the Act, Wilson is prohibited from becoming or acting as a director or officer of any issuer or registrant; and
vi. pursuant to paragraph 8.5 of s.127(1) of the Act, Wilson is prohibited from becoming or acting as a registrant or promoter.
b. Against Wright:
i. pursuant to paragraph 2 of s.127(1) of the Act, trading in any securities or derivatives by Wright cease permanently;
ii. pursuant to paragraph 2.1 of s.127(1) of the Act, the acquisition of any securities by Wright cease permanently;
iii. pursuant to paragraph 3 of s.127(1) of the Act, any exemptions contained in Ontario securities law do not apply to Wright permanently;
iv. pursuant to paragraphs 7 and 8.1 of s.127(1) of the Act, Wright resign any positions that he holds as a director or officer of any issuer or registrant;
v. pursuant to paragraphs 8 and 8.2 of s.127(1) of the Act, Wright is prohibited from becoming or acting as a director or officer of any issuer or registrant; and
vi. pursuant to paragraph 8.5 of s.127(1) of the Act, Wright is prohibited from becoming or acting as a registrant or promoter.
c. Against Prinster:
i. pursuant to paragraph 2 of s.127(1) of the Act, trading in any securities or derivatives by Prinster cease permanently;
ii. pursuant to paragraph 2.1 of s.127(1) of the Act, the acquisition of any securities by Prinster cease permanently;
iii. pursuant to paragraph 3 of s.127(1) of the Act, any exemptions contained in Ontario securities law do not apply to Prinster permanently;
iv. pursuant to paragraphs 7 and 8.1 of s.127(1) of the Act, Prinster resign any positions that he holds as a director or officer of any issuer or registrant;
v. pursuant to paragraphs 8 and 8.2 of s.127(1) of the Act, Prinster is prohibited from becoming or acting as a director or officer of any issuer or registrant; and
vi. pursuant to paragraph 8.5 of s.127(1) of the Act, Prinster is prohibited from becoming or acting as a registrant or promoter.
Dated at Toronto this 22nd day of September, 2020.
{1} RSO 1990, c S.5 (the Act)
{2} Re DominionGrand, 2019 BCSECCOM 150 (the BCSC Findings)
{3} RSBC 1996, c 418 (the BC Act)
{4} Re DominionGrand, 2019 BCSECCOM 335 (the BCSC Sanctions Order)
{5} Ontario Securities Commission Rules of Procedure and Forms, (2019) 42 OSCB 9714 (Rules of Procedure), r 11(3)
{6} Marked as Exhibit 1 in this proceeding
{7} Statutory Powers Procedure Act, RSO 1990, c S.22, s 7(2); Rules of Procedure, r 21(3)
{8} BCSC Findings at para 2
{9} BCSC Findings at para 6
{10} BCSC Findings at paras 7 and 8
{11} BCSC Findings at para 8
{12} BCSC Findings at para 9
{13} BCSC Findings at para 92
{14} BCSC Findings at para 10
{15} BCSC Findings at para 92
{16} SBC 2002, c 57, s 346(1)(b); Section 346(1)(b) of the Business Corporations Act (BC Business Corporations Act) deals with dissolved companies deemed to continue for the purposes of litigation. It states that even though a company is dissolved under the BC Business Corporations Act, litigation may continue as if the company is not dissolved if a legal proceeding is brought against the company within 2 years of its dissolution.
{17} Exhibit 2, Staff's Hearing Brief, BC Company Summary for DominionGrand II Mortgage Investment Corporation, Tab 4
{18} Exhibit 2, Staff's Hearing Brief, BC Company Summary for DominionGrand Investment Fund Inc., Tab 5
{19} BCSC Findings at para 11
{20} BCSC Findings at para 12
{21} BCSC Findings at para 18
{22} RSBC 1996, c 313
{23} BCSC Findings at para 19
{24} BCSC Findings at para 20
{25} BCSC Findings at para 21
{26} BCSC Findings at para 24
{27} BCSC Findings at para 25
{28} BCSC Findings at para 26
{29} BCSC Findings at para 27
{30} BCSC Findings at para 29
{31} BCSC Findings at para 30
{32} BCSC Findings at para 77
{33} BCSC Findings at para 79
{34} BCSC Findings at para 80
{35} BCSC Findings at paras 82 and 88
{36} BCSC Findings at para 93
{37} BCSC Findings at para 100
{38} BCSC Sanctions Order at para 57
{39} Nickford (Re), 2018 ONSEC 24, (2018) 41 OSCB 3846 at para 13; Hable (Re), 2018 ONSEC 11, (2018) 41 OSCB 2351 at para 8; Cook (Re), 2018 ONSEC 6, (2018) 41 OSCB 1497 at para 9
{40} Committee for Equal Treatment of Asbestos Minority Shareholders v Ontario (Securities Commission), 2001 SCC 37 at paras 42-43
{41} JV Raleigh Superior Holdings Inc (Re), 2013 ONSEC 18, (2013) 36 OSCB 4639 at para 21
{42} Belteco Holdings Inc (Re), (1998) 21 OSCB 7743 at 7746; MCJC Holdings Inc (Re), (2002) 25 OSCB 1133 at 1136
{43} BCSC Sanctions Order at para 10
{44} BCSC Sanctions Order at para 11
{45} BCSC Sanctions Order at para 15
{46} BCSC Sanctions Order at para 12
{47} BCSC Sanctions Order at paras 17 and 18
{48} BCSC Sanctions Order at paras 19 and 22
{49} Black Panther Trading Corp (Re), 2017 ONSEC 8, (2017) 40 OSCB 3727 at para 68
{50} BC Business Corporations Act, s 346(1)(b); see para 12 of these Reasons for a further explanation.
1. For the reasons outlined below, my decision is to reactivate the registration of Kyle Krajewski (Krajewski or theApplicant) as a dealing representative in the category of mutual fund dealer, sponsored by Royal Mutual Funds Inc. (RMFI), with the following term and condition:
Within 4 months of Krajewski's registration being reactivated that he completes and successfully passes the Ethics and Professional Conduct course administered by IFSE.
2. The Applicant is 24 years old and a recent university graduate. While attending university, he obtained a part-time position with TD Bank (TD) as a teller and progressed to a personal banking advisor. He was employed with TD from April 2018 to September 2019. Between March 20, 2019 to September 13, 2019, the Applicant obtained and was registered as a mutual fund dealing representative with TD Investment Services Inc. (TDIS).
3. Krajewski was terminated for cause by TD and TDIS, effective September 13, 2019, for inappropriately accessing customer profiles out of curiosity and without a valid business purpose which breached TD's Code of Conduct and Ethics policy as it relates to Protecting Confidential Information -- Protecting Customer Information. The customer banking profiles contain extensive portfolio and customer details. Over an approximate four-month period, Krajewski accessed 45 customer profiles and searched 33 names who were not TD customers.
4. As required by National Instrument 33-109 Registration Information, TDIS submitted a Form 33-109F1 Notice of Termination of Registered Individuals and Permitted Individuals for Krajewski. The reason provided for the termination is:
"Dismissed for Cause for breaching the Bank's Code of Conduct and Ethics policy. Misconduct relates to inappropriate access of TD customer information. There was no involvement with mutual funds. This matter will be reported to the Mutual Fund Dealers Association of Canada."
5. Krajewski was then hired by Royal Bank (RBC), effective November 3, 2019 as a banking advisor. During the interview process with RBC, Krajewski disclosed that he had been terminated for cause from TD and TDIS.
6. On March 9, 2020, RMFI submitted an application for reactivation of Krajewski's mutual fund dealing representative registration. The termination for cause disclosure was appropriately disclosed in Item 12- Resignations and Terminations of Form 33-109F4- Registration of Individuals and Review of Permitted Individuals.
7. Due to the Applicant's disclosure in Item 12, the file was assigned to the Registrant Conduct Team (Staff) of the Compliance and Registrant Regulation Branch for further review. During the course of Staff's review, information obtained from TD appears to indicate that Krajewski had not been initially forthcoming with TD about his conduct but later admitted to the conduct.
8. Staff conducted a voluntary interview with Krajewski on May 7, 2020. During the interview, Staff explored the circumstances that resulted Krajewski's termination.
9. At the conclusion of the further review, Staff informed Krajewski by letter dated July 2, 2020, that it is Staff's assessment that the Applicant is not suitable for registration because it appears to Staff that Krajewski was not honest and forthcoming with the TD investigator. Staff recommends to the Director that Krajewski's registration application be refused.
10. The Ontario Securities Commission (theCommission) oversees the registration process for firms registered in the category of mutual fund dealer and individuals registered as mutual fund dealing representatives.
11. Pursuant to section 31 of the Act, the Applicant is entitled to an opportunity to be heard (OTBH) before the Director makes a decision on Staff's recommendation. The OTBH occurred via teleconference on August 17, 2020. Mark Skuce, Senior Legal Counsel, Compliance and Registrant Regulation represented Staff and Krajewski appeared on his own behalf. Ms. Julie Scrocco, Community Manger, RBC attended as a character reference for the Applicant.
12. Subsection 27(1) of the Securities Act, RSO 1990, c.S.5, as amended (the Act) provides that the Director shall reinstate the registration of the person unless it appears to the Director that the person is not suitable for registration or that the registration is otherwise objectionable. Subsection 27(2) of the Act states that in considering whether a person is suitable for registration, the Director shall consider the requirements prescribed in the regulations relating to proficiency, solvency and integrity. Subsection 27(3) of the Act provides that the Director has the ability to impose terms and conditions on the registration of any person or company.
Staff's Submissions
13. Staff submits that Krajewski's apparent dishonesty with the TD Bank investigator and the breach of the TD Code of Conduct and Ethics calls into question his integrity and therefore, his suitability for registration, as well as a concern that his actions would make his registration otherwise objectionable.
14. Included in TD's reasons for termination was a finding that Krajewski breached TD Code of Conduct and Ethics as it relates to Protecting Confidential Information -- Protecting Customer Information.
15. Another provision of the TD Code of Conduct and Ethics covers "Cooperating with Audits, Reviews and Investigations", the Code of Conduct instructs employees that they must "fully cooperate" with internal investigations, and continues: "Further, we must not in any way obstruct, hinder or delay any internal investigation. The obligation to cooperate may extend to providing truthful information pursuant to, or in the defense or prosecution of, legal proceedings and investigations involving TD, its customers, or employees." However, the TD Investigative Report did not cite this provision of the Code of Conduct and Ethics as one of the reasons for termination.
16. The investigative report indicates that Krajewski admitted viewing two profiles and initially denied viewing other profiles. After further discussion he admitted to viewing 45 other customer profiles without authorization and searching 33 other non-customer names. He also initially denied knowing a customer but later admitted to knowing the customer, after being presented with the evidence.
17. During the voluntary interview with Staff, when asked about the specific details that lead to his termination and his apparent lack of cooperation with the TD investigation, Krajewski did not appear to be forthright. The responses included statements that he did not know how many customer profiles were improperly accessed and estimated that it was "around 15 to 20", which was less than half of the actual number. Other responses included vague answers to questions such as he did not have a good recollection of the events.
Applicant's submissions
18. During the OTBH, Krajewski explained that he was not trying to be vague or evasive with Staff about the number of client profiles he accessed. He contends that the circumstances that lead to his termination is a difficult mental place to think back to, so he wasn't trying to be evasive.
19. As for the interaction with the TD investigator, Krajewski reiterates that his actions were because of nervousness and not knowing where the conversation was going. His actions were not coming from a position of dishonesty, trying to mislead, or attempt to be evasive.
20. Krajewski did not share any of the personal information with anyone. The searches were conducted out of curiosity.
21. Krajewski provided further context to his personal situation at the time of the TD interview and thereafter. He was working, attending university, taking on a new position and planning a wedding so with all those factors he did not have a good recollection of the events.
22. Throughout the voluntary interview and the OTBH, Krajewski repeatedly stated that he takes full responsibility for his actions.
Findings
23. The outcome of this OTBH turns on two issues. The first is whether Krajewski was intentionally dishonest with the TD Investigator and Staff by being vague and evasive which would impugn his integrity. The second is whether the reactivation of Krajewski's registration would be otherwise objectionable.
24. On the issue of integrity, integrity is not defined under the Act. However, in considering the integrity of an individual to be registered, the Commission has held in prior cases that an assessment of integrity should be guided by the criteria set out in paragraph 2.1(2)(iii) of the Act: "This provision states that an important principle that the Commission shall consider in pursuing the purposes of the Act is 'the maintenance of high standards of fitness and business conduct to ensure honest and responsible conduct by market participants.'"{1}
25. Upon reviewing the information submitted in this matter, it is my opinion that during the voluntary interview with Staff, Krajewski did not appear to be intentionally evasive or attempting to downplay the severity of the breaches of the TD Code of Conduct and Ethics. Staff read statements from the TD Investigative Report to Krajewski and he was reacting to the statements from a report that he was not familiar with, relying on his memory and the general statement provided on the Notice of Termination for context. Krajewski received a copy of the TD Investigative Report as part of Staff's materials for this OTBH. Krajewski's other responses and explanations seemed credible.
26. As for the claim that Krajewski was dishonest during the TD investigation, due to his young age and lack of experience in a professional environment, it is reasonable that an unsolicited call to human resources without understanding the purpose of the meeting could be intimidating and make it difficult to formulate initial responses. In the end, Krajewski did admit to all of the conduct and took full responsibility for his actions.
27. I do not have any evidence that TD considered Krajewski's conduct during the investigation to be a breach of the TD Code of Conduct and Ethics as it relates to Cooperating with Audits, Reviews and Investigations. Staff did not put forth any information that they discussed this claim with TD so without knowing TD's position on this point, I am unable to make a finding.
28. Based on the above, I find that Krajewski's integrity has not been impugned by his conduct.
29. On the issue of whether the reactivation of registration would be otherwise objectionable, the term "otherwise objectionable" is not defined in the Act. However, "the Commission has previously determined that a purposive approach should be taken in considering whether registration is objectionable. The purposes of the Act, as described in section 1.1, are to provide protection to investors from unfair, improper or fraudulent practices and to foster fair and efficient capital markets and confidence in capital markets."{2}
30. Krajewski acted in an improper manner when he accessed 45 customer profiles without a valid business purpose and searched 33 names of non-TD customers which was determined to be a breach of the TD Code of Conduct and Ethics as it relates to Protecting Confidential Information -- Protecting Customer Information. This breach of privacy harmed investors and permitting the reactivation of registration without Krajewski taking appropriate steps to rehabilitate his fitness for registration would erode confidence in Ontario's capital markets. Therefore, I find his reactivation of registration to be otherwise objectionable.
31. During the intervening time since his termination with TD and this OTBH, Krajewski has taken steps to rehabilitate his fitness for registration which I believe affords him a second chance without further delay.
32. In Re Sawh (2016), 39 OSCB 2477, the Director set out six factors that must be considered in making a determination on an applicant's suitability for registration after a finding by the Director or the Commission that the applicant was not suitable for registration. Such determination includes evaluating the evidence supporting each of the factors, prior to making a decision on the subsequent application for registration:
a. the applicant must show by a sufficient course of conduct that he/she can be trusted in performing business duties;
b. the applicant must introduce evidence of other independent, trustworthy persons with whom the applicant has been associated since the prior refusal, suspension or revocation of registration;
c. a sufficient period of time must have elapsed for the purposes of general and specific deterrence;
d. where proficiency is at issue, the applicant must demonstrate how he or she has specifically remediated his or her proficiency;
e. the applicant must demonstrate that the misconduct that led to the prior refusal, suspension or revocation is unlikely to recur in the future by no longer engaging in business with non-compliant business associates; and
f. the applicant must demonstrate remorse and take full responsibility for his or her past conduct.
33. Krajewski, during this OTBH, responded to the factors as follows:
a. Since being terminated from TD, Krajewski has demonstrated a sufficient course of conduct that demonstrates that he can be trusted to perform business duties. At his initial and subsequent interviews with his current employer, he proactively informed the hiring managers that he was terminated for cause and the conduct that led to his termination. Also, when applying for a reactivation of his registration he disclosed the termination on the registration forms.
b. Julie Scrocco, Community Manger, RBC attended the OTBH and provided a character statement and discussed her interactions with Krajewski. Scrocco stated that "during his tenure, Krajewski has represented himself with pure honesty and integrity". Also, "his ethical behaviour is extremely reflective in client experience surveys, feedback from his team, feedback from his partners, as well as reflective in his holistic advice that he's actually providing".
c. Krajewski registration was terminated in September 2019. He started working at RBC in November 2019 and applied for reactivation of his registration on March 9, 2020. But for the termination disclosure, it is likely that Krajewski's reactivation of his registration would have been granted because Staff did not raise any other ground to refuse his registration. Allotting for a 5-day service standard, Krajewski could have been registered on or about March 13, 2020. Therefore, I will consider the more than 6-month period between applying for registration and the date of this decision to be sufficient time to have elapsed for specific and general deterrence.
d. Proficiency is not at issue in this matter.
e. Scrocco stated that there has been no unauthorized access to client information and having knowledge of the prior conduct, RBC has not put any tailored supervisory procedures in place restricting access. Further, Krajewski has sought opportunities to educate himself in both ethics and integrity by thoroughly studying and reviewing course materials for the Personal Financial Planner exam along with other books on this topic.
f. Finally, Krajewski expressed remorse and fully understands that client privacy is a very serious matter and sincerely takes full responsibility for his actions. Further he has also expressed this remorse to Scrocco and has reassured her that that conduct will not happen again.
34. While Krajewski did complete some self-study in the area of ethics, I believe he would benefit from a course in ethics. Therefore, it is my decision to impose a term and condition on his registration that limits the duration of Krajewski's registration to four months unless he completes and successfully passes the Ethics and Professional Conduct course administered by IFSE before his registration expires.
35. My rationale for proceeding in this manner, is that the Applicant is in the very early stages of his career with limited professional experience and seemed credible during this OTBH. He took responsibility for his actions, took steps to learn from his mistake, had a relevant and credible character witness from his current employer and he disclosed the reasons for his termination to his new employer and the regulator. Despite his conduct while employed at TD and TDIS, Krajewski has appeared to make efforts to rehabilitate himself and learn from his mistakes. My decision may have been different if there was a failure to disclose detrimental information to a current employer or the regulator, or there was a more experienced or mature applicant.
{1} Re Pyasetsky (2013), 36 OSCB 3897 at paras. 96-97
{2} Re Bouji, 2017 ONSEC 38 para. 35, citing Re Sawh, 2012 ONSEC 27 at paras. 16-17
Temporary, Permanent & Rescinding Issuer Cease Trading Orders
Company Name |
Date of Temporary Order |
Date of Hearing |
Date of Permanent Order |
Date of Lapse/Revoke |
|
||||
THERE IS NOTHING TO REPORT THIS WEEK. |
||||
Company Name |
Date of Order |
Date of Revocation |
|
||
Tree of Knowledge International Corp. |
July 15, 2020 |
September 23, 2020 |
|
||
Green 2 Blue Energy Corp. |
January 29, 2020 |
September 25, 2020 |
Temporary, Permanent & Rescinding Management Cease Trading Orders
Company Name |
Date of Order |
Date of Lapse |
|
||
THERE IS NOTHING TO REPORT THIS WEEK. |
||
Outstanding Management & Insider Cease Trading Orders
Company Name |
Date of Order or Temporary Order |
Date of Hearing |
Date of Permanent Order |
Date of Lapse/ Expire |
Date of Issuer Temporary Order |
|
|||||
Performance Sports Group Ltd. |
19 October 2016 |
31 October 2016 |
31 October 2016 |
__________ |
__________ |
Company Name |
Date of Order |
Date of Lapse |
|
||
Agrios Global Holdings Ltd. |
September 17, 2020 |
__________ |
|
||
Mountain Valley MD Holdings Inc. |
September 17, 2020 |
__________ |
|
||
Sproutly Canada, Inc. |
September 16, 2020 |
__________ |
Issuer Name:
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Project #3116979
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Project #3115125
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Project #3115780
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Project #3117071
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Project #3115569
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Project #3115785
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Project #3117064
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Project #3116432
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Project #3116426
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Project #3116733
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Project #3114330
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Project #3110653
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Project #3113230
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Project #3113483
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Type |
Company |
Category of Registration |
Effective Date |
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New Registration |
Brintab Corp. |
Portfolio Manager |
September 23, 2020 |
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New Registration |
Price Street, Inc. |
Portfolio Manager and Exempt Market Dealer |
September 22, 2020 |
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Voluntary Surrender |
PanVest Capital Corporation |
Exempt Market Dealer |
September 3, 2020 |
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Change in Registration Category |
Bolton Capital Canada Inc. |
From: Investment Fund Manager, Portfolio Manager and Exempt Market Dealer |
September 24, 2020 |
To: Commodity Trading Manager, Investment Fund Manager, Portfolio Manager and Exempt Market Dealer |
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Consent to Suspension (Pending Surrender) |
Gemini Asset Management Inc. |
Portfolio Manager |
September 25, 2020 |
Nasdaq CXC Limited -- Notice of Proposed Changes and Request for Comment
Nasdaq CXC Limited (Nasdaq Canada) has announced plans to implement the changes described below in Q4, 2020 subject to regulatory approval. Nasdaq Canada is publishing this Notice of Proposed Changes in accordance with the requirements set out in the Process for the Review and Approval of Rules and the Information Contained in Form 21-101F1 and the Exhibits Thereto (Exchange Protocol). Pursuant to the Exchange Protocol, market participants are invited to provide the Commission with comment on the proposed changes.
Comment on the proposed changes should be in writing and submitted by November 2, 2020 to:
Market Regulation BranchOntario Securities Commission20 Queen Street West, 22nd FloorToronto, ON M5H 3S8Fax 416 595 8940Email: marketregulation@osc.gov.on.ca
And to:
Matt ThompsonChief Compliance OfficerNasdaq CXC Limited25 York St., Suite 900Toronto, ON M5J 2V5Email: matthew.thompson@nasdaq.com
Comments received will be made public on the OSC website. Upon completion of the review by OSC staff, and in the absence of any regulatory concerns, notice will be published to confirm the completion of Commission staff's review and to outline the intended implementation date of the changes.
Nasdaq Canada has announced plans to introduce the following change in Q4, 2020 subject to regulatory approval. Nasdaq Canada is publishing this Notice of Proposed Changes in accordance with the requirements set out in the Exchange Protocol.
Nasdaq Canada currently supports odd lot trading on each of its Trading Books where Odd Lot Members guarantee auto-execution fills at the Protected National Best Bid and Offer (PNBBO) for odd lot orders that are both marketable and marked Immediate-or-Cancel. We are proposing to change the reference price for auto-execution fills for odd lot trading from the PNBBO to the Consolidated National Best Bid and Offer (CNBBO) which includes the best bid and best offer of at least one board lot displayed across all marketplaces (protected and unprotected). Where the CNBBO for a security is in a locked or crossed an odd lot order will be executed at the PNBBO. (Proposed Change)
The Canadian equity market is comprised of a combination of marketplaces that are protected for the purposes of the Order Protection Rule (OPR) and marketplaces that are not protected for OPR purposes. Under OPR the obligation to not trade through protects against orders trading through protected quotes only; orders are permitted to trade-through quotes on unprotected marketplaces that may have a better price. The Proposed Change is being made to provide odd lot orders with the best available price based on the best quote across all lit marketplaces. Because it is common for retail investors to use odd lot orders, the Proposed Change will result at times in these investors receiving a better execution price.
Subject to regulatory approval, we are expecting to introduce the new options in Q4, 2020.
Members that enter odd lot orders may receive a superior price than what would otherwise be available today.
There is no impact to Nasdaq Canada's compliance with Ontario Securities Law. All participants are able to enter odd lot orders and potentially benefit from the Proposed Change.
This Proposed Changes are being made in response to participant feedback.
There are no changes required by members or vendors to make to their Systems in response of the Proposed Change.
Yes. Auto execution facilities for odd lot orders are currently supported by Nasdaq Canada, the CSE and Neo Exchange.
Any questions regarding these changes should be addressed to Matt Thompson, Nasdaq CXC Limited: matthew.thompson@nasdaq.com, T: 647-243-6242
1.1 Definitions and Interpretation
<<Consolidated National Best Bid and Offer or "CNBBO">> |
<<The best bid and best offer of at least one Board lot displayed on all marketplaces.>> |
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<<Consolidated National Best Bid or "CNBB">> |
<<The best bid of at least one Board Lot displayed on all marketplaces.>> |
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<<Consolidated National Best Offer or "CNBO">> |
<<The best offer of at least one Board Lot displayed on all marketplaces.>> |
Each Nasdaq Canada Trading Book provides Members with guaranteed fills at the CNBBO for Odd Lot IOC marketable orders. Odd Lot trading has the following features:
1. Odd Lot orders that are not IOC or immediately marketable are canceled back.
2. Odd Lot execution is available between 9:30 am and 4:00 pm ET or as otherwise determined by the Exchange.
3. The Exchange System will accept either Mixed Lots or Odd Lots that are marked IOC.
4. Odd Lot executions will be filled at the NBBO if the CNBBO for a security is in a locked or crossed condition.
5. Odd Lot execution is not allowed when the NBBO for a security is in a locked or crossed market condition.
6. Members are not permitted to send two or more orders that would trigger auto-execution by Odd Lot Members as this would violate the just and equitable principles imposed by UMIR Policy 2.1. This would include, for example, shredding a Board Lot order.
7. Members may not enter the Odd Lot portion of a Mixed Lot order immediately prior to entering the Board Lot portion.
8. Odd Lot trading is subject to the policies imposed by UMIR prohibiting unfair trading practices, including but not limited to the following activities:
a. Effecting pre-arranged wash sales in Odd Lots, which are trades in which an offer to buy is coupled with an offer to sell back at the same or advanced price (or vice versa).
b. Entering orders for the purpose of affecting the execution price of the Odd Lot trades.
9. If a Member is engaged in Odd Lot trading activity that is unfair, the Exchange may restrict the Member or suspend the Approved Trader from Odd Lot Activity or take other action that is appropriate under the circumstances.