Markarian_RCMP_W eb

Transcription

Markarian_RCMP_W eb

A/Sgt. C.R. (Christopher) Pittman,
Montréal IMET/ ÉIPMF
Place Victoria, Tour de la Bourse
800, Place Victoria, bureau 1610
Casier postal 244
Montréal (Québec)
H4Z 1E8
04 September 2007
Dear Sgt. Christopher Pittman (Chris),
Re: Markarian v. CIBC
Thank you for your call on August 29, 2007 with respect to the Markarian c. Marchés
mondiaux CIBC inc. [2006] QCCS 3314 decision (“Decision”) rendered in Montreal on
June 14, 2006.1
As per our discussion, both l'Autorité des marchés financiers (AMF) and the
Investment Dealers Association of Canada (IDA) have failed in bringing this matter
to the attention of the RCMP or the local police force.
Furthermore, the IDA has
taken the position that it was not aware of the case even after it had permanently
prohibited Migirdic from approval in any capacity with a Member of the Association
on 14 June 2004 and further fined him $305,000 and ordered payment of $55,000 in
costs.
Please see letter from James MacDonald to Paul Bourque, Senior Vice-
President, Member Regulation, IDA dated August 24, 2007.2
The Decision rendered by Justice Senécal evidences that CIBC World Markets Inc., a
member firm of the IDA3 and Thomas Monahan, the President of CIBC World
Markets, a registrant under the Quebec Securities Act, were aware of the fraud.
Below are translated extractions from the Decision;
[160] Uncomfortable with what he had done and unable to bear the
pressure any longer, Migirdic was absent from work for a week in
February and decided to admit his fraud. He contacted the president of
CIBC Wood Gundy, Tom Monahan, on February 26, 2001 to inform him
that there were certain "problems" with the accounts of certain clients.
Monahan asked him to put that down in writing and to send it to
Noonan. An email followed immediately in which Migirdic indicated the
accounts and the problems. Migirdic mentioned in the e-mail that the
Markarians were completely unaware that they had guaranteed the
accounts of Luthi and Gazarosyan…
Page 1 of 5
[179] Two and half years later, i.e. on April 16, 2004, the Investment
Dealers Association of Canada (the IDA) found Migirdic guilty of 24
counts, including 11 related to the present case, and excluded him for
life from working as a securities representative in Canada, in addition to
ordering him to pay $305 000 in fines (which he never paid). However,
no criminal charges were ever laid against him. Moreover, there was
never any complaint or sanction against CIBC.
[213] The Court shares the opinion in the IDA'S decision: letting a
gullible client believe that a signature on a blank document is a mere
formality related to his or her record, then using it in another file for
completely different purposes constitutes forgery of a signature (at para.
30 of the decision) and fraud (at para. 10), which is a crime (at para.
40).4
[558] The Markarians were, profoundly affected by Migirdic's fraud, for
which ClBC is responsible….
[614] Daniel Bowering, Compliance Department officer, was mandated
by ClBC to investigate Migirdic's fraud and he testified. He wrote to his
bosses at the end of his investigation that the firm should probably
absorb the Markarians' losses, given all the irregularities committed by
Migirdic, Migirdic's statements, the Markarians' statements and all the
information revealed in Bowering's investigation.
Bowering's
recommendation was not followed.
[615] So why was everything blocked? Why were the false guarantees
exercised? Why did ClBC seize the Markarians' assets?
[616] Because Tom Monahan, the president of ClBC Wood Gundy,
decided that was what to do.
[638] CIBC thus became the accomplice in Migirdic's fraud and did
everything in its power to benefit from it directly.
Thomas Monahan was also on the Board of Directors of the IDA from June 2003 to
June 2005.5
The IDA decision, in dealing with Migirdic, makes no reference to
Thomas Monahan’s complicity in fraud as does Justice Senécal. Is the enforcement
arm of the IDA influenced by the Board of Directors or the Executive Committee?
The fact that the IDA is one of the RCMP IMET “partners” and assists the RCMP in
filtering which cases should be forwarded to IMET for consideration needs to be
seriously re-addressed. As per my phone call, I do not wish the RCMP to share the
information that I provide to you, with the IDA. In my opinion any IDA participation
can only serve to vitiate the RCMP IMET’s efforts.
Page 2 of 5
Furthermore employees/directors of the IDA, unlike you, have taken no oath of
office. They are not a statutory body and as such have no legislative mandate to
protect the public.
The following is an excerpt from l’Autorité des marchés financier’s web site located at
http://www.lautorite.qc.ca/index.en.html
6
found under the heading “Register of
Firms and Individuals authorized to practice”, downloaded on Friday, August 31,
2007:
Name
MONAHAN,
THOMAS STEPHEN
Position
Status
PRESIDENT
(PRESIDENT)
OFFICER / OTHER
(OFFICER / OTHER)
DIRECTOR
(DIRECTOR)
CHAIRMAN OF THE BOARD
(CHAIRMAN OF THE BOARD)
DIRECTOR
(DIRECTOR)
CHIEF FINANCIAL OFFICER
(CHIEF FINANCIAL OFFICER)
DIRECTOR
(DIRECTOR)
DIRECTOR
(DIRECTOR)
Firm
APPROVED
CIBC INVESTOR SERVICES INC.
APPROVED
CIBC WORLD MARKETS INC.
APPROVED
CIBC TRUST CORPORATION
APPROVED
APPROVED
CIBC WORLD MARKETS INC.
APPROVED
APPROVED
CIBC PRIVATE INVESTMENT COUNSEL INC.
APPROVED
According to [para 160], of the Decision (see above) Mr. Monahan became informed
of Migirdic’s fraud on or about February 26, 2001. Within 6 weeks, on or about April
5, 2001, CIBC World Markets terminated Migirdic’s employment.
This was shortly
after Mr. Monahan accepted the appointment as Chair of the Retail Sales Committee
of the IDA.7
The Mandate of the IDA Retail Sales Committee is:
... to provide Members and/or the Board with . . . recommendations on
education and training proficiency standards (to raise the competence of
Members and their Approved Persons, resulting in higher industry
standards which are in the public interest). . . 7
It would appear that this private association of investment dealers has its own view
of what constitutes “public interest”. I would venture that the retail investing public
has a much different view – more in line with Judge Senécal’s.
Page 3 of 5
The following is an extract from the IDA Notice of Hearing and Particulars dated 19
April 2004.8
137. Upon CIBC’s refusal to accept the forged power of attorney, the
Respondent flew to London, England to obtain the signature of the
beneficial owner of the account of Y. Ltd. on the power of attorney;
Did the IDA or CIBC World Markets, or both, have a duty to report this to the proper
law enforcement authorities? Are they not both complicit by not reporting?
Judge Senécal has addressed the matter of CIBC’s guilt within the framework of a
civil action. Criminal fraud is not totally different albeit the standard of proof may be
somewhat higher.
The following is an extract from an article entitled “Broker broke promise, court told”
in the Montreal Gazette dated 20 January 2005 authored by Paul DeLean.
Not even a letter sent to CIBC president John Hunkin, to which was
attached a letter signed by Migirdic admitting his misdeeds, was enough
to block the seizure, Papazian said.9
It would appear that Thomas Monahan was not the only executive in the know.
On Thursday, August 30th Me. Nathalie Drouin, Executive Director, Enforcement and
Legal Affairs at the AMF returned my call.
Me. Drouin initially said she was not
familiar with the Markarian v. CIBC decision. As I continued to explain what the case
was about, Me. Drouin acknowledged that she was very familiar with the case but
that those within the enforcement department commonly referred to this as the
“CIBC case”.
I asked her why the AMF had not contacted the RCMP IMET or any
other law enforcement body. She responded in a defensive fashion stating that the
AMF would neither deny nor confirm that any file had been opened on this matter but
she would not directly answer my question. I reminded her that this case had been
active for a very long time, since the 1990’s, and in fact that the IDA had barred
Migirdic from the industry back in 2004 and yet it would appear that neither had
reported CIBC or Monahan.
Page 4 of 5
I then read Me. Drouin a few of the paragraphs from the Decision.
Me. Drouin
acknowledged that Justice Senacal’s words raised serious concerns. I suggested that
she contact the police since this matter involved fraud.
Our conversation was
concluded.
Why hadn’t either the IDA or the AMF reported Migirdic to the RCMP? Why are there,
at minimum, 45 other decisions posted on the IDA’s website that involve forgery and
other offences constituting fraud, (the majority of the plaintiff’s having pleaded
guilty), that the RCMP have no knowledge of?
Should the AMF be performing the
oversight of the IDA or should it be by a third party reporting to the legislative?
What justice is there for the other victims, as per the Decision, of CIBC and Tom
Monahan’s fraudulent acts?
CIBC refused to provide “with respect to the communication of Mr. Migirdic's past
compliance, disciplinary, credit and regulatory files” as found in Papazian c. Marchés
mondiaux CIBC inc. [2003] J.Q. no 12759 para. 26.10
2.
For confidentiality and privacy reasons, we will hide the clients'
names and account numbers in each file;
It would appear that there are several others which may have suffered a similar fate
to that of the Markarians.
Will the RCMP open a file and investigate this matter?
response.
Best wishes,
Robert Kyle
InvestorVoice.ca
60 Pleasant Blvd. #2501
Toronto, Ontario
M4T 1K1
Home: 416-925-6230
Cell: 647-868-6230
Page 5 of 5
I look forward to your
COMITÉ DU CONSEIL DE SECTION
CANADA
PROVINCE DE QUÉBEC
Date : 16 avril 2004
______________________________________________________________________
PRÉSIDENT :
Me Jean-Pierre Lussier
______________________________________________________________________
ASSOCIATION CANADIENNE DES COURTIERS EN VALEURS MOBILIÈRES,
Ci-après appelée « l’Association »
Et
HARRY MIGIRDIC,
Ci-après appelé « l’intimé »
______________________________________________________________________
DÉCISION
______________________________________________________________________
[1]
Le 19 janvier 2004, l’Association signait un avis d’audience adressé à l’intimé
afin qu’il comparaisse devant le Comité du conseil de section pour y répondre de 24
chefs d’infraction.
PAGE : 2
1.
LES PRÉLIMINAIRES
[2]
L’intimé a effectivement comparu à la date prévue à cet avis d’audience, soit le 4
février 2004. Il n’avait cependant pas signifié par écrit une réponse aux allégations de
l’avis d’audience dans le délai prévu aux statuts de l’Association.
[3]
Au lieu de tenir pour avérés les faits allégués et les conclusions de l’Association,
comme l’autorise l’article 15 du Statut 20, vu leur gravité et la déclaration de l’intimé à
l’effet qu’il était représenté par avocat, le Comité a choisi de remettre l’audience au 18
mars 2004 et de permettre à son avocat de produire, le cas échéant, une contestation
écrite des allégations et conclusions de l’Association.
[4]
Le 16 février 2004, l’intimé a produit une contestation écrite de tous et chacun
des chefs d’infraction par l’entremise de son procureur, Me Franco Iezzoni.
2.
LA PREUVE
[5]
Lors de l’audience du 18 mars 2004, l’intimé et son procureur étaient présents.
L’intimé a d’abord procédé au dépôt d’un document à l’effet qu’il admettait le contenu
de chacun des paragraphes 1 à 138 des détails au soutien de tous les chefs
d’infraction. Par la suite, il déposait un second document par lequel il retirait à Me
Iezzoni le mandat de le représenter. Il ajoutait qu’il désirait se représenter lui-même,
sans avocat.
[6]
Vu l’admission générale des faits allégués, l’Association déclara sa preuve close.
[7]
Interrogé par le président du Comité sur la question de savoir si son admission
des allégations à l’appui des chefs d’infraction constituait pour lui un plaidoyer de
culpabilité, l’intimé répondit négativement et manifesta son intention de témoigner.
[8]
Dans son témoignage, il mentionna que toutes les transactions faites pour ses
clients, l’avaient été avec leur plein consentement. Ceux-ci, rapporte-t-il, lui avaient
donné mandat de faire fructifier leurs comptes depuis plusieurs années et ce n’est
qu’avec l’effondrement des marchés qu’ils se plaignirent de sa gestion de leurs
comptes.
[9]
Contre-interrogé par exemple à l’égard de sa cliente J.P., il reconnaît tous les
détails contenus aux paragraphes 16 à 22 et il ignore le paragraphe 23. Cette cliente
voulait qu’elle puisse disposer d’une somme mensuelle fixe et lui laissait latitude pour le
reste.
[10] Il admet aussi avoir fait signer en blanc des formules de garanties d’une autre
cliente (R.L.) par un client (H.M.) qui ne connaissait pas R.L. Ce client, signataire de la
garantie, lui faisait confiance, croyant à une formalité temporaire. Quant à la cliente
R.L., elle ne savait pas que H.M. avait garanti son compte. Le même pattern a été
utilisé pour garantir le compte d’autres clients.
PAGE : 3
[11]
La preuve a été ensuite déclarée close de part et d’autre.
3.
APPRÉCIATION DE LA PREUVE À L’ÉGARD DES INFRACTIONS
REPROCHÉES
[12] Le Comité rappelle d’abord, pour le bénéfice du lecteur, que l’intimé a, dans sa
réponse fournie selon l’obligation que lui faisait l’article 14 du Statut 20, admis les faits
allégués sans cependant reconnaître les conclusions qu’en tirait l’ACCOVAM.
[13] L’article 15 du même Statut 20 stipule que le Comité peut accepter comme ayant
été prouvés les faits allégués qui n’ont pas été explicitement niés dans la réponse de
l’intimé. Or, en l’espèce, non seulement les faits n’ont-ils pas été niés, mais ils ont été
spécifiquement admis à la fois dans la réponse et dans le témoignage de l’intimé à
l’audience. Pour cette raison, le Comité estime que chaque fait exposé dans les détails
1 à 138 a été établi à sa satisfaction.
[14] Ceci précisé, pour une meilleure intelligence de sa décision, le Comité juge à
propos de reproduire un à la suite de l’autre chaque chef d’infraction et les détails le
concernant. Par la suite, le Comité exposera son appréciation de la preuve à l’égard de
ces chefs d’infraction, compte tenu des détails qui les concernent.
A)
CHEF 1
Chef 1
Entre septembre 2000 et février 2001 inclusivement, l’intimé, alors qu’il
était représentant inscrit de CIBC, une société membre de l’Association, a
effectué quelque 105 opérations discrétionnaires dans le compte de la
cliente J.P. à l’insu et sans l’autorisation écrite préalable de cette dernière,
et sans que le compte ait été autorisé et accepté par écrit comme compte
carte blanche par la personne désignée du membre CIBC, en contravention
de l’article 4 du Règlement 1300 de l’Association.
Détails
#2
L’intimé, Harry Migirdic, a été autorisé à titre de représentant inscrit le 21 mars
1980 ou vers cette date.
#4
date
Il a été nommé vice-président de Merrill Lynch le 21 octobre 1986 ou vers cette
#5
L’intimé a été transféré chez Wood Gundy (maintenant CIBC), société membre
de l’ACCOVAM, à la succursale du 600, boul. De Maisonneuve à Montréal, le 15 janvier
1990 ou vers cette date.
#6
L’intimé a été congédié le 5 avril 2001 ou vers cette date.
PAGE : 4
#7
Depuis son congédiement de CIBC, l’intimé n’a pas été employé par aucune
société membre et n’a pas été autorisé à quelque titre que ce soit par l’Association.
#16 Le 24 août 2000 ou vers cette date, J.P. a ouvert le compte n° 500-21169 chez
CIBC auprès de l’intimé, qui était son conseiller en placement.
#17 Au moment de l’ouverture du compte, J.P. était âgée de 68 ans; son revenu
annuel estimatif était de 24 000 $ et sa valeur nette totale s’élevait à environ 300 000 $.
Selon le profil de la cliente, les objectifs de placement étaient les suivants : 50% gains
en capital à court terme et 50% gains en capital à long terme. Les facteurs de risque du
compte étaient les suivants : 50% faible et 50% élevé. Les connaissances de la cliente
en matière de placement étaient qualifiées de «bonnes».
#18 Le profil de la cliente a été mis à jour le 24 octobre 2000 ou vers cette date, soit
deux mois après l’ouverture de son compte, et les facteurs de risque ont alors été
changés pour 50% moyen et 50% élevé.
#19 Malgré le fait que le compte de J.P. n’était pas un compte carte blanche, l’intimé
a procédé à des achats et des ventes de titres sans consulter la cliente au moment de
ces opérations ou au sujet des titres visés, de la quantité ou des prix.
#20 Entre le 6 septembre 2000 et février 2001, un total d’environ 105 opérations ont
été effectuées dans le compte de la cliente.
#21 Toutes les opérations effectuées dans le compte de J.P. ont été exécutées sur
une base discrétionnaire.
#22 Le compte de J.P. n’avait pas été autorisé et accepté par CIBC comme compte
carte blanche conformément à l’article 4 du Règlement 1300 de l’Association.
#23 CIBC a d’ailleurs ramené les comptes de J.P. à leur statut initial à partir des
renseignements contenus dans le profil de la cliente et a indemnisé celle-ci pour les
pertes qu’elle avait subies. CIBC a d’abord versé un montant de 97 400 $ à la cliente,
représentant le rendement du capital dans le compte n° 500-21169, majoré des intérêts.
CIBC a ensuite crédité le compte FERR n° 553-19545 de J.P. d’un montant de
112 000 $. Ce montant représentait aussi le rendement du capital dans le compte,
majoré des intérêts. CIBC a présenté cette offre à J.P. parce que le compte renfermait
principalement deux titres à risque élevé qui ne convenaient pas à un FERR.
[15] Soulignons en premier lieu qu’il n’est pas contesté que l’intimé était un
représentant inscrit de mars 1980 à avril 2001 (cf. détails nos 2, 4, 6 et 7) auprès de
l’Association.
PAGE : 5
[16] Or l’article 4 du Règlement 1300 qui s’applique entre autres aux représentants
inscrits, stipule ce qui suit :
Article 4 : Aucune personne, à l’exception d’un associé, d’un administrateur, d’un
dirigeant ou d’un représentant inscrit (autre qu’un représentant inscrit
(organismes de placement collectif) ou (clients institutionnels)), qui a été autorisé
comme tel en vertu des Statuts applicables de l’Association, ne peut effectuer
des opérations pour un client sur un compte carte blanche, et de telles
opérations autorisées ne pourront être effectuées que si :
a)
le client a préalablement donné au membre une autorisation
écrite qui est acceptée par ce dernier conformément à l’article
5 du présent Règlement;
b)
le compte a été formellement autorisé et accepté par écrit
comme un compte carte blanche par l’administrateur,
l’associé, le dirigeant, le directeur de succursale, le
responsable de contrats à terme ou d’options sur contrats à
terme désigné, selon le cas, qui a autorisé l’ouverture du
compte,
et si cette personne autorisée à effectuer des opérations sur ces comptes, en
vertu de pouvoirs discrétionnaires, négocie activement sur le marché des titres,
des contrats à terme ou des options sur contrats à terme ou agit à titre de
conseiller ou effectue des analyses relativement à ces marchés depuis une
période de deux ans.
[17] Cette disposition, à son alinéa a), édicte qu’un représentant inscrit ne peut
effectuer des opérations pour un client sur un compte carte blanche, à moins que le
client n’ait préalablement fourni au membre (en l’espèce, il s’agissait ici de Wood Gundy
devenue CIBC) une autorisation écrite acceptée par ce dernier.
[18] Les détails #19, #20 et #21 établissent que même si le compte de J.P. n’était pas
un compte carte blanche, l’intimé a procédé à environ 105 opérations sans consulter sa
cliente, uniquement sur une base discrétionnaire. Ce compte de J.P. n’a pas été
autorisé par CIBC comme un compte carte blanche conformément à l’article 4 du
Règlement 1300 (cf. détail #22).
[19] Dans son témoignage, l’intimé a mentionné que ses clients (incluant donc J.P.)
savaient ou consentaient à ce qu’il procède à des transactions discrétionnaires.
[20] Cette affirmation de l’intimé, qu’elle soit ou non bien fondée, ne modifie
nullement les prescriptions de l’article 4 du Règlement 1300. Pour pouvoir effectuer
des opérations discrétionnaires sur le compte d’un client, ce dernier doit préalablement
fournir au membre (en l’espèce CIBC) une autorisation écrite et acceptée formellement
par ce dernier comme un compte carte blanche.
PAGE : 6
[21] Une autorisation donnée verbalement par le client n’est pas qu’une simple
contravention de formalité. Car la procédure d’autorisation a pour objectif que ces
types de compte soient gérés par des personnes convenablement qualifiées. Ces
comptes sont aussi assujettis à une surveillance plus étroite chez le membre. Il s’ensuit
qu’un compte opéré discrétionnairement sans avoir préalablement été autorisé par écrit
expose le client à un risque plus grand.
[22] Pour toutes ces raisons, le Comité estime que l’intimé a contrevenu à ce chef
d’infraction.
B)
CHEF 2
Chef 2
effectué des opérations discrétionnaires dans le compte du client J.M. à
l’insu et sans l’autorisation écrite préalable de ce dernier, et sans que le
compte ait été autorisé et accepté par écrit comme compte carte blanche
par la personne désignée du membre CIBC, en contravention de l’article 4
du Règlement 1300 de l’Association.
Détails
#24 Le 9 septembre 2000 (on devrait lire le 19 septembre au lieu du 9) ou vers cette
date, J.M. a ouvert le compte n° 310-28106 chez CIBC auprès de l’intimé, qui était son
conseiller en placement.
#25 Au moment de l’ouverture du compte, J.M. était âgé de 80 ans; son revenu
annuel estimatif était de 35 000 $ et sa valeur nette totale s’élevait à environ 375 000 $.
Selon le profil du client, les objectifs de placement étaient les suivants : 100% gains en
capital à long terme. Les facteurs de risque du compte étaient les suivants : 45% faible,
45% moyen et 10% élevé. Les connaissances du client en matière de placement
étaient qualifiées d’«excellentes».
#26 Malgré le fait que le compte de J.M. n’était pas un compte carte blanche, l’intimé
a procédé à des achats et des ventes de titres sans consulter le client au moment de
#27 J.M. s’est plaint à la CIBC au sujet du fait que l’intimé effectuait des opérations
sans son autorisation ou sans le consulter et que, en de nombreuses occasions, il avait
exprimé son profond désaccord à l’égard des achats effectués.
#28 Entre septembre 2000 et février 2001, un total d’environ 35 opérations ont été
effectuées dans le compte du client.
PAGE : 7
#29 Le compte de J.M. n’avait pas été autorisé et accepté par CIBC comme compte
#30 CIBC a d’ailleurs indemnisé J.M. pour les pertes qu’il avait subies. Le montant
de l’indemnisation s’est élevé à 69 897,72$.
[23] Ce que le Comité écrivait à propos du chef 1 s’applique mutatis mutandis au chef
2. Le Comité estime donc que l’intimé a contrevenu au chef d’infraction 2.
C)
CHEFS 3 À 6
Chef 3
Le 8 mai 2000 ou vers cette date, l’intimé a eu une conduite inconvenante
et préjudiciable aux intérêts du public en modifiant les objectifs de
placement, les facteurs de risque et la valeur nette totale dans la mise à
jour du profil du client P.A. à l’insu et sans le consentement de ce dernier,
en contravention de l’article 1 du Statut 29 de l’Association.
Chef 4
effectué des opérations discrétionnaires dans le compte du client P.A. à
l’insu et sans l’autorisation écrite préalable de ce dernier, et sans que le
compte ait été autorisé et accepté par écrit comme compte carte blanche
par la personne désignée du membre CIBC, en contravention de l’article 4
du Règlement 1300 de l’Association.
Chef 5
Le 14 mai 2000 ou vers cette date, l’intimé n’a pas observé des normes
élevées de déontologie et de conduite et a eu une conduite inconvenante et
préjudiciable aux intérêts du public en assumant la responsabilité de la
baisse de valeur du portefeuille de son client P.A. et en offrant à ce dernier
de le dédommager pour les pertes qui pouvaient en résulter entre janvier
2000 et janvier 2001, cette offre ayant été faite à l’insu et sans le
consentement ou l’autorisation de CIBC, en contravention de l’article 1 du
Statut 29 de l’Association et de la Norme C du Code de déontologie et des
normes de conduite.
PAGE : 8
Chef 6
Le 1er juillet 2000 ou vers cette date, l’intimé n’a pas observé des normes
élevées de déontologie et de conduite et a eu une conduite inconvenante et
préjudiciable aux intérêts du public en remettant à son client P.A., à l’insu
et sans le consentement ou l’autorisation de CIBC, un billet à ordre d’un
montant de 400 000$ pour couvrir les pertes que le client avait subies dans
son compte, en contravention de l’article 1 du Statut 29 de l’Association et
de la Norme C du Code de déontologie et des normes de conduite.
Détails
#31 P.A. détenait le compte n° 500-08860 chez CIBC auprès de l’intimé, qui était son
conseiller en placement.
#32 Selon la mise à jour du profil du client datée du 4 novembre 1994, P.A. était âgé
de 65 ans; son revenu annuel estimatif était de 100 000 $ et sa valeur nette totale
s’élevait à environ 250 000 $. Les objectifs de placement du client étaient les suivants :
50% revenu et 50% gains en capital à moyen terme. Les facteurs de risque du compte
étaient «100% faible». Dans cette mise à jour, les connaissances du client en matière
de placement étaient qualifiées de «bonnes».
#33 Une nouvelle mise à jour du profil du client a été remplie le 1er septembre 1995
ou vers cette date et les facteurs de risque ont alors été changés comme suit : 70%
faible, 10% moyen et 20% élevé. La valeur nette totale du client a été portée à
600 000 $.
#34 Dans une autre mise à jour du profil du client, datée du 18 mars 1997, les
facteurs de risque ont été changés comme suit : 30% faible, 20% moyen et 50% élevé.
La valeur nette totale du client a été relevée à 1 000 000 $, et les connaissances du
client en matière de placement ont été qualifiées cette fois d’«excellentes».
#35 Une dernière mise à jour du profil du client a été remplie le 8 mai 2000 ou vers
cette date. Les objectifs de placement de P.A. ont alors été changés comme suit : 40%
revenu, 20% court terme, 30% moyen terme et 10% long terme. Les facteurs de risque
du compte ont également été changés, mais cette fois comme suit : 10% faible, 10%
moyen et 80% élevé. Enfin, la valeur nette totale du client a été portée à 1 800 000 $.
#36 L’intimé n’a pas informé P.A. des changements qu’il avait apportés dans la mise
à jour de son profil en mai 2000. P.A. ne savait pas que son profil était mis à jour en
mai 2000, aussi n’a-t-il jamais approuvé ou consenti à ces changements.
#37 Malgré le fait que le compte de P.A. n’était pas un compte carte blanche, l’intimé
a procédé à des achats et des ventes de titres sans consulter le client au moment de
PAGE : 9
#38 Toutes les opérations effectuées sur des titres américains dans le compte de
P.A. ont été exécutées sur une base discrétionnaire, à l’exception des opérations
portant sur deux actions.
#39 Entre mars 1994 et février 2001, un total d’environ 1400 opérations ont été
effectuées dans le comptes de P.A. Au cours de l’année 2000, quelque 360 opérations
ont été effectuées dans le compte.
#40 Le compte de P.A. n’avait pas été autorisé et accepté par CIBC comme compte
#41 De plus, entre décembre 1999 et juin 2000, le portefeuille de P.A. a perdu près
de 50% de sa valeur. Au 31 décembre 1999 ou vers cette date, le portefeuille avait une
valeur de 1 059 954,82$, et au 30 juin 2000 ou vers cette date, il ne valait plus que
471 519,21$.
#42 P.A. s’est plaint à l’intimé au sujet de ses pertes. En guise de réponse, l’intimé a
remis à son client, le 14 mai 2000 ou vers cette date, une lettre dans laquelle il disait
assumer la responsabilité de la baisse de valeur du portefeuille et s’engageait à rétablir
la valeur du portefeuille avant la clôture du troisième vendredi de janvier 2001 pour
qu’elle corresponde à la valeur détenue au 20 janvier 2000, soit 1 059 954$. L’intimé a
également écrit que, s’il n’arrivait pas à rétablir la valeur du portefeuille à son niveau de
janvier 2000, il rembourserait au titulaire du compte la différence entre la valeur au mois
de janvier 2000 et la valeur au mois de janvier 2001.
#43 L’intimé a présenté cette offre à P.A. à l’insu et sans le consentement ou
l’autorisation de CIBC.
#44 Toujours insatisfait, P.A. a envoyé une lettre à l’intimé l’enjoignant de cesser
toutes les opérations dans son compte et de lui rembourser ses pertes.
#45 Après avoir reçu la lettre de P.A., vers le 1er juillet 2000, l’intimé a offert et remis
à P.A. un billet à ordre d’un montant de 400 000 $.
#46 En plus de ce billet à ordre, l’intimé a remis à P.A. une photocopie d’une
obligation de 300 000 $ en guise de garantie.
#47 L’intimé n’a pas informé CIBC qu’il avait remis un billet à ordre à P.A., car il
espérait que les marchés se redressent et qu’il n’ait pas à rembourser P.A.
#48 En ce qui concerne le compte de P.A., l’intimé a écrit ce qui suit dans son
courriel du 26 février 2001 : (version originale anglaise) « 50008860 Discretionary
trades in options loss in account 900m».
#49 En mars 2001, CIBC a informé P.A. que l’intimé avait demandé un congé pour
des raisons de santé.
PAGE : 10
#50 Le 29 mars 2001 ou vers cette date, CIBC a envoyé une lettre à P.A. lui
demandant de combler l’insuffisance de couverture de 111 158 $ dans son compte en
liquidant des positions et en déposant d’autres liquidités ou d’autres titres dans le
compte. De plus, CIBC a indiqué au client que, s’il ne transférait pas des fonds ou des
titres dans son compte ou ne donnait pas des instructions appropriées en vue de la
liquidation de positions dans son compte avant la clôture des marchés le 29 mars 2001,
le compte serait liquidé à 9 h 30 le lendemain matin.
#51 P.A. a refusé de donner des instructions à CIBC pour la liquidation de ses
positions en vue de combler l’insuffisance de couverture dans son compte, et CIBC a
confirmé dans une lettre envoyé à P.A. qu’elle avait liquidé des positions à partir du 30
mars 2001.
[24] L’article 1 du Statut 29 défend à un représentant inscrit d’avoir une conduite
inconvenante et préjudiciable aux intérêts du public. Il se lit ainsi :
1.
Les membres ainsi que chaque associé, administrateur, dirigeant,
directeur des ventes, directeur, directeur adjoint ou codirecteur de
succursale, représentant inscrit, représentant en placement et employé
d’un membre (i) sont tenus d’observer des normes élevées d’éthique et
de conduite professionnelle dans l’exercice de leur activité, (ii) ne doivent
pas avoir de conduite ou de pratique commerciale inconvenante ou
préjudiciable aux intérêts du public et (iii) doivent avoir le caractère, la
réputation, l’expérience et la formation qui correspondent aux normes
mentionnées aux points (i) et (ii) qui précèdent ou que le conseil
d’administration peut prescrire.
Aux fins des procédures disciplinaires prévues aux Statuts, chaque
membre est responsable des actes et des omissions de chacun de ses
associés, administrateurs, dirigeants, directeurs des ventes, directeurs,
directeurs adjoints et codirecteurs de succursale, représentants inscrits,
représentants en placement et employés, et chacune des personnes
susmentionnées doit se conformer à tous les Statuts, Règlements et
Principes directeurs auxquels le membre doit se conformer.
[25] Dans le cas du client P.A., la preuve a établi que le ou vers le 8 mai 2000, les
objectifs de placement du client ont été modifiés par l’intimé sans que le client n’en ait
été avisé ou n’ait consenti à ces changements (cf. pièce P-21 et détails nos 34 et 35).
L’intimé a changé le formulaire Know your client pour faire passer les facteurs de risque
élevé de 50% à 80%, de toute évidence afin de refléter l’état des transactions actuelles
et futures du compte.
[26] Les formulaires d’ouverture de compte (ci-après désignés comme FDOC)
doivent être mis à jour pour refléter les changements importants dans la situation du
PAGE : 11
client afin d’assurer que les recommandations de placement soient appropriées. En
l’espèce, il était loin d’être approprié de modifier à la hausse le risque des placements
de P.A. sans en avoir préalablement discuté avec lui. Une telle façon de faire
constituait certes une conduite inconvenante au sens de l’article 1 du Statut 29.
[27]
Le Comité conclut donc que le chef d’infraction 3 est bien fondé.
[28] Le chef d’infraction 4 concerne aussi le client P.A. Il fait reproche à l’intimé
d’avoir contrevenu à l’article 4 du Règlement 1300 (précédemment reproduit), en
effectuant des opérations discrétionnaires dans son compte, à son insu et sans
autorisation écrite préalable du client et sans que le membre n’ait autorisé ce compte
comme un compte carte blanche.
[29] La preuve a établi qu’au moment des transactions tout au moins,
consultait pas P.A. (cf. détail #37). Le compte n’était pas un compte carte
les opérations au nombre d’environ 1400 ont été effectuées sur
discrétionnaire (cf. détails #37 à #39). Et enfin, le membre n’avait pas
autorisé le compte de P.A. comme un compte carte blanche (cf. détail #40).
l’intimé ne
blanche et
une base
accepté ni
[30] Le Comité réitère encore ici les propos qu’il tenait à l’égard du chef d’infraction 1
et pour ces mêmes raisons, il déclare que le chef 4 est bien fondé.
[31] Les chefs 5 et 6 sont similaires. Le premier reproche à l’intimé d’avoir offert à
son client P.A. de le dédommager pour ses pertes et ce, à l’insu du membre. Le
second, d’avoir remis à son client un billet à ordre au montant de 400 000 $ dans les
mêmes circonstances.
[32] Les deux chefs réfèrent à une contravention à l’article 1 du Statut 29, mais
également à la norme C du Code de déontologie. L’article 1 du Statut 29 a été
précédemment reproduit. Quant à la norme C du Code de déontologie, elle se lit
différemment dans ses versions anglaise et française. En effet, la version française se
lit comme suit:
La personne inscrite doit encourager les autres à exercer leurs activités dans les
valeurs mobilières d’une façon professionnelle, ce qui aura des retombées
positives sur elle-même, ses employeurs et la profession. La personne inscrite
doit aussi s’efforcer de maintenir et d’accroître ses connaissances
professionnelles et partager avec les autres membres de la profession des
renseignements susceptibles de les aider.
(le soulignement est du Comité)
[33]
Quant à la version anglaise elle est pour sa part libellée ainsi :
PAGE : 12
Registrants must, and should encourage others too, conduct business in a
professionnal manner that will reflect positively on themselves, their firms and
their profession. Registrants should also strive to maintain and improve their
professionnal knowledge and that of others in the profession.
(le soulignement est du Comité)
[34] Le Comité n’est pas sans noter une disparité significative dans le libellé de cette
norme selon que l’on considère la version anglaise ou française. Dans la version
anglaise, la norme exige du représentant inscrit qu’il conduise ses affaires d’une façon
professionnelle et encourage autrui à faire de même. Dans le texte français, l’obligation
semble se limiter à encourager autrui à se conduire de façon professionnelle.
[35] Cette différence entre les deux versions est déplorable et susceptible
d’engendrer de l’ambiguïté, du moins à l’égard d’un représentant inscrit qui n’aurait
consulté que la version française.
[36] Quoiqu’il en soit, dans le cas sous étude, il faut cependant convenir de deux
choses. D’une part, l’intimé utilise essentiellement la langue anglaise et il n’a jamais
prétendu avoir de quelque façon été induit en erreur par le libellé français de cette
norme, libellé qu’il n’a sans doute jamais consulté.
[37] D’autre part, l’obligation d’encourager autrui à se conduire de façon
professionnelle peut difficilement se dissocier de l’obligation d’agir soi-même de façon
professionnelle. Un représentant inscrit qui ne se conduit pas de façon professionnelle
n’incite-t-il pas autrui, n’encourage-t-il pas autrui à suivre son exemple ?
[38] Pour ces deux raisons, le Comité a décidé de ne pas se préoccuper de la
disparité des deux versions et il conclut que, selon l’une et l’autre, le but recherché
reste essentiellement le même, à savoir le professionnalisme du représentant inscrit.
Or, ce professionnalisme implique que le représentant dirige ses affaires personnelles
de façon responsable, de manière à faire honneur à son employeur et sa profession.
Pour ce faire, il doit éviter d’avoir des rapports personnels de nature financière avec un
client, comme lui prêter ou emprunter des sommes d’argent, régler les pertes d’un client
à partir de ses propres fonds et ne pas partager d’intérêt financier dans un compte avec
un client. Il doit éviter les conflits d’intérêt réels ou apparents et, le cas échéant,
divulguer une situation potentielle de conflit d’intérêt à la firme qui l’emploie.
[39] Au surplus, le fait d’agir de façon non professionnelle constitue certes une
conduite inconvenante au sens de l’article 1 du Statut 29. Cette disposition, rappelonsle, fait obligation aux membres et aux représentants inscrits d’observer des normes
élevées d’éthique et de conduite professionnelle dans l’exercice de leur activité. Elle
défend aussi une conduite inconvenante.
[40] Si l’on revient maintenant aux faits à la source des chefs 5 et 6, la preuve a établi
que l’intimé a offert à P.A. de le dédommager pour ses pertes et ce, à l’insu et sans le
PAGE : 13
consentement de CIBC (cf. détails #41 et #43). De même, il a offert et remis à P.A. un
billet à ordre de 400 000,$ à l’insu et sans l’autorisation de CIBC (cf. détails #45 et #47).
[41] En agissant ainsi, qu’il ait ou non été de bonne foi, l’intimé indirectement privait
son client de son droit à se plaindre rapidement devant les instances de résolution des
différends ou encore à la société membre afin d’obtenir une indemnisation. L’intimé se
mettait à l’abri d’une plainte, faisant primer son propre intérêt sur celui de son client.
[42] Cette façon d’agir, non professionnelle pour l’ensemble des raisons que nous
avons précédemment exposées, constitue de l’avis du Comité une conduite
inconvenante, contraire à l’article 1 du Statut 29. Elle constitue aussi une contravention
à la norme C du Code de déontologie et les chefs 5 et 6 sont donc bien fondés.
D)
CHEFS 7 À 10
Chef 7
Le 16 février 1993 ou vers cette date, l’intimé a eu une conduite
inconvenante de la part d’un représentant inscrit, en contravention de
l’article 1 du Statut 29 de l’Association, en obtenant, par un faux semblant,
la signature de H.M. pour une convention de garantie de compte donnée en
faveur du compte de R.L.
Chef 8
Le 21 juillet 1995, le 31 juillet 1996, le 21 juillet 1997 et le 18 août 1997 ou
vers ces dates, l’intimé a eu une conduite inconvenante de la part d’un
représentant inscrit, en contravention de l’article 1 du Statut 29 de
l’Association, en n’indiquant pas dans les mises à jour du profil de la
cliente R.L. que le compte de H.M. et de A.M. garantissait le compte de
cette dernière.
Chef 9
Le 3 octobre 1997 et le 2 août 1999 ou vers ces dates, l’intimé a eu une
conduite inconvenante de la part d’un représentant inscrit, en
contravention de l’article 1 du Statut 29 de l’Association, en n’indiquant pas
dans les mises à jour du profil des clients H.M. et A.M. que R.L. avait un
intérêt financier dans le compte de ces derniers, puisque ce compte
garantissait le compte de R.L.
Chef 10
Le 25 avril 2000 ou vers cette date, l’intimé a eu une conduite inconvenante
de la part d’un représentant inscrit, en contravention de l’article 1 du Statut
PAGE : 14
29 de l’Association, en obtenant, par un faux semblant, la signature de H.M.
pour une attestation de convention de garantie de compte donnée en
faveur du compte de R.L.
Détails
#52
L’intimé connaissait H.M. et A.M. depuis le début des années 1980.
#53 Le 7 octobre 1986 ou vers cette date, H.M. et A.M. ont ouvert un compte conjoint
(compte n° 500-01327) chez Merril Lynch auprès de l’intimé, qui était leur conseiller en
placement.
#54 Au moment de l’ouverture du compte, H.M. était âgé de 53 ans et son épouse,
A.M., était âgée de 49 ans.
#55 L’intimé a rempli un profil de client et a fait deux mises à jour de ce profil pour le
compte de H.M. et de A.M., comme suit :
Date
7 oct. 1986
3 oct. 1997
2 août 1999
100% long terme
100% long terme
Titres de bonne qualité
50% moyen
50% moyen
Titres spéculatifs
50% élevé
50% élevé
Revenu annuel
50 000 $
100 000 $
100 000 $
Valeur nette totale
250 000 $
1 000 000 $
2 000 000 $
Bonnes
Bonnes
Objectifs de placement Revenu
Croissance
Facteurs de risque
Connaissance en
matière de placement
#56 En 1988, R.L. a ouvert le compte n° 500-01193 chez Merrill Lynch auprès d’un
conseiller en placement qui n’était pas l’intimé.
#57
L’intimé est devenu le conseiller en placement de R.L. par la suite.
#58
L’intimé a effectué sept (7) mises à jour du profil de R.L., comme suit :
PAGE : 15
Date
25-3-1991
22-7-1992
21-7-1995
31-7-1996
21-7-1997
5-8-1999
18-8-1997
Objectifs de 25%
placement
croissance
20% revenu 10%
revenu
70% court
50%
terme
70% court
croissance
terme
avec risque 10%
long
terme
20% long
25%
terme
placements
en capital
de risque
Facteurs de
risque
50% faible
50% court 50%
terme
terme
court 50% court
terme
50% long 50%
terme
terme
long 50% long
terme
30% moyen 30% moyen 100% élevé
100% élevé
50% moyen 70% élevé
70% élevé
40 000 $
40 000 $
40 000 $
40 000 $
40 000 $
Valeur nette 400 000 $
totale
400 000 $
400 000 $
400 000 $
400 000 $
800 000 $
Connaissan
ces en
matière de
placement
Bonnes
Bonnes
Bonnes
Bonnes
Bonnes
Revenu
annuel
40 000 $
Bonnes
#59 En ce qui concerne le compte de H.M. et de A.M. et le compte de R.L., l’intimé a
écrit ce qui suit dans son courriel du 26 février 2001 : (version originale anglaise)
«50001327 garantees 50001193 since 1995 unaware of the guarantee dr in 50001193
320m+150 their $».
#60 En février 1993, R.L. a voulu retirer de l’argent de son compte chez CIBC mais
celui-ci affichait des pertes.
#61 Pour assurer à R.L. qu’elle pouvait retirer de l’argent de son compte, l’intimé a
fait signer à H.M., le 16 février 1993 ou vers cette date, une convention de garantie de
compte en faveur de R.L.
#62 H.M. et A.M. ne connaissaient pas R.L. et ne connaissaient pas non plus la
nature du document que H.M. signait. Ils n’étaient pas au courant des conséquences
que pouvait entraîner cette garantie. Ils n’avaient aucune raison de garantir le compte
de R.L., compte d’une personne qu’ils ne connaissaient pas.
PAGE : 16
#63 L’intimé a obtenu la signature de H.M. en donnant pour prétexte que la signature
était nécessaire pour l’administration du compte.
#64 Le 21 juillet 1995, le 31 juillet 1996, le 21 juillet 1997 et le 18 août 1997 ou vers
ces dates, alors qu’il mettait à jour le profil de la cliente R.L., l’intimé a omis d’indiquer
que le compte de H.M. et de A.M. garantissait le compte de celle-ci.
#65 Le 3 octobre 1997 et le 2 août 1999 ou vers ces dates, alors qu’il mettait à jour le
profil de client de H.M. et de A.M., l’intimé a omis d’indiquer que R.L. avait un intérêt
financier dans le compte de H.M. et de A.M., puisque ce dernier garantissait le compte
de R.L.
#66 Le 25 avril 2000 ou vers cette date, l’intimé a fait signer à H.M., par un faux
semblant, une lettre confirmant la garantie de compte donnée en faveur du compte de
R.L.
[43] Le chef 7 reproche à l’intimé une conduite inconvenante au sens de l’article 1 du
Statut 29 précédemment reproduit, en ce que le 16 février 1993, il aurait obtenu par un
faux semblant la signature de son client H.M. pour une convention de garantie en
faveur d’une autre cliente, R.L.
[44] À ce sujet, les détails #60 à #63 établissent la cause de reproche. La garantie
datée du 16 février 1993 (pièce P-48) a été signée par H.M. en faveur de R.L. Le
premier ne connaissait pas la seconde et n’avait aucun avantage, ni aucune raison à
garantir ce compte. S’il a signé la convention de garantie, c’était parce que l’intimé lui a
laissé croire que ce document était une formalité nécessaire pour l’administration de
son propre compte.
[45] Il s’agissait certes là d’une supercherie, d’un faux semblant. L’intimé a fait de
fausses représentations à H.M. pour obtenir cette garantie sur le compte de R.L. Il a
ainsi causé préjudice à H.M. en plus de porter atteinte à la confiance du public dans la
profession dans son ensemble.
[46] De tels agissements ont déjà été jugés contraires à l’article 1 du Statut 29,
notamment dans une affaire impliquant Patrick Teggart1. Monsieur Teggart avait
obtenu la signature de deux clients pour la garantie de comptes alors que ces deux
clients ne savaient pas ou ne comprenaient pas la nature du document signé.
[47] Le Comité n’a donc aucune hésitation à conclure en une contravention à l’article
1 du Statut 29 et à déclarer bien fondé le chef 7.
1
ACCOVAM vs Patrick Teggart, Bulletin de l’Accovam, no. 3138, 24 avril 2003;
PAGE : 17
[48] Le chef 8 reproche à l’intimé une conduite inconvenante en contravention avec
l’article 1 du Statut 29 en n’indiquant pas dans les mises à jour du profil de la cliente
R.L. que le compte de H.M. et A.M. garantissait son propre compte.
[49] La preuve établit qu’aux quatre dates mentionnées au chef d’infraction 8 des
formulaires de mise à jour du compte de R.L. ont été remplis par l’intimé (pièces P-42 à
P-45 et détail #64). Nulle part n’y lit-on qu’H.M. et A.M. ont un intérêt financier dans le
compte de R.L. en ce qu’ils garantissaient son compte, et ce malgré que le formulaire
prévoie une case où on doit indiquer ce renseignement.
[50] Il ne fait pas de doute que la mise à jour du FDOC est un corollaire de la règle de
la connaissance du client. L’omission d’y inscrire un renseignement aussi important
que celui-là constituait certes une conduite inconvenante car la documentation ne
reflétait pas un changement important dans la situation du client.
[51]
Le chef 8 est donc bien fondé.
[52] Le chef 9 est le pendant du chef 8. Lors des mises à jour du compte de H.M. et
A.M., l’intimé a omis d’indiquer que R.L. avait un intérêt financier dans leur compte, du
fait que le compte de cette dernière était garanti par le leur. Le détail #65 et les pièces
P-35 et P-36 en établissent la preuve et le Comité estime que ce chef doit également
être retenu.
[53] Le chef 10 reproche encore une contravention à l’article 1 du Statut 29 en ce que
le 25 avril 2000, l’intimé aurait obtenu par un faux semblant la signature de H.M.,
attestant une convention de garantie donnée en faveur du compte de R.L.
[54] Bien que le Comité s’interroge sur l’étendue de la naïveté de H.M. à la lecture du
document signé par ce dernier (cf. P-49), il conclut néanmoins de la preuve que ce chef
d’infraction a été établi. En effet, l’intimé a admis avoir incité H.M. à signer ce
document suite à un faux semblant (cf. détail #66). Il a également reconnu le fait,
lorsqu’il a été interrogé par l’enquêteur Rondeau (cf. pièce P-5 à la page 8). Il lui
expliquait en effet avoir probablement mentionné à H.M. et A.M. que la convention de
garantie avait été fournie par erreur et que ce malentendu allait être arrangé bientôt.
E)
CHEFS 11 ET 12
Chef 11
Le 16 février 2001 ou vers cette date, l’intimé, alors qu’il était représentant
inscrit de CIBC, a effectué une opération discrétionnaire dans le compte de
H.M. à l’insu et sans l’autorisation écrite préalable de ce dernier, et sans
que le compte ait été autorisé et accepté par écrit comme compte carte
PAGE : 18
blanche par la personne désignée du membre CIBC, en contravention de
l’article 4 du Règlement 1300 de l’Association.
Chef 12
Le 16 février 2001 ou vers cette date, l’intimé, alors qu’il était représentant
inscrit de CIBC, a effectué une opération discrétionnaire dans le compte de
la cliente A.M. à l’insu et sans l’autorisation écrite préalable de cette
dernière, et sans que le compte ait été autorisé et accepté par écrit comme
compte carte blanche par la personne désignée du membre CIBC, en
contravention de l’article 4 du Règlement 1300 de l’Association.
Détails
#67 Le 16 février 2001 ou vers cette date, pendant que H.M. et A.M. étaient en
voyage à l’étranger, 11 300 actions de Intergold Ltd. ont été achetées à un coût de
22 587,50 $ dans le compte REER n° 550-41038 de A.M. sans l’autorisation de la
cliente.
#68 De même, le 16 février 2001 ou vers cette date, pendant que H.M. et A.M.
étaient en voyage à l’étranger, 11 000 actions de Intergold Ltd. ont été achetées à un
coût de 21 990,50 $ dans le compte REER n° 550-41039 de H.M. sans l’autorisation du
client.
#69 CIBC a annulé les opérations du 16 février 2001 sur les actions d’Intergold et a
redressé les comptes REER en conséquence après que H.M. et A.M. eurent porté
plainte.
#70 Malgré le fait que les comptes REER de H.M. et de A.M. n’étaient pas des
comptes carte blanche, l’intimé a procédé aux achats d’actions d’Intergold sans
consulter les clients.
#71 Les comptes de H.M. et de A.M. n’avaient pas été autorisés et acceptés comme
comptes carte blanche par CIBC conformément à l’article 4 du Règlement 1300 de
l’Association.
#72 Au début de mars 2001, CIBC a informé H.M. et A.M. que l’intimé avait demandé
un congé pour des raisons de santé.
#73 Le 16 mars 2001 ou vers cette date, H.M. et A.M. ont envoyé une lettre à CIBC
demandant qu’aucune opération ne soit effectuée dans leurs comptes sans leur
autorisation écrite préalable.
H.M. et A.M. avaient également appris qu’ils
garantissaient le compte de R.L.
#74 Le 19 juin 2001 ou vers cette date, CIBC a envoyé une lettre à R.L. et une copie
conforme de cette lettre à H.M. et A.M., demandant à R.L. de prendre les arrangements
PAGE : 19
financiers nécessaires pour verser à la société le paiement intégral du solde dû de
356 824,91 $CA au plus tard le 26 juin 2001. CIBC a également informé la cliente que,
si elle ne fournissait pas ledit paiement, CIBC allait exercer ses droits à l’égard du
compte de H.M. et de A.M. qui garantissait le compte de R.L.
#75 CIBC a finalement vendu les positions détenues dans le compte de H.M. et de
A.M. pour couvrir le solde que devait R.L.
[55] Le Comité réitère ici ce qu’il écrivait en rapport avec le chef 1. Il s’agissait
encore ici d’opérations discrétionnaires dans deux comptes qui n’étaient pas des
comptes carte blanche. Ces opérations ont été faites à l’insu et sans autorisation
préalable des clients et sans que leur compte n’ait été autorisé et accepté par le
membre comme un compte carte blanche.
[56] Les détails #67 à #71 établissent la culpabilité de l’intimé sous chacun des deux
chefs.
F)
CHEFS 13 À 17
Chef 13
Le 28 mars 1994 ou vers cette date, l’intimé a eu une conduite
la signature de H.M. à titre d’actionnaire principal de X inc. pour une
convention de garantie de compte donnée en faveur du compte de S.G.
Chef 14
Le 31 octobre 1995, le 17 octobre 1996, le 15 octobre 1997, le 19 octobre
1998 et le 20 octobre 1999 ou vers ces dates, I'intimé a eu une conduite
inconvenante de la part d'un représentant inscrit, en contravention de
l'article 1 du Statut 29 de l'Association, en obtenant, par un faux semblant,
la signature de H.M. à titre d'actionnaire principal de X inc pour une
attestation de convention de garantie de compte donnée en faveur du
compte de S.G.
Chef 15
Le 13 mars 1997, le 30 septembre 1997 et le 21 mai 1998 ou vers ces dates,
I'intimé a eu une conduite inconvenante de la part d'un représentant inscrit,
en contravention de l'article 1 du Statut 29 de l'Association, en n'indiquant
PAGE : 21
Facteurs
de risque
Titres de
bonne
qualité
100% élevé
Titres
spéculatif
s
10% faible
10% moyen
20 000 $
50 000 $
100% élevé
100% élevé
50% élevé
80% élevé
Revenu
annuel
50%
moyen
100 000 $
100 000 $
100 000 $
100 000 $
100 000 $
Valeur
100 000 $ 200 000 $ 250 000 $
nette totale
300 000 $
500 000 $
500 000 $
1 000 000 $
Excellentes
Excellentes
Excellentes
Excellentes
Excellentes
Connaissa
nces en
matière de
placement
#80 Le 15 novembre 1993 ou vers cette date, H.M. et A.M. ont ouvert le compte n°
500-00204 au nom de X inc., leur société de portefeuille, chez CIBC auprès de l’intimé,
qui était leur conseiller en placement.
#81 L’intimé a rempli un profil de client pour X inc. et effectué trois (3) mises à jour de
ce profil, comme suit :
Date
15 nov. 1993
18 sept. 1995
30 sept. 1997
21 mai 1998
80% revenu
80% revenu
80% revenu
80% revenu
20% long terme
20% long terme
20% long terme 20% long terme
100% faible
50% faible
50% faible
50% moyen
50% moyen
1 000 000 $
1 000 000 $
1 000 000 $
1 000 000 $
Connaissance en
Excellentes
matière de placement
Excellentes
Excellentes
Excellentes
Objectifs de
placement
Facteurs de risque
Valeur nette totale
100% élevé
#82 En ce qui concerne les comptes de X inc. et de S.G., l’intimé a écrit ce qui suit
dans son courriel du 26 février 2001 : (version originale anglaise) «50000204
guarantees 31006094 since 1995 unaware of the guarantee dr in 31006094 1mm».
PAGE : 20
pas dans les mises à jour du profil du client S.G. que le compte de X inc.
garantissait le compte de ce dernier.
Chef 16
Le 18 septembre 1995, le 30 septembre 1997 et le 21 mai 1998 ou vers ces
dates, l’intimé a eu une conduite inconvenante de la part d’un représentant
inscrit, en contravention de l'article 1 du Statut 29 de l'Association, en
n'indiquant pas dans les mises à jour du profil de X inc. que S.G. avait un
intérêt financier dans le compte de cette dernière, puisque ce compte
garantissait le compte de S.G.
Chef 17
Le 21 mai 1998 ou vers cette date, I'intimé a eu une conduite inconvenante
et préjudiciable aux intérêts du public en relevant à « 100 % élevé» la
tolérance du risque indiquée dans la mise à jour du profil de X inc., à I'insu
et sans le consentement de cette dernière, en contravention de l'article 1
du Statut 29 de I'Association.
Détails
#76 En novembre 1983, S.G. a ouvert un compte chez Merrill Lynch auprès de
l’intimé, qui était son conseiller en placement. L’adresse indiquée dans le formulaire
d’ouverture de compte était à la Place Bonaventure; aucun numéro d’assurance sociale
n’a été inscrit sur le formulaire, ni aucun nom de personne ayant un intérêt financier ou
une autorisation de négocier à l’égard du compte.
#77
S.G. est l’oncle de l’intimé, et vivait alors en Turquie.
#78
S.G. est maintenant âgé de 73 ans.
#79 L’intimé a rempli un profil de client et effectué sept (7) mises à jour de ce profil,
comme suit :
Date
Objectifs
de
placement
24-111983
7-111985
7-5-1992
Revenu
Revenu
100%
terme
13-3-1997
30-9-1997
21-5-1998
10-6-1999
10-2-1994
court 80% court 80% court 80% court 80%
terme
terme
terme
terme
10%
moyen
terme
10%
moyen
terme
court
10% moyen 10% moyen
terme
terme
10% long 10%
10% long 10% long terme
terme
terme
terme
long
PAGE : 22
#83 Le 28 mars 1994 ou vers cette date, l’intimé a fait signer à H.M., au nom de X
inc., une convention de garantie de compte en faveur de S.G.
#84 H.M. ne connaissait pas S.G. et n’était pas au courant des conséquences de
cette garantie. Il n’avait aucune raison de faire garantir le compte de S.G. par sa
société X inc., compte dont il ne connaissait pas le titulaire.
#85 L’intimé a obtenu la signature de H.M. en donnant pour prétexte que celle-ci était
nécessaire pour l’administration du compte.
#86 Le 31 octobre 1995, le 17 octobre 1996, le 15 octobre 1997, le 19 octobre 1998
et le 20 octobre 1999 ou vers ces dates, l’intimé a obtenu, par un faux semblant, la
signature de H.M. à titre d’actionnaire principal de X inc. pour une attestation de
convention de garantie en faveur du compte de S.G.
#87 Le 18 septembre 1995 ou vers cette date, l’intimé a modifié les facteurs de
risque indiqués dans le profil de client de X inc., comme suit : 50% faible et 50% moyen.
De plus, l’intimé a omis d’indiquer dans la mise à jour du profil de client que S.G. avait
un intérêt financier dans le compte de X inc. puisque celui-ci garantissait le compte de
S.G.
#88 Dans une mise à jour du profil du client S.G., datée du 13 mars 1997, le nom de
P.G. est indiqué en réponse aux questions suivantes : «Est-ce que d’autres personnes,
incluant le conseiller financier ont une autorisation de négocier dans ce compte ?, ont
un intérêt financier dans ce compte ?, garantissent ce compte ?». L’intimé a omis
d’indiquer dans cette mise à jour que X inc. garantissait le compte de S.G.
#89 Dans une mise à jour du profil du client S.G., datée du 30 septembre 1997, les
facteurs de risque ont été changés comme suit : 50% moyen et 50% élevé, et la valeur
nette totale a été changée pour 500 000 $. De plus, le nom de P.G. a été indiqué en
regard des questions suivantes : «Est-ce que d’autres personnes, incluant le conseiller
financier ont une autorisation de négocier dans ce compte ?, ont un intérêt financier
dans ce compte ?, garantissent ce compte?». L’intimé a omis d’indiquer dans cette
mise à jour que X inc. garantissait le compte de S.G.
#90 Le même jour, soit le 30 septembre 1997 ou vers cette date, l’intimé a déposé
une mise à jour du profil de X inc., mais n’a apporté aucun changement par rapport à
l’information qui se trouvait dans la dernière version du profil remontant à 1995. Les
objectifs de placement étaient toujours les suivants : 80% revenu et 20% long terme.
Les facteurs de risque étaient 50% faible et 50% moyen et la valeur nette totale était de
1 000 000 $. L’intimé n’a pas indiqué dans la mise à jour que le compte de X inc.
garantissait le compte de S.G.
#91 Le 21 mai 1998 ou vers cette date, l’intimé a préparé une mise à jour du profil de
X inc. et a changé les facteurs de risque pour les porter à 100% élevé. L’intimé a mis à
jour le profil de X inc. à l’insu et sans le consentement de cette dernière.
PAGE : 23
#92 Le même jour, soit le 21 mai 1998 ou vers cette date, le profil du client S.G. a
aussi été mis à jour, et les facteurs de risque ont été portés à 100% élevé.
#93 Dans les mises à jour des profils de X inc. et de S.G., datées du 21 mai 1998,
l’intimé a omis d’indiquer que le compte de X inc. garantissait le compte de S.G.
#94 Le 10 juin 1999 ou vers cette date, le profil du client S.G. a été modifié de façon
à indiquer que le compte de X inc. garantissait le compte de S.G. Avant juin 1999,
jamais le profil du client S.G. n’avait été modifié pour indiquer que le compte de ce
dernier était garanti par le compte n° 500-00204 de X inc.
#95 Le 6 mars 2001 ou vers cette date, le superviseur de l’intimé, Thomas Noonan, a
envoyé une lettre à X inc. l’informant que l’intimé avait demandé un congé pour des
raisons de santé.
#96 Le 16 mars 2001 ou vers cette date, X inc. a envoyé une lettre à CIBC
demandant qu’aucune opération ne soit effectuée dans son compte sans son
autorisation écrite préalable.
#97 Le 24 octobre 2001 ou vers cette date, CIBC a transféré une somme de
691 936,30 $ du compte de X inc. au compte de S.G. aux termes de la convention de
garantie, ce qui a laissé un solde en espèces de 0 $ dans le compte de X inc. De plus,
CIBC a transféré le même jour une somme de 11 008,86 $ du compte de H.M. et A.M.
au compte de S.G., laissant un solde en espèces de 2,54$ dans le compte de ces
derniers.
[57] Le chef 13 reproche une conduite inconvenante contraire à l’article 1 du Statut
29 en obtenant la signature de H.M. à titre d’actionnaire du compte de X inc. pour une
convention de garantie de compte en faveur du compte de S.G.
[58] Le détail #83 fait la preuve que le 28 mars 1994, l’intimé a fait signer à H.M. au
nom de X inc. une convention de garantie en faveur de S.G. Or, H.M. ne connaissait
pas S.G. (détail #84) et n’avait aucune raison de consentir à une telle garantie. Il l’a fait
parce que l’intimé lui a fait croire que sa signature était une formalité nécessaire à son
propre compte (cf. P-5, à la page 5 et détail #85).
[59] Le Comité réitère ici les remarques qu’il faisait en rapport avec le chef
d’infraction 7 et conclut à la culpabilité de l’intimé.
[60] Le chef 14 reproche à l’intimé d’avoir eu une conduite inconvenante au sens de
l’article 1 du Statut 29 en ce que, en cinq occasions différentes, il a obtenu par un faux
semblant la signature de H.M. attestant que X inc. avait consenti une convention de
garantie en faveur du compte de S.G.
PAGE : 24
[61] Encore une fois, le Comité s’interroge sérieusement sur la naïveté de H.M. et sur
la confiance qu’il mettait en l’intimé. Quoiqu’il en soit, ce dernier a admis le détail #86
où l’on peut lire qu’il a obtenu par un faux semblant la signature de H.M. Le Comité est
donc d’avis que la preuve établit la culpabilité de l’intimé sur ce chef.
[62] Le chef 15 reproche à l’intimé une contravention à l’article 1 du Statut 29 en
n’indiquant pas lors des mises à jour du profil du client S.G. que le compte de X inc.
garantissait le sien. Il s’agissait pourtant là d’une information de première importance
que l’intimé avait l’obligation de consigner au formulaire. Les détails #88, #89 et #93
constituent la preuve à l’encontre de l’intimé. Ce chef est donc bien fondé.
[63] Le chef 16 est le pendant du chef 15. L’intimé, dans les mises à jour du compte
du client X inc., a omis d’indiquer que S.G. avait un intérêt financier dans le compte.
Les détails #87, #90 et #93 établissent la culpabilité de l’intimé sur le chef 16.
[64] Le chef 17 vise une modification du taux de tolérance du risque d’un client à
l’insu et sans le consentement du client. Le détail #91 établit cette cause de reproche.
Et le Comité n’est pas sans noter que l’intimé, le même jour, avait mis à jour le profil du
client S.G. (cf. détail #92) dont le compte était garanti par X inc., la concordance étant
nécessaire entre le compte garanti et le compte garant.
[65] La modification des facteurs de tolérance au risque élevé est un élément
fondamental du compte d’un client. De procéder à un changement à cet égard sans
l’autorisation ou le consentement du client constitue certes une inconduite grave et il ne
fait aucun doute que cela entraîne une contravention à l’article 1 du Statut 29.
G)
CHEF 18
Chef 18
Le 24 juillet 1996 ou vers cette date, I'intimé. a eu une conduite
inconvenante de la part d'un représentant inscrit, en contravention de
l'article 1 du Statut 29 de l'Association, en obtenant, par un faux semblant,
la signature de L.N. pour une convention de garantie de compte donnée en
faveur du compte de S.G.
Détail
#98 Le 24 juillet 1996 ou vers cette date, l’intimé a fait signer à L.N., par un faux
semblant, une convention de garantie au nom de Z inc. en faveur de S.G. Cette
garantie a été révoquée dès le 22 août 1996. L.N. ne connaissait pas S.G. et n’avait
aucune raison de garantir le compte de ce dernier.
PAGE : 25
[66] Il s’agit encore ici de l’obtention par un faux semblant de la signature d’un client
pour garantir le compte d’un autre client, inconnu du garant.
[67] Bien que la garantie ait été rapidement révoquée par le garant, le détail #98 fait
la preuve que l’intimé a obtenu par un faux semblant la signature de L.N. lequel, au
nom de Z inc., garantissait le compte de S.G.
[68] Pour les mêmes motifs que ceux exprimés à l’égard du chef 7, le Comité conclut
à la culpabilité de l’intimé.
H)
CHEF 19
Chef 19
Le 3 juin 1993 ou vers cette date, I'intimé a eu une conduite inconvenante
de la part d'un représentant inscrit, en contravention de l'article 1 du Statut
29 de l’Association, en obtenant, par un faux semblant, la signature de K.P.
pour une convention de garantie de compte donnée en faveur du compte
de A.P. et B.P.
Détails
#99 Le 1er août 1984 ou vers cette date, A.P. et B.P. ont ouvert un compte conjoint
chez Merrill Lynch auprès de l’intimé.
#100 L’intimé a rempli un profil de client pour A.P. et B.P. et effectué six (6) mises à
jour de ce profil, comme suit
Date
Objectifs
de
placement
Facteurs
de risque
1-8-1984
Revenu
Titres
sûrs
22-7-1992
3-9-1996
1-10-1997
11-2-1998
5-6-1998
5-4-1999
70%
revenu
50%
revenu
50%
revenu
50% court 50% court 50% court
terme
terme
terme
30% court 50% court 50% court 50%
terme
terme
terme
moyen
50%
moyen
50%
moyen
70% titres 100%
élevé
sûrs
100%
élevé
100% élevé
100 000 $
100 000 $
50% moyen
50% moyen
50% élevé
50% élevé
100 000 $ 100 000 $
100 000 $
30% titres
spéculatifs
Revenu
annuel
100 000 $ 100 000 $
PAGE : 26
Valeur
nette
totale
500 000 $ 400 000 $
400 000 $ 400 000 $
400 000 $
400 000 $
800 000 $
Excellentes
Excellentes Excellentes
Excellentes
Excellentes
Excellentes
Connaissa
nces en
matière de
placement
#101 Le 18 décembre 1984 ou vers cette date, K.P. a ouvert un compte chez Merrill
Lynch auprès de l’intimé, qui était son conseiller en placement. Au moment de
l’ouverture du compte, K.P. était âgée de 55 ans.
#102 K.P. a le même nom de famille que A.P. et B.P., mais n’a aucun lien de parenté
avec ces derniers.
#103 L’intimé a rempli un profil de client pour K.P. et effectué six (6) mises à jour de ce
profil, comme suit :
Date
18-12-1984 20-4-1993
19-7-1993
1-10-1997
5-6-1998
13-7-2000
25%
revenu
25% revenu
50%
terme
31-7-1996
Objectifs de
placement
Revenu
Facteurs de Titres sûrs
risque
Revenu
annuel
25 000 $
Valeur nette 100 000 $
totale
100%
revenu
25%
revenu
25%
court
25% court 25% court terme
50%
terme
terme
25% moyen terme
25%
25%
terme
moyen
moyen
25%
long
terme
terme
terme
25% long 25% long
terme
terme
court
long
50% faible
50% faible
50% moyen 100% élevé
20% faible
50%
moyen
50% élevé
50% élevé
100 000 $
100 000 $
100 000 $
100 000 $
100 000 $
1 500 000
$
1 500 000
$
1 500 000
$
1 500 000 $
1 000 000 $
20% moyen
60% élevé
PAGE : 27
Connaissan
ces en
matière de
placement
Bonnes
Bonnes
Bonnes
Bonnes
Bonnes
#104 Le fils de K.P., R.P., avait aussi ouvert un compte chez Merrill Lynch auprès de
l’intimé quelques jours avant sa mère. Ses objectifs de placement et sa tolérance du
risque étaient les mêmes que ceux de sa mère. Sa valeur nette totale était d’environ
250 000 $ et son revenu annuel était de 100 000 $.
#105 Le 19 avril 1993 ou vers cette date, K.P., qui était alors âgée de 64 ans, a signé
une autorisation de négocier en faveur de son fils R.P.
#106 Une mise à jour du profil de la cliente a été remplie le jour suivant, soit le 20 avril
1993 ou vers cette date, dans laquelle les objectifs de placement ont été changés pour
100% revenu, et les facteurs de risque ont été changés pour 50% faible et 50% moyen.
La valeur nette totale estimative a été portée à 1 500 000 $ et le revenu annuel a été
relevé à 100 000 $. Sur le formulaire, on retrouve la mention suivante : (version
originale anglaise) «R.P. (son) will be managing account».
#107 En ce qui concerne le compte de A.P. et B.P. et le compte de K.P., l’intimé a
écrit ce qui suit dans son courriel du 26 février 2001 : (version originale anglaise)
«50001555 guarantees 5001628 since 1995 unaware of the guarantee dr in 50001628
300m».
#108 Le 3 juin 1993 ou vers cette date, l’intimé a fait signer à K.P. une convention de
garantie de compte en faveur de A.P. et B.P. L’intimé a obtenu la signature de K.P. en
donnant pour prétexte que celle-ci était nécessaire pour l’administration du compte.
#109 K.P. ne connaissait pas A.P. et B.P. et n’avait aucune raison de garantir le
compte de personnes qu’elle ne connaissait pas.
#110 L’intimé n’a pas informé K.P. que le document qu’elle signait servait à garantir le
compte de A.P. et B.P. Il ne l’a pas informée non plus des conséquences de cette
garantie.
#111 De plus, R.P. a signé une convention de garantie en faveur de K.P.
[69] Le chef 19 reproche à l’intimé d’avoir eu une conduite inconvenante en obtenant
par un faux semblant la signature de K.P. pour une convention de garantie de compte
en faveur du compte de A.P. et B.P.
PAGE : 28
[70] Les détails #108 à #110 établissent la conduite de l’intimé eu égard à ce chef
d’accusation. Pour les mêmes motifs que ceux exposés au sujet du chef d’infraction 7,
le Comité estime que l’intimé s’est livré à une conduite inconvenante au sens de l’article
1 du Statut 29 de l’Association.
I)
CHEFS 20 À 23
Chef 20
Le 19 juillet 1993, le 31 juillet 1996, le 1er octobre 1997, le 5 juin 1998 et le 13
juillet 2000 ou vers ces dates, l’intimé a eu une conduite inconvenante de la
part d’un représentant inscrit, en contravention de l’article 1 du Statut 29 de
l’Association, en n’indiquant pas dans les mises à jour du profil de la
cliente K.P. que A.P. et B.P. avaient un intérêt financier dans le compte de
cette dernière, puisque ce compte garantissait le leur.
Chef 21
Le 3 septembre 1996, le 1er octobre 1997, le 11 février 1998 et le 5 juin 1998
ou vers ces dates, l’intimé a eu une conduite inconvenante de la part d’un
représentant inscrit, en contravention de l’article 1 du Statut 29 de
l’Association, en n’indiquant pas dans les mises à jour du profil des clients
A.P. et B.P. que le compte de K.P. garantissait le compte de ces derniers.
Chef 22
Le 25 juin 1998 ou vers cette date, l’intimé a eu une conduite inconvenante
de la part d’un représentant inscrit, en contravention de l’article 1 du Statut
29 de l’Association, en obtenant, par un faux semblant, la signature de R.P.
pour une attestation de convention de garantie de compte donnée par K.P.
en faveur du compte de A.P. et B.P., et en donnant la fausse promesse que
la garantie serait révoquée.
Chef 23
Le 31 mars 1999 ou vers cette date, l’intimé a eu une conduite
la signature de K.P. pour une attestation de convention de garantie de
compte donnée en faveur du compte de A.P. et B.P.
Détails
#112 Le 19 juillet 1993 ou vers cette date, les objectifs de placement indiqués dans le
profil de la cliente K.P. ont été changés comme suit : 25% revenu, 25% court terme,
PAGE : 29
25% moyen terme et 25% long terme. Les facteurs de risque ont aussi été changés
comme suit : 50% faible et 50% élevé. L’intimé a omis d’indiquer dans la mise à jour du
profil de la cliente que A.P. et B.P. avaient un intérêt financier dans le compte de cette
dernière puisque ce compte garantissait le leur.
#113 K.P. a nommé son fils R.P. à titre de mandataire en signant une «procuration» à
cet effet le 15 juillet 1994 ou vers cette date.
#114 Le jour suivant, soit le 16 juillet 1994 ou vers cette date, K.P. a signé un autre
formulaire de Wood Gundy pour donner à son fils l’autorisation de signer des chèques
sur son compte.
#115 Une autre mise à jour du profil de la cliente K.P. a été déposée le 31 juillet 1996
ou vers cette date. Aucune modification n’a été apportée au profil.
#116 Le 3 septembre 1996 ou vers cette date, alors qu’il mettait à jour le profil des
clients A.P. et B.P., l’intimé a omis d’indiquer dans la mise à jour que le compte de K.P.
garantissait le compte de A.P. et B.P.
#117 Le 1er octobre 1997 ou ves cette date, les facteurs de risque du compte de K.P.
ont été relevés à 50% moyen et 50% élevé, comme le montre la mise à jour du profil de
la cliente.
#118 Le même jour, soit le 1er octobre 1997 ou vers cette date, les facteurs de risque
du compte de A.P. et B.P. ont été abaissés à 50% moyen et 50% élevé. Le compte de
K.P. et le compte de A.P. et B.P. comportaient ainsi les mêmes facteurs de risque.
#119 Dans les mises à jour du profil de A.P. et B.P. et du profil de K.P., datées du 1er
octobre 1997, l’intimé a omis d’indiquer que le compte de K.P. garantissait le compte
de A.P. et B.P.
#120 Le 11 février 1998 ou vers cette date, les objectifs de placement de A.P. et B.P.
ont été changés comme suit : 50% court terme et 50% moyen terme. L’intimé n’a
toujours pas indiqué dans la mise à jour que le compte de K.P. garantissait le compte
de A.P. et B.P.
#121 Le 5 juin 1998 ou vers cette date, les facteurs de risque du compte de K.P. ont
encore été relevés, cette fois à 100% élevé, comme le montre la mise à jour du profil de
la cliente.
#122 Le même jour, soit le 5 juin 1998 ou vers cette date, les facteurs de risque du
compte de A.P. et de B.P. ont également été portés à 100% élevé. Le compte de K.P.
et le compte de A.P. et de B.P. comportaient ainsi de nouveau les mêmes facteurs de
risque.
PAGE : 30
#123 Dans les mises à jour du profil de A.P. et B.P. et du profil de K.P., datées du 5
juin 1998 l’intimé a omis d’indiquer que le compte de K.P. garantissait le compte de A.P.
et B.P.
#124 Le 25 juin 1998 ou vers cette date, le superviseur de l’intimé, Thomas Noonan, a
envoyé une lettre à K.P. demandant à celle-ci de confirmer la garantie de compte
donnée en faveur du compte de A.P. et B.P.
#125 R.P. a signé sur cette lettre de confirmation le nom de sa mère ainsi que son
propre nom, l’intimé lui ayant fait la promesse que la garantie serait révoquée. R.P. n’a
fait aucun suivi à ce sujet, car il faisait confiance à l’intimé et était assuré que celui-ci
allait révoquer la garantie, chose qu’il n’a jamais faite.
#126 Le 31 mars 1999 ou vers cette date, le superviseur de l’intimé, Thomas Noonan,
a envoyé une autre lettre à K.P. lui demandant encore une fois de confirmer la garantie
donnée à l’égard du compte de A.P. et B.P. Cette fois, seule K.P. a signé la lettre de
confirmation, et c’est l’intimé qui la lui a fait signer. K.P. ne connaissait pas la nature
du document qu’elle signait ni les conséquences de la garantie donnée à l’égard du
compte de A.P. et de B.P.
#127 Une autre mise à jour du profil des clients A.P. et B.P. a été déposée le 5 avril
1999 ou vers cette date. Aucune modification n’a été apportée au profil, sauf une
mention selon laquelle le compte n° 500-01555 de K.P. garantissait le compte de A.P.
et B.P.
#128 Le 13 juillet 2000 ou vers cette date, l’intimé a omis d’indiquer dans la mise à
jour du profil de la cliente K.P. que A.P. et B.P. avaient un intérêt financier dans le
compte de celle-ci.
#129 Le 6 mars 2001 ou vers cette date, le superviseur de l’intimé, Thomas Noonan, a
envoyé une lettre à R.P. l’informant que l’intimé avait demandé un congé pour des
raisons de santé.
#130 Le 1er avril 2001 ou vers cette date, R.P. a envoyé une plainte écrite à Thomas
Noonan au sujet des agissements de l’intimé et de CIBC.
#131 Le 2 avril 2001 ou vers cette date, au domicile de R.P., l’intimé a signé une lettre
préparée par R.P., lettre dans laquelle il confirmait avoir obtenu la signature de K.P. à
l’égard de la convention de garantie du 3 juin 1993 sans avoir informé la cliente de la
nature du document.
#132 L’intimé a également confirmé avoir obtenu la signature de R.P. le 25 juin 1998
sous le prétexte que la convention de garantie avait été établie par erreur et en donnant
la promesse que ladite garantie serait révoquée.
PAGE : 31
#133 Le 4 avril 2001 ou vers cette date, CIBC a envoyé une lettre à A.P. et B.P., et
une copie conforme de cette lettre à K.P., leur demandant de prendre les arrangements
financiers nécessaires pour verser à la société, au plus tard le 11 avril 2001, le
paiement intégral du solde dû de 309 151,14 $CA. CIBC a également informé les
clients que, s’ils ne fournissaient pas ledit paiement, CIBC allait exercer ses droits à
l’égard du compte de K.P. qui garantissait leur compte.
#134 CIBC a vendu les positions de K.P. pour couvrir le solde à payer par A.P. et B.P.,
tel que le confirme la lettre envoyée par CIBC le 27 avril 2001.
[71] Pour ce qui concerne les chefs 20 à 23, le lecteur aura avantage à se rapporter
non seulement aux détails #112 à #134 ci-haut reproduits, mais aux détails #99 à #111
reproduits en rapport avec le chef d’infraction 19.
[72] On constate au détail #108 que K.P. avait un intérêt financier dans le compte de
A.P. et B.P. et vice-versa. Or les détails #112, #115, #119 et #123 établissent que dans
les mises à jour du profil de la cliente K.P. effectuées les 19 juillet 1993, 31 juillet 1996,
1er octobre 1997 et 5 juin 1998, l’intimé a omis d’indiquer que A.P. et B.P. possédaient
un intérêt financier dans le compte. L’intimé est donc coupable du chef 20, pour les
mêmes motifs que ceux exprimés en regard du chef d’infraction 8.
[73] Dans les mises à jour du compte de A.P. et B.P. effectuées les 3 septembre
1996, 1er octobre 1997, 11 février 1998 et 5 juin 1998 (détails #116, #119, #120 et
#123), l’intimé a omis d’indiquer que K.P. possédait un intérêt financier dans leur
compte. L’intimé est donc coupable du chef 21, encore une fois pour les mêmes motifs
que ceux exprimés à l’égard du chef 8.
[74] Le chef 22 reproche à l’intimé une conduite inconvenante en contravention avec
l’article 1 du Statut 29 en ayant obtenu le 25 juin 1998 par un faux semblant, la
signature de R.P. pour une attestation de garantie de compte donnée par K.P. en
faveur du compte de A.P. et B.P. en donnant la fausse promesse que la garantie serait
révoquée.
[75] Les détails #124 et #125 établissent les faits à l’origine de ce chef d’infraction et,
pour les mêmes motifs que ceux exprimés au chef 7, l’intimé est coupable du chef 22.
[76] Enfin, le chef 23 reproche à l’intimé une conduite inconvenante en ayant obtenu
le 31 mars 1999, par faux semblant, la signature de K.P. pour une attestation de
convention de garantie en faveur du compte de A.P. et B.P. Le détail #126 établit la
conduite inconvenante de l’intimé eu égard à ce chef.
PAGE : 33
[80] Dans sa plaidoirie, l’intimé a fait valoir certains facteurs (par exemple sa
collaboration à l’enquête, son absence d’intention malhonnête, l’accord de ses clients
pour qu’il effectue des transactions discrétionnaires etc.) qui ont ou pourraient avoir une
pertinence en matière de sanction mais qui n’ont pas pour effet, malheureusement pour
l’intimé, de contrer sa culpabilité aux chefs d’infraction dont il fait l’objet. En temps et
lieu, lorsque viendra le moment de décider de la sanction, les différents éléments qu’il a
invoqués feront partie de l’ensemble des circonstances que le Comité devra analyser.
PAR CES MOTIFS, LE COMITÉ :
[81]
DÉCLARE l’intimé coupable de tous les chefs d’infraction.
[82] FIXE au 21 mai 2004 la date où l’Association et l’intimé pourront présenter leurs
représentations sur la sanction;
[83]
CONVOQUE l’Association et l’intimé à une audience à cette fin le 21 mai 2004.
Le 16 avril
2004
(S) Jean Élie
Jean Élie, membre
Le 16 avril
2004
(S) Yvan Naud
Yvan Naud, membre
Le 16 avril
2004
(S) Jean-Pierre Lussier
Me Jean-Pierre Lussier, membre du public et
président du Comité
COPIE CERTIFIÉE CONFORME
Jean-Pierre Lussier
Member Detail
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You Are Here: Membership > Member Detail
Last Updated: Monday September 3, 2007
Member Detail
Print-Friendly
Company:
CIBC Investor Services Inc.
Address:
800 Bay Street, 2nd Floor
Toronto ON M5S 3A9
Telephone:
(416) 351-4343
Fax:
(416) 351-2852
www.investorsedge.cibc.com
Lines of Business:
Discount Brokerage
Senior Management:
Judy Crawford
Vice President, Customer Contact Centres
and Support Services, Investor Services
Inc.
Wayne Ralph
Executive Director, Investor Services Inc.
Thomas S. Monahan
Chair, Chief Executive Officer
Please contact Member directly for additional information.
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Member Detail
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You Are Here: Membership > Member Detail
Member Detail
Print-Friendly
Company:
CIBC World Markets Inc.
Address:
161 Bay Street, BCE Place
PO Box 500
Toronto ON M5J 2S8
Telephone:
(416) 594-7000
Fax:
(416) 214-8669
www.cibcwm.com
Lines of Business:
Equities
Financial Planning
Fixed Income
Futures & Options Trading
Government & Corporate Finance
Institutional Sales & Trading
Insurance Services
Investment Banking
Mergers and Acquisitions
Portfolio Investment Management
Research
Retail Services
Senior Management:
Steven R. McGirr
Deputy Chairman & Managing Director
Thomas S. Monahan
Managing Director
Brian Shaw
President & Chief Executive Officer
Richard Venn
Deputy Chairman & Managing Director
Please contact Member directly for additional information.
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Retail Sales Committee
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You Are Here: About The IDA > Organization > IDA Committees > Retail Sales Committee
Retail Sales Committee
Mandate
The mandate of the Retail Sales Committee (the RSC) is to provide Members and/or the Board with advice
and advocacy on policy issues pertaining to the retail business of the securities industry. Such policy issues
include: recommendations on education and training proficiency standards (to raise the competence of
Members and their Approved Persons, resulting in higher industry standards which are in the public
interest); and consideration of the impact of regulation and trends on retail business activities.
Authority
The RSC reports to the IDA's Board of Directors.
Composition
Members include senior retail staff from various sized firms, with broad geographic representation. All
members of the RSC are voting members, including ex-officio members. However, any Member firm or
organization is limited to one vote.
Membership Terms:
The Chair and Vice-chair are appointed by the Committee for a 1 year term. Both appointments are
renewable, by decision of the Committee, to a maximum of a 2 year term. Should the Chair resign the
position, the Vice-chair becomes RSC Chair, for the remainder of the Chair's term.
Membership on the RSC is voluntary. There is no membership term. Any Member firm that offers retail
services may have a representative on the RSC. However, this may be reconsidered by the Committee
should the number of RSC members exceed 30.
Ex-officio Members of the Committee:
●
Chairs struck by the Committee;
●
Chair of the Education & Proficiency Committee;
●
Chair of the Compliance & Legal Section;
●
Chair of the Discount Brokerage Committee;
●
President of the Canadian Securities Institute; and
Meeting Schedule:
The RSC will meet on the second Thursday of each month at 4:00 p.m. (EST), or as decided by the Chair
with the Committee's agreement.
Members
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IN THE MATTER OF A DISCIPLINE HEARING PURSUANT TO BY-LAW 20
OF THE INVESTMENT DEALERS ASSOCIATION OF CANADA
Quebec District Council
RE: HARRY MIGIRDIC
NOTICE OF HEARING
NOTICE is hereby given that a hearing will be held before the Quebec District
Council («the District Council») of the Investment Dealers Association («the
Association»), on February 4, 2004, at 1, Place Ville-Marie, Suite 2802, Montreal
(Quebec), at 9:30 AM, or as so soon thereafter as the hearing can be held,
concerning a disciplinary action brought by the Association Staff concerning
Harry Migirdic («the Respondent»).
NOTICE is further given that the staff of the Association alleges the following
violations of the By-laws, Regulations or Policies of the Association by the
Respondent being at all relevant time a Registered Representative employed
with the Member firm, CIBC World Market inc. («CIBC»):
Count 1
Between September 2000 and February 2001, inclusive, the Respondent, while a
Registered Representative of CIBC, a Member of the Association, effected
approximately 105 discretionary trades in the client account of J.P., without the
prior knowledge or written authorization of the client and without such client
account having been specifically approved and accepted in writing as a
discretionary account by the designated person of the Member CIBC, contrary to
Association Regulation 1300.4.
Count 2
Between September 2000 and February 2001, inclusive, the Respondent, while a
Registered Representative of CIBC, a Member of the Association, traded in a
discretionary manner in the client account of J.M., without the prior knowledge or
written authorization of the client and without such client account having been
specifically approved and accepted in writing as a discretionary account by the
designated person of the Member CIBC, contrary to Association Regulation
1300.4.
Count 3
On or around May 8, 2000, the Respondent engaged in conduct unbecoming and
detrimental to the public interest by modifying the investment objectives, the risk
factors and the total net worth on an update of the Know Your Client form
regarding the account of P.A., without the knowledge and consent of the latter,
contrary to By-law 29.1 of the Association.
2
Count 4
Between December 2000 and February 2001, inclusive, the Respondent, while a
Registered Representative of CIBC, a Member of the Association, traded in a
discretionary manner in the client account of P.A., without the prior knowledge or
written authorization of the client and without such client account having been
specifically approved and accepted in writing as a discretionary account by the
designated person of the Member CIBC, contrary to Association Regulation
1300.4.
Count 5
On or around May 14, 2000, the Respondent failed to observe high standards of
ethics and conduct and engaged in conduct unbecoming and detrimental to the
public interest by assuming responsibility of the decline of his client P.A.’s
portfolio and by making an offer to compensate him for losses he could incurred
between January 2000 and January 2001, with such offer being made without
the knowledge, consent or authorization of CIBC, contrary to By-law 29.1, of the
Association and to Standard C of the Code of Ethics and Standards of Conduct.
Count 6
On or around July 1, 2000, the Respondent failed to observe high standards of
ethics and conduct and engaged in conduct unbecoming and detrimental to the
public interest by giving a promissory note in the amount of $400,000 to
compensate his client P.A. for losses he incurred in his account, without the
knowledge, consent or authorization of CIBC, contrary to By-law 29.1, of the
Association and to Standard C of the Code of Ethics and Standards of Conduct.
Count 7
On or around February 16, 1993, the Respondent engaged in conduct
unbecoming a registered representative contrary to By-law 29.1 of the
Association, in that he obtained the signature of H.M. for an account guarantee
agreement in favour of the account of R.L., under false pretence.
Count 8
On or around July 21, 1995, July 31, 1996, July 21, 1997 and August 18, 1997,
the Respondent engaged in conduct unbecoming a registered representative,
contrary to By-law 29.1 of the Association, in that he failed to indicate on updates
of Know Your Client forms, regarding the account of R.L., that H.M. and A.M.’s
account was guaranteeing the account of R.L.
3
Count 9
On or around October 3, 1997 and August 2, 1999, the Respondent engaged in
conduct unbecoming a registered representative, contrary to By-law 29.1 of the
Association, in that he failed to indicate on updates of Know Your Client forms,
regarding the account of H.M. and A.M., that R.L. had a financial interest in their
account, since the latter was guaranteeing R.L.’s account.
Count 10
On or around April 25, 2000, the Respondent engaged in conduct unbecoming a
registered representative contrary to By-law 29.1 of the Association, in that he
obtained the signature of H.M. for an acknowledgement of a guarantee
agreement in favour of the account of R.L., under false pretence.
Count 11
On or around February 16, 2001, the Respondent, while a registered
representative of CIBC, effected a discretionary trade in the account of H.M.,
without the prior knowledge or written authorization of the client and without such
client’s account having been specifically approved and accepted in writing as a
Count 12
On or around February 16, 2001, the Respondent, while a registered
representative of CIBC, effected a discretionary trade in the account of A.M.,
without the prior knowledge or written authorization of the client and without such
client’s account having been specifically approved and accepted in writing as a
Count 13
On or around March 28, 1994, the Respondent engaged in conduct unbecoming
a registered representative contrary to By-law 29.1 of the Association, in that he
obtained the signature of H.M. in his quality of principal shareholder of X inc. for
an account guarantee agreement in favour of the account of S.G., under false
pretence.
Count 14
On or around October 31, 1995, October 17, 1996, October 15, 1997,
October 19, 1998 and October 20, 1999, the Respondent engaged in conduct
unbecoming a registered representative contrary to By-law 29.1 of the
Association, in that he obtained the signature of H.M. as a principal shareholder
4
of X inc. for an acknowledgement of a guarantee agreement in favour of the
account of S.G., under false pretence.
Count 15
On or around March 13, 1997, September 30, 1997 and May 21, 1998, the
Respondent engaged in conduct unbecoming a registered representative
contrary to By-law 29.1 of the Association, in that he failed to indicate on updates
of Know Your Client forms, regarding the account of S.G., that X inc.’s account
was guaranteeing the account of S.G.
Count 16
On or around September 18, 1995, September 30, 1997 and May 21, 1998, the
Respondent engaged in conduct unbecoming a registered representative,
contrary to By-law 29.1 of the Association, in that he did not indicate on updates
of Know Your Client forms, regarding the account of X inc., that S.G. had a
financial interest in its account, since X inc.’s account was guaranteeing S.G.’s
account.
Count 17
On or around May 21, 1998, the Respondent engaged in conduct unbecoming
and detrimental to the public interest by increasing to «100% high» the risk
tolerance indicated on the update of the Know Your Client form of X inc., without
the knowledge and consent of the latter, contrary to By-law 29.1 of the
Association.
Count 18
On or around July 24, 1996, the Respondent engaged in conduct unbecoming a
obtained the signature of L.N. for an account guarantee agreement in favour of
the account of S.G., under false pretence.
Count 19
On or around June 3, 1993, the Respondent engaged in conduct unbecoming a
obtained the signature of K.P. for an account guarantee agreement in favour of
the account of A.P. and B.P., under false pretence.
Count 20
On or around July 19, 1993, July 31, 1996, October 1, 1997, June 5, 1998 and
July 13, 2000, the Respondent engaged in conduct unbecoming a registered
representative, contrary to By-law 29.1 of the Association, in that he did not
indicate on updates of Know Your Client forms, regarding the account of K.P.,
5
that A.P. and B.P. had a financial interest in the account of K.P., since the latter
was guaranteeing A.P. and B.P.’s account.
Count 21
On or around September 3, 1996, October 1, 1997, February 11, 1998 and June
5, 1998, the Respondent engaged in conduct unbecoming a registered
representative contrary to By-law 29.1 of the Association, in that he did not
indicate on updates of Know Your Client forms, regarding the account of A.P.
and B.P., that K.P.’s account was guaranteeing the account of A.P. and B.P.
Count 22
On or around June 25, 1998, the Respondent engaged in conduct unbecoming a
obtained the signature of R.P. for an acknowledgment of a guarantee agreement
given by K.P. in favour of the account of A.P. and B.P., under false pretence and
under the false promise that the guarantee would be revoked.
Count 23
On or around March 31, 1999, the Respondent engaged in conduct unbecoming
a registered representative contrary to By-law 29.1 of the Association, in that he
obtained the signature of K.P. for an acknowledgement of a guarantee
agreement in favour of the account of A.P. and B.P., under false pretence.
Count 24
In or around September 1997, the Respondent engaged in conduct unbecoming
and detrimental to the public interest, contrary to By-law 29.1 of the Association,
by accepting a forged power of attorney for the account of Y Ltd., knowing that
the said power of attorney had not been signed by the beneficial owner of the
account.
6
PARTICULARS
NOTICE is further given that the following is a summary of the facts alleged and
intended to be relied upon by the Association at the said hearing:
1.
The Association initiated an investigation into the conduct of the
Respondent following allegations of discretionary trading and conduct
unbecoming contained in the Uniform Termination Notice («UTN») of the
Respondent filed on April 16, 2001, by CIBC World Markets inc. («CIBC»), a
Member of the Association;
a)
The Respondent
2.
The Respondent, Harry Migirdic, was first registered as a Registered
Representative on or around March 21, 1980;
3.
He changed his name from Migirdicoglu to Migirdic in January 1984;
4.
He was named vice-president of Merrill Lynch on or around October 21,
1986;
5.
The Respondent was transferred to the Member firm Wood Gundy, now
CIBC, branch of 600, De Maisonneuve, Montreal, on or around, January 15,
1990;
6.
The Respondent was terminated on or around April 5, 2001;
7.
Since being fired by CIBC, the Respondent has not been employed with any
Member firm and has not been an approved person with the Association;
8.
On or around August 22, 2002, the Quebec District Counsel refused the
application of the Respondent for approval as a registered representative
because such approval was not in the public interest, pursuant to By-law
20.4 of the Association. The Respondent did not appeal of the decision;
b)
Introduction
9.
Before being dismissed, the Respondent have been subject to several
internal disciplinary measures by CIBC notably for having forged a power of
attorney and for having effected discretionary trades in clients’ accounts.
For those violations, the Respondent was fined by CIBC;
7
10. On or around January 23, 2001, the Respondent signed a promissory note
in favour of CIBC for the aggregate of various losses in clients’ accounts
which amounted to $335,663.23. The debt was to be repaid by deducting
$10,000 per month from his net payout before tax;
11. On or around February 20, 2001, the Respondent left the office for sick
leave and one week later, he told CIBC that he had problems with several
accounts;
12. On or around February 26, 2001, the Respondent sent an e-mail to his
supervisor, Thomas Noonan, in which he listed «the accounts that are in
trouble». The Respondent admitted having violated the Association By-laws
and Regulations by giving short comments regarding each of these
accounts;
13. As it appears from the UTN that followed the Respondent’s dismissal on
April 5, 2001, more than twenty (20) clients complained to CIBC about the
Respondent’s misconduct regarding suitability, discretionary trading,
account performance, repudiating client documents, losses in account,
margin deficiency;
14. Some of the complainants are now suing before civil courts the Respondent
and CIBC for damages. The amounts claimed totalize approximately
$5,000,000 for losses incurred in their accounts and approximately
$55,000,000 for punitive damages. No trial has been held yet and therefore
no judgment has been rendered in the civil files;
15. Other complainants have settled out of court their claims with CIBC;
c)
Counts
i)
Account of J.P. – Discretionary trading
Count 1
16. On or around August 24, 2000, J.P. opened the account number 500-21169
at CIBC with the Respondent as her investment advisor;
17. At the time of opening the account, J.P. was 68 years old with an estimated
annual income of $24,000 and a total net worth of approximately $300,000.
According to the Know Your Client form («KYC»), the client’s investment
objectives were 50% short term capital gains and 50% long term capital
gains. Her risk factors were noted as 50% low risk and 50% high risk. Her
investment knowledge was noted on the KYC as «good»;
8
18. A KYC update was prepared on or around October 24, 2000, two months
after the opening of the account, and the risk factors were changed to 50%
medium risk and 50% high risk;
19. Notwithstanding that J.P.’s account was not a discretionary account, the
Respondent proceeded to make purchases and sales of securities without
consulting J.P. at the timing of the trade or as to the specific security to be
bought, quantity or price;
20. From September 6, 2000 to February 2001, a total of approximately 105
trades were made in the account;
21. All the trades executed in the account of J.P. were executed on a
discretionary basis;
22. J.P.’s account had not been accepted by CIBC as a discretionary account
pursuant to Association Regulation 1300.4;
23. Besides, CIBC brought back J.P.’s accounts to their original status based on
her account profile and compensated her for the losses that she suffered.
First, CIBC gave her $97,400 which represented the return of capital to her
account 500-21169 plus interests. Second, CIBC credited $112,000 J.P.’s
RRIF account 553-19545. This amount was also representing the return of
capital to the account plus interests. CIBC made this offer to J.P. because
the account was concentrated in two higher risk securities, which were not
appropriate for a RRIF;
ii)
Account of J.M. – Discretionary trading
Count 2
24. On or around September 9, 2000, J.M. opened the account number
310-28106 at CIBC with the Respondent as his investment advisor;
25. At the time of opening the account, J.M. was 80 years old with an estimated
annual income of $35,000 and a total net worth of approximately $375,000.
According to the KYC, the client’s investment objectives were 100% long
term capital gains. His risk factors were noted as 45% low risk, 45%
medium risk and 10% high risk. His investment knowledge was noted on
the KYC as «excellent»;
26. Notwithstanding that J.M.’s account was not a discretionary account, the
consulting J.M. at the timing of the trade or as to the specific security to be
9
27. J.M. complained to CIBC about the fact that the Respondent was carrying
out transactions without his approval or consultation and that on numerous
occasions, he expressed his total disagreement with purchases;
28. From September 2000 to February 2001, a total of approximately 35 trades
were made in the account;
29. J.M.’s account had not been accepted by CIBC as a discretionary account
30. Besides, CIBC compensated J.M. for the losses that he suffered. Indeed,
they settled for an amount of $69,897.72;
iii)
Account of P.A. – Discretionary trading and Conduct unbecoming
31. P.A. had the account number 500-08860 at CIBC with the Respondent as
his investment advisor;
32. According to an update of the KYC dated November 4, 1994, P.A. was at
the time 65 years old with an estimated annual income of $100,000 and a
total net worth of approximately $250,000.
The client’s investment
objectives were 50% income, and 50% medium term capital gains. His risk
factor was noted as 100% low risk. His investment knowledge was noted
on the KYC update as «fair»;
33. A KYC update was prepared on or around September 1, 1995, and the risk
factors were changed to 70% low risk, 10% medium risk and 20% high risk.
The total net worth was evaluated at $600,000;
34. Another KYC update, dated March 18, 1997, changed again the risk factors
to 30% low risk, 20% medium risk and 50% high risk. The total net worth
was evaluated at $1,000,000 and the investment knowledge was described
as «excellent»;
Count 3
35. Finally, an update of the KYC was made on or around May 8, 2000, on
which P.A.’s investment objectives were changed to 40% income, 20%
short term, 30% medium and 10% long term. The risk factors were also
changed to 10% low, 10% medium and 80% high. The total net worth was
then evaluated at $1,800,000;
10
36. The Respondent did not inform P.A. about the changes that he brought on
the KYC update of May 2000. P.A. did not know that his KYC was updated
in May 2000 and accordingly, he never consented or agreed with those
changes;
Count 4
37. Notwithstanding that P.A.’s account was not a discretionary account, the
consulting P.A. at the timing of the trade or as to the specific security to be
38. All the American transactions executed in P.A.’s account were discretionary
except for two stocks;
39. From March 1994 to February 2001, a total of approximately 1400 trades
were made in the account of P.A. During the year 2000, approximately 360
trades were made in the account;
40. P.A.’s account had not been accepted by CIBC as a discretionary account
Count 5
41. Moreover, between December 1999 and June 2000, P.A.’s portfolio suffered
a loss of approximately 50%. On or around December 31, 1999, the value
of the portfolio was $1,059,954.82 and on or around June 30, 2000, it was
$471,519,21;
42. P.A. complained to the Respondent about his losses. In response to his
complaints, on or around May 14, 2000, the Respondent gave to his client a
letter in which he said that he assumed the responsibility of the decline of
the portfolio and undertook to appreciate the portfolio value back to the
value held on January 2000 which was $1,059,954 prior to the expiration of
the third Friday of January 2001. Furthermore, the Respondent wrote that
in the case of his inability to bring the portfolio to the January 2000 level, he
would reimburse the account holder the discrepancy between January 2000
value and January 2001 value;
43. The Respondent made this offer to P.A. without the knowledge, consent or
authorization of CIBC;
11
Count 6
44. Still unsatisfied, P.A. sent a letter to the Respondent asking him to cease all
trading in his account and to reimburse him for his losses;
45. Following the reception of the letter of P.A., on or around July 1, 2000, the
Respondent offered and gave to his client P.A. a promissory note for the
amount of $400,000;
46. With this promissory note, the Respondent gave to P.A. a photocopy of a
bond in the amount of $300,000 as a guarantee;
47. The Respondent did not inform CIBC that he gave to P.A. a promissory note
because he was hoping that the markets would turn around and that he
would not have to reimburse P.A.;
48. Regarding the account of P.A., the Respondent wrote in his February 26,
2001 e-mail the following: «50008860 Discretionary trades in options loss in
account 900m»;
49. In March 2001, P.A. was informed by CIBC that the Respondent had
requested a leave of absence for health reasons;
50. On or around March 29, 2001, CIBC sent a letter to P.A. requesting to
rectify the margin deficiency of $111,158 by liquidating positions and by
bringing further money or securities to the account. Moreover, CIBC
indicated that, failing of transfer of money or securities or appropriate
instructions of liquidation before the close of the markets of March 29, 2001,
the account would be liquidated at 9:30 the morning after;
51. P.A. refused to give instructions to CIBC to liquidate his positions to cover
the account deficiency and CIBC confirmed by letter to P.A. that they
liquidated them, starting March 30, 2001;
iv)
Account of H.M. and
Discretionary trading
A.M.
–
Conduct
unbecoming
and
52. The Respondent knows H.M. and A.M. since the beginning of the eighties;
53. On or around October 7, 1986, H.M. and A.M. opened a joint account
number 500-01327 at Merrill Lynch with the Respondent as their investment
advisor;
54. At the time of opening the account, H.M. was 53 years old and his wife A.M.
was 49 years old;
12
55. A KYC form and two (2) KYC updates were filled in for the account of H.M.
and A.M. by the Respondent as follows:
Oct. 7, 1986
Date
Investment objectives Income
Growth
Oct. 3, 1997
Aug. 2, 1999
100% long term
100% long term
Risk Factor
Good quality
Speculative
50% medium
50% high
50% medium
50% high
Annual income
$50,000
$100,000
$100,000
Total Net Worth
$250,000
$1,000,000
$2,000,000
Good
Good
Investment
knowledge
56. In 1988, R.L. had the account number 500-01193 opened at Merrill Lynch
with an investment dealer as her investment advisor who was not the
Respondent;
57. The Respondent became R.L.’s investment advisor afterwards;
58. Seven (7) updates of the KYC form were filled in for the account of R.L. by
the Respondent as follows:
July 22, 92
July 21, 95
July 31, 96
July 21, 97/ Aug. 5, 99
Aug. 18, 97
Investment 25% growth
objectives 50% growth
with risk
25% venture
situations
20%
income
70% short
10% long
10%
income
70% short
20% long
50% short
50% long
50% short
50% long
50% short
50% long
Risk
Factor
50% low
50%
medium
30%
medium
70% high
30%
medium
70% high
100% high
100% high
$40,000
$40,000
$40,000
$40,000
$40,000
Total Net $400,000
Worth
$400,000
$400,000
$400,000
$400,000
$800,000
Investment Good
knowledge
Good
Good
Good
Good
Good
Date
Annual
Income
March 25,
1991
$40,000
13
59. Regarding the account of H.M. and A.M. and the account of R.L., the
Respondent wrote in his February 26, 2001 e-mail the following:
«50001327 guarantees 50001193 since 1995 unaware of the guarantee dr
in 50001193 320m+150 their $»;
Count 7
60. In February 1993, R.L. wanted to take out money from her CIBC account
but she had suffered losses in the said account;
61. To assure R.L. to take out money from her account, on or around
February 16, 1993, the Respondent had H.M. sign a Guarantee Agreement
in favour of R.L.;
62. H.M. and A.M. did not know R.L. and they were not aware of the document
that H.M. signed. They did not know the consequences of guaranteeing
R.L.’s account. They had no reason to guarantee R.L.’s account, the
account of somebody that they did not know;
63. The Respondent obtained H.M.’s signature under the false pretence that it
was required for account maintenance;
Count 8
64. On or around July 21, 1995, July 31, 1996, July 21, 1997 and August 18,
1997, while updating the KYC form for the account of R.L., the Respondent
failed to indicate on R.L.’s KYC that H.M. and A.M.’s account was
guaranteeing her account;
Count 9
65. On or around October 3, 1997 and August 2, 1999, while updating the KYC
forms for the account of H.M. and A.M., the Respondent failed to indicate on
H.M. and A.M.’s KYC updates, that R.L. had a financial interest in H.M. and
A.M.’s account, since the latter was guaranteeing R.L.’s account;
Count 10
66. On or around April 25, 2000, the Respondent had H.M. sign a confirmation
letter of the guarantee in favour of the account of R.L. under false pretence;
14
Counts 11 and 12
67. On or around February 16, 2001, while left for a trip abroad, 11,300 shares
of Intergold Ltd. were purchased at a cost of $22,587.50 in the RRSP
account number 550-41038 of A.M. without her authorization;
68. Similarly, on or around February 16, 2001, while left for a trip abroad,
11,000 Intergold Ltd. shares were purchased for the RRSP account number
550-41039 of H.M. at a cost of $21,990.50 without his authorization;
69. CIBC cancelled the February 16, 2001 Intergold transactions and reinstated
the RRSP accounts accordingly, following a complaint from H.M. and A.M.;
70. Notwithstanding that H.M. and A.M.’s RRSP accounts were not
discretionary accounts, the Respondent proceeded to make purchases of
Intergold shares without consulting his clients;
71. H.M. and A.M.’s accounts had not been accepted by CIBC as discretionary
accounts pursuant to Association Regulation 1300.4;
72. At the beginning of March 2001, H.M. and A.M. were informed by CIBC that
the Respondent had requested a leave of absence for health reasons;
73. On or around March 16, 2001, H.M. and A.M. sent a letter to CIBC
requesting that no transactions should be made in any of their accounts
without their prior written authorization. H.M. and A.M. had also learned that
they were guaranteeing the account of R.L.;
74. On or around June 19, 2001, CIBC sent a letter to R.L. with conform copy to
H.M. and A.M., requesting her to make necessary financial arrangements to
provide the firm with payment in full of the balance owing of
$356,824.91CDN by June 26, 2001. Failing that, CIBC advised that they
would proceed to exercise their rights with respect of H.M. and A.M.’s
account which guaranteed R.L.’s account;
75. CIBC actually sold H.M. and A.M.’s positions to cover the balance owed by
R.L.;
v)
Account of X inc. – Conduct unbecoming
76. S.G. had an account opened at Merrill Lynch in November 1983 with the
Respondent as his investment advisor. The address given on the New
Account Application form was at Place Bonaventure, no social insurance
number was given and nobody appeared to have a financial interest or
authority in the account;
15
77. S.G. is the Respondent’s uncle who lived in Turkey;
78. S.G. is now 73 years old;
79. A KYC form and seven (7) KYC updates were filled in by the Respondent as
follows:
Date
Nov. 24,
83
Nov. 7, 85 May 7, 92 Mar. 13,
/ Feb. 10, 97
94
Sept. 30,
97
May 21,
98
Jun. 10, 99
Investment
objectives
Income
Income
100%
short
80% short
10%
medium
10% long
80% short
10%
medium
10% long
80% short
10%
medium
10% long
80% short
10%
medium
10% long
Risk Factor
Good
Quality
Speculative
100%
high
10% low
10%
medium
80% high
50%
medium
50% high
100%
high
100% high
Annual
income
$20,000
$50,000
$100,000
$100,000
$100,000
$100,000
$100,000
Total Net
Worth
$100,000 $200,000
$250,000
$300,000
$500,000
$500,000
$1,000,000
Excellent
Excellent
Excellent
Excellent
Excellent
Investment
knowledge
80. On or around November 15, 1993, H.M. and Arek M. opened the account
number 500-00204 in the name of X inc., their holding company, at CIBC
with the Respondent as their investment advisor;
81. A KYC form and three (3) KYC updates were filled in for X inc. by the
Respondent as follows:
Date
Nov. 15, 1993 Sept. 18,
1995
Sept. 30,
1997
May 21, 1998
80% income
80% income
80% income
Investment objectives 80% income
20% long term 20% long term 20% long term 20% long term
Risk Factor
100% low
50% low
50% medium
50% low
50% medium
100% high
Total Net Worth
$1,000,000
$1,000,000
$1,000,000
$1,000,000
Investment
knowledge
Excellent
Excellent
Excellent
Excellent
16
82. Regarding the account of X inc. and S.G., the Respondent wrote in his
February 26, 2001 e-mail the following: «50000204 guarantees 31006094
since 1995 unaware of the guarantee dr in 31006094 1mm»;
Count 13
83. On or around March 28, 1994, the Respondent had H.M., in the name of
X inc., sign a Guarantee Agreement in favour of S.G.;
84. H.M. did not know S.G. and he was not aware of the consequences of
guaranteeing S.G.’s account. He had no reason for X inc. to guarantee
S.G.’s account, the account of somebody that he did not know;
85. The Respondent obtained the H.M.’s signature under the false pretence that
it was required for account maintenance;
Count 14
86. On or around October 31, 1995, October 17, 1996, October 15, 1997,
October 19, 1998 and October 20, 1999, the Respondent obtained the
signature of H.M. as a principal shareholder of X inc. for an
acknowledgement of a guarantee agreement in favour of the account of
S.G., under false pretence;
Counts 15, 16, 17
87. On or around September 18, 1995, the Respondent modified the risk factors
listed on the KYC of X inc. for 50% low risk and 50% medium risk.
Moreover, the Respondent failed to indicate on the KYC update that S.G.
had a financial interest in the account since X inc.’s account was
guaranteeing S.G.’s account;
88. A KYC update dated March 13, 1997 for S.G.’s account showed that to the
question «Does any other person including the financial consultant: - Have
authority over this account? - Have a financial interest in this account?
- Guarantee this account?», the name of P.G. is given. The Respondent
failed to indicate on the KYC update that X inc. was guaranteeing the
account of S.G;
89. An update of the KYC of S.G.’s account dated September 30, 1997,
changed the risk factors to 50% medium and 50% high and the total net
worth was $500,000. The KYC update indicated to the question «Does any
17
other person including the financial consultant: - Have authority over this
account? - Have a financial interest in this account? - Guarantee this
account?», the name of P.G. is given. The Respondent failed to indicate on
the KYC update that X inc. was guaranteeing the account of S.G.;
90. On or around the same day, September 30, 1997, a KYC update form was
filled in by the Respondent for the account of X inc. but nothing was
changed from the last version of 1995. The investment objectives were still
80% income and 20% long term. The risk factors were 50% low risk and
50% medium risk. The total net worth was evaluated at $1,000,000. The
Respondent did not indicate on the KYC update that S.G.’s account was
guaranteed by the X inc.’s account;
91. On or around May 21, 1998, an update of the KYC of X inc. was prepared
and the risk tolerance was from then 100% high. The Respondent
amended the KYC for X inc.’s account without the knowledge or consent of
his client;
92. The same day, on or around May 21, 1998, S.G.’s KYC was updated. His
risk tolerance was also from then 100% high.
93. On both May 21, 1998 updates of X inc.’s and S.G.’s KYC, the Respondent
failed to indicate that X inc.’s account was guaranteeing the account of S.G.;
94. On or around June 10, 1999, S.G.’s KYC was amended so to indicate that
X inc.’s account was guaranteeing the account of S.G. Never before June
1999, S.G.’s KYC forms were modified to indicated that his account was
guaranteed by 500-00204 account, the X inc.’s account;
95. On or around March 6, 2001, X inc. was informed by a letter from the
Respondent’s supervisor, Thomas Noonan, that the Respondent had
96. On or around March 16, 2001, X inc. sent a letter to CIBC requesting that no
transactions should be made in its account without its prior written
authorization;
97. On or around October 24, 2001, CIBC transferred $691,936.30 from the
X inc.’s account to the account of S.G. by virtue of the guarantee agreement
leaving a cash balance of $0 in the X inc.’s account. In addition, CIBC
transferred the same day $11,008.86 from H.M. and A.M.’s account to the
account of S.G. leaving them a cash balance of $2,54;
18
vi)
Account of L.N. – Conduct unbecoming
Count 18
98. On or around July 24, 1996, the Respondent had L.N. sign a guarantee
agreement in the name of Z inc. in favour of S.G. under false pretence. This
guarantee was revoked as soon as August 22, 1996. L.N. did not know
S.G. and he had no reason to guarantee S.G.’s account;
vii) Account of K.P. – Conduct unbecoming
99. On or around August 1, 1984, A.P. and B.P. opened a joint account at
Merrill Lynch with the Respondent;
100. A KYC form and six (6) KYC updates were filled in for the account of A.P.
and B.P. by the Respondent:
Date
Aug. 1, 84 July 22,
92
Investment Income
objectives
Sept. 3,
96
Oct. 1, 97
Feb. 11,
98
June 5,
98
April 5, 99
70%
50%
50%
50% short 50% short 50% short
income
income
income
50%
50%
50%
30% short 50% short 50% short medium
medium
medium
Risk
Factor
Investment
value
70%
investment
grade
30%
speculative
100%
high
50%
medium
50% high
50%
medium
50% high
100%
high
100%
high
Annual
income
$100,000
$100,000
$100,000
$100,000
$100,000
$100,000
$100,000
Total Net
Worth
$500,000
$400,000
$400,000
$400,000
$400,000
$400,000
$800,000
Excellent
Excellent
Excellent
Excellent
Excellent
Excellent
Investment
knowledge
101. On or around December 18, 1984, K.P. opened an account at Merrill Lynch
with the Respondent as her investment advisor. At the time of opening the
account, K.P. was 55 years old;
102. K.P. has the same surname as A.P. and B.P. but she is not related to them;
103. A KYC form and six (6) KYC updates were filled in for the account of K.P. by
the Respondent as follows:
19
Date
Dec. 18,
1984
April 20, 93
July 19, 93
July 31, 96
Oct. 1, 97
June 5, 98
July 13, 00
Investment
objectives
Income
100%
income
25%
income
25% short
25%
medium
25% long
25%
income
25% short
25%
medium
25% long
25%
income
25% short
25%
medium
25% long
50% short
50% long
Risk Factor
Investment
value
50% low
50%
medium
50% low
50% high
50%
medium
50% high
100% high
20% low
20%
medium
60% high
Annual
income
$25,000
$100,000
$100,000
$100,000
$100,000
$100,000
Total Net
Worth
$100,000
$1,500,000
$1,500,000
$1,500,000
$1,500,000
$1,000,000
Good
Good
Good
Good
Good
Investment
knowledge
104. K.P.’s son, R.P., had also opened an account at Merrill Lynch with the
Respondent a couple of days before her. He had the same investment
objectives and risk factors as his mother’s. His total net worth was
approximately $250,000 and his annual income was $100,000;
105. On or around April 19, 1993, K.P. who was then 64 years old, signed a
trading authorization in favour of her son R.P.;
106. An update of the KYC was signed the day after, on or around April 20, 1993,
in which the investment objective was established at 100% income and the
risk factors at 50% low risk and 50% medium risk. The estimated total net
worth was $1,500,000 and the annual income was $100,000. On this form,
it is written «R.P. (son) will be managing account»;
107. Regarding the account of A.P. and B.P. and the account of K.P., the
Respondent wrote in his February 26, 2001 e-mail the following:
«50001555 guarantees 50001628 since 1995 unaware of the guarantee dr
in 50001628 300m»;
Count 19
108. On or around June 3, 1993, the Respondent had K.P. sign a Guarantee
Agreement in favour of A.P. and B.P. The Respondent obtained the
signature of K.P. under the false pretence that it was required for account
maintenance;
20
109. K.P. did not know A.P. and B.P. She had no reason to guarantee A.P. and
B.P.’s account, the account of people that she did not know;
110. The Respondent did not inform K.P. that the document signed was to
guarantee the account of A.P. and B.P. He did not inform her as to the
consequences of guaranteeing K.P.’s account;
111. Moreover, a guarantee agreement was signed by R.P. in favour of K.P.;
Counts 20, 21, 22, 23
112. On or around July 19, 1993, the investment objectives indicated on K.P.’s
KYC were changed for 25% income, 25% short, 25% medium and 25%
long. The risk factors were also changed for 50% low and 50% high. The
Respondent failed to indicate on the KYC update that A.P. and B.P. had a
financial interest in the account since K.P.’s account was guaranteeing their
account;
113. K.P. appointed her son R.P. as her agent and attorney by signing a «Power
of Attorney» on or around July 15, 1994;
114. The day after, on or around July 16, 1994, she signed another Wood Gundy
form to give her son the authorization to sign cheques in her account;
115. Another KYC update for the account of K.P. was filled in on or around July
31, 1996. No modification was brought to the form;
116. On or around September 3, 1996, while updating the KYC form for the
account of A.P. and B.P., the Respondent failed to indicate on A.P. and
B.P.’s KYC, that K.P.’s account was guaranteeing the account of A.P. and
B.P;
117. On or around October 1, 1997, the risk factors were increased for K.P.’s
account as it appears from the KYC update. As a matter of fact, they
changed to 50% medium risk and 50% high risk;
118. The same day, on or around October 1, 1997, the risk factors were
decreased for A.P. and B.P.’s account to 50% medium risk and 50% high
risk. Thus, K.P.’s account and A.P. and B.P.’s account had the same
degree of risk;
119. On both October 1, 1997 updates of A.P. and B.P.’s KYC and K.P.’s KYC,
the Respondent failed to indicate that K.P.’s account was guaranteeing A.P.
and B.P.’s account;
21
120. On or around February 11, 1998, the investment objectives of A.P. and B.P.
were changed to 50% short term and 50% medium term. The Respondent
failed again to indicate on the KYC update that K.P.’s account was
guaranteeing their account;
121. On or around June 5, 1998, the risk factors were increased again as noted
in the KYC update for the account of K.P. Indeed, they changed to 100%
high risk;
122. The same day, on or around June 5, 1998, the risk factors were also
increased to 100% high risk for the account of A.P. and B.P. Thus, K.P.’s
account and A.P. and B.P.’s account had the same degree of risk once
again;
123. On both June 5, 1998 updates of A.P. and B.P.’s KYC and K.P.’s KYC, the
Respondent failed to indicate that K.P.’s account was guaranteeing A.P.
and B.P.’s account;
124. On or around June 25, 1998, the Respondent’s supervisor, Thomas
Noonan, sent a letter to K.P. requesting her confirmation of the guarantee
agreement in favour of A.P. and B.P.’s account;
125. R.P. signed the name of his mother on this confirmation letter as well as his
own name under the promise of the Respondent that the guarantee would
be revoked. There was no follow up on the part of R.P. because he trusted
the Respondent that he would revoke the guarantee but he never did it;
126. On or around March 31, 1999, another letter from the Respondent’s
supervisor, Thomas Noonan, was sent to K.P. requesting again her
confirmation of the guarantee of liability of the account of A.P. and B.P.
This time, only K.P. signed the confirmation letter. The Respondent had her
sign the confirmation letter. She had no knowledge or understanding of the
document being signed and of the consequences of guaranteeing the
account of A.P. and B.P.;
127. Another KYC update of A.P. and B.P.’s account was filled in on or around
April 5, 1999. No modification was made except the mention of the account
500-01555, K.P.’s account, guaranteeing A.P. and B.P.’s account;
128. On or around July 13, 2000, the Respondent failed to indicate on K.P.’s
KYC update that A.P. and B.P.’s account had a financial interest in her
account;
129. On or around March 6, 2001, the Respondent’s supervisor, Thomas
Noonan, sent a letter to R.P. informing him that the Respondent had
22
130. On or around April 1, 2001, R.P. sent a complaint letter to Thomas Noonan
about the Respondent and CIBC’s conduct;
131. On or around April 2, 2001, at R.P.’s home, the Respondent signed a letter
already prepared by R.P., in which he confirmed having obtained K.P.’s
signature on the June 3, 1993 guarantee agreement without informing her of
the nature of the document;
132. The Respondent also confirmed having obtained the signature of R.P. on
June 25, 1998, under the false pretence that the guarantee agreement was
an error and under the promise to revoke the said guarantee agreement;
133. On or around April 4, 2001, CIBC sent a letter to A.P. and B.P. with conform
copy to K.P., requesting them to make necessary financial arrangements to
provide the firm with payment in full of the balance owing of
$ 309,151.14 CDN by April 11, 2001. Failing that, CIBC advised that they
would proceed to exercise their rights with respect of the K.P.’s account
which guarantees A.P. and B.P.’s account;
134. CIBC sold K.P.’s positions to cover the balance owed by A.P. and B.P., as
confirmed in the letter sent by CIBC on April 27, 2001;
viii) Forgery – Conduct unbecoming
Count 24
135. In or around September 1997, the Respondent accepted a power of
attorney for the account of Y Ltd. which he knew had not been signed by the
beneficial owner of the account;
136. The Respondent accepted the forged power of attorney to speed up matters
with his client;
137. Upon CIBC’s refusal to accept the forged power of attorney, the
Respondent flew to London, England to obtain the signature of the
beneficial owner of the account of Y. Ltd. on the power of attorney;
138. Afterwards, CIBC fined the Respondent $30,000 for having knowingly
accepted a forged document.
NOTICE is further given that the Respondent shall be entitled to appear and be
heard and be accompanied by counsel or agent at the hearing and to call,
examine and cross-examine witnesses.
23
NOTICE is further given that the Association By-laws provide that if, in the
opinion of the District Council, the Respondent has failed to comply with or carry
out the provisions of any federal or provincial statute relating to trading or
advising in respect of securities or commodities or of any regulation or policy
made pursuant thereto; failed to comply with the provisions of any of the Bylaws, Regulations, Rulings or Policies of the Association; engaged in any
business conduct or practice which such District Council in its discretion
considers unbecoming or not in the public interest; or is otherwise not qualified
whether by integrity, solvency, training or experience, the District Council has the
power to impose any one or more of the following penalties :
1) a reprimand;
2) a fine not exceeding the greater of :
a) $1,000,000. per offence; and
b) an amount equal to three times the pecuniary benefit which
accrued to such person as a result of committing the
violation;
3) suspension of approval of the person for such specified period and
upon such terms as the District Council may determine;
4) revocation of approval of such person;
5) prohibition of approval of the person in any capacity for any period
of time;
6) such conditions of approval or continued approval as may be
considered appropriate by the District Council.
NOTICE is further given that the District Council may, in its discretion, require
that the Respondent pay the whole or part of the costs of the proceedings before
the District Council and any investigation relating thereto.
NOTICE is further given that the District Council may accept as having been
proven any facts alleged or conclusions drawn by the Association in the Notice of
Hearing and Particulars that are not specifically denied, with a summary of the
facts alleged and conclusions drawn based on those alleged facts, in a REPLY.
NOTICE is further given that the Respondent has ten (10) days from the date on
which this Notice of Hearing and Particulars was served, to serve a REPLY
upon:
24
Investment Dealers Association of Canada
1, Place Ville-Marie
Suite 2802
Montréal (Québec)
H3B 4R4
Attention : Me Caroline Champagne
Suite 210
Montréal (Québec)
H3B 2E7
A REPLY may either:
i)
specifically deny (with a summary of the facts alleged and intended to be
relied upon by the Respondent, and the conclusions drawn by the
Respondent based on all the alleged facts) any or all of the facts alleged
or the conclusions drawn by the Association in the Notice of Hearing and
Particulars; or
ii)
admit the facts alleged and conclusions drawn by the Association in the
notice of Hearing and Particulars and plead circumstances in mitigation of
any penalty to be assessed.
NOTICE is further given that, if the Respondent fails to serve a Reply or attend at
the hearing, notwithstanding that a Reply may have been served, the District
Council may proceed with the hearing of the matter on the date and at the time
and place set out in this Notice, or on any subsequent date, at any time and
place, without further notice to and in the absence of the Respondent, and the
District Council may accept the facts alleged or the conclusions drawn by the
Association in this Notice of Particulars as having been proven, and may impose
any of the penalties prescribed by the By-laws of the Association.
DATED at Montreal, Province of Quebec, this 19th day of January 2004.
___________________________________
CARMEN CRÉPIN
Vice-President, Quebec
INVESTMENT DEALERS ASSOCIATION OF CANADA
Suite 2802
Montreal (Quebec)
H3B 4R4
Broker broke promise, court told
Page 1 of 2
Elderly widow held responsible for losses of two unrelated CIBC World Markets
clients
PAUL DELEAN
January 20, 2005
Former CIBC World Markets broker Harry Migirdic assured the outraged son of one of his
clients in 1998 that he'd rescind, within 48 hours, the guarantee which had her liable for
the investment losses of another couple.
But three years later, the guarantee was still in place, and CIBC ended up exercising it to
seize about $300,000 from elderly widow Kiganouchi (Ketty) Papazian to cover a deficit in
the account of two other Migirdic clients, Bedros and Aida Papazian, to whom she was not
related.
"It was the only money she had," said Richard Papazian, the son of Kiganouchi Papazian,
who died in 2003 at age 78.
Richard Papazian, 44, was a witness yesterday in the multi- million-dollar lawsuit of two
other former Migirdic clients, Haroutioun and Alice Markarian, against CIBC World Markets.
In his Superior Court testimony, Papazian said he looked after his mother's financial affairs
after the death of his father in 1990. That meant dealing with her broker, Migirdic, and
making sure her investments were safe.
He said he was furious when he first learned of the guarantee in 1998 after closely
examining a document Migirdic had brought him to get his mother to sign.
It indicated she'd been guaranteeing the account of the unrelated Papazians since 1993.
"He (Migirdic) said a mistake was made, and he needed her signature to correct and
reverse the mistake made in 1993," Papazian said.
He refused to bring the form to his mother to sign.
When Migirdic insisted it was just a formality, Papazian signed his mother's name to the
document. "I didn't want a valid signature on it."
Papazian said he called Migirdic two days later, and "he said the guarantee was removed,
everything's okay."
The next time Papazian saw the document, it was as a fax sent to him in April 2001 by
CIBC branch manager Tom Noonan, along with a 1993 document signed by his mother.
Because she worked downtown in a clothing store that was in the same complex as the
Page 2 of 2
CIBC office, Migirdic often brought forms to the store for her to sign, Papazian said.
"She would not let me guarantee my own sister," Papazian said, "so I'm pretty sure she
wouldn't guarantee someone she doesn't know."
But Noonan informed him the CIBC considered it a valid guarantee. Papazian said he called
the brokerage because a stockbroker had told his brother-in-law at church a day earlier
there might be problems with Migirdic accounts.
Migirdic, however, still insisted the guarantee was gone. The broker admitted Kiganouchi
Papazian was on a list of problem accounts he'd provided to the CIBC, but Papazian said he
assured him "it'd be taken care of like all the other times."
Not even a letter sent to CIBC president John Hunkin, to which was attached a letter signed
by Migirdic admitting his misdeeds, was enough to block the seizure, Papazian said.
He recalled receiving a response from Hunkin a few days later that thanked him for his
letter and misidentified his mother, calling her Winnie Hart.
Migirdic, terminated by the CIBC in April 2001, last summer was fined $305,000 and barred
for life from the securities industry by the Investment Dealers Association of Canada.
During his testimony earlier this week, he admitted he had not paid any of that fine.
Nor has he paid a $500,000 court judgment obtained against him by CIBC after his
dismissal.
Asked by the Markarians' lawyer, Serge Letourneau, if the CIBC had asked him to pay the
judgment or seized any of his property, Migirdic said it hadn't.
He also hasn't paid in full the $250,000 demanded from him in the mid-1990s by CIBC
after it found him guilty of discretionary trading and reimbursed that amount to one of his
clients.
CIBC deducted a percentage from his commissions for a period of years after that - he
wasn't sure how much in total - but it was less than $250,000, Migirdic said.
The deductions stopped when he'd gone a certain period of time without further problems,
he said.
The trial continues today.
[email protected]
A newsletter published by the
IDA REP
RT
Summer 2003
Regulatory Reform:
a Securities Industry Priority
This is the moment for securities regulatory reform. Never before has the
need been so great or the field so
crowded. The IDA has examined the
current proposals for change and articulated its position on what would
constitute success and what would
represent failure.
regulators. The lack of cost information has
made it more difficult to evaluate the
potential benefits that might be achieved
from reform. To address this shortcoming,
the IDA retained Charles River Associates
(CRA) to conduct an independent study,
Estimating the Incremental Costs of Multiple
Securities Regulators in Canada, which is
available to governments and regulators
involved in the current reform efforts.
Currently, there are three models with
real potential: a federal commission,
a pan-Canadian commission and the Although each of the three models has the
current structure of 13 provincial and potential to be developed into an efficient
territorial commissions.
and well-functioning regulatory structure
for Canada, we need to set the bar high. We
A regulatory system must be capable should be aiming for dramatic
of achieving and balancing the improvement, not merely tinkering. What
overarching regulatory goals of inves- we urgently need is the equivalent of a
tor protection, as well as efficiency home run—regulation that will truly meet
and competitiveness. To fulfill this Canada’s needs.
dual mandate, it should have the following characteristics: regulatory ex- For additional information about IDA
pertise and in-depth knowledge of positions, please visit www.ida.ca/
capital markets; regional representa- Regulation/Regulatory Proposals:
tion to ensure sensitivity to local mar- • IDA Response to the Wise Persons’
kets and small businesses;
Committee Questions to the Canadian
cost-effectiveness; flexibility and reCapital Markets Community, June 30, 2003
sponsiveness to changes in markets; • IDA Response to Provincial and
uniformity of rules or, at a minimum,
Territorial Ministers Discussion Paper
a high degree of harmonization; poSecurities Regulation in Canada: an Intertential for consensus; governance that
Provincial Securities Framework, July 8, 2003
assures objectivity; appropriate inde- • IDA Response to Request for
pendence and accountability to govComments: Canadian Securities
ernment; and an ability to represent
Administrators Uniform Securities
Canada internationally.
Legislation Project: Blueprint for
Uniform Securities Laws for Canada
While the debate over reform has
been long-standing, there is little in Please see also in Media, Events &
the way of empirical evidence on the Speeches/Speeches:
costs to be saved by market • Regulatory Reform: Who’s On First, Address
participants from dealing with fewer
by Joe Oliver, President and CEO
•
•
•
Canada’s Capital Markets: Learning from Andy
Warhol, Address by Joe Oliver
Regulatory Reform: Made-in-Canada, Address
by Joe Oliver
New Approaches to Regulating the Financial
Services Sector, Address by Paul Bourque,
Senior Vice-President, Member Regulation
The Association encourages Members to participate in this important consultation process.
For more information, please contact:
Joe Oliver
President & CEO
(416) 865-3020 or [email protected].
Beneficial
Ownership &
Offshore Accounts
The beneficial ownership of private corporate
brokerage accounts has always been a significant regulatory concern to the securities industry and especially so in jurisdictions which have
been identified by the Financial Action Task
Force (FATF) of the Organization for Economic
Cooperation and Development (OECD) as
lacking proper financial oversight systems.
In October 2001, the Association passed
changes to Regulations 1300.1 and 1300.2
which would have required Members to obtain beneficial owner information where possible, but would have permitted them to open
accounts for which the information could not
be obtained subject to special approval and
account monitoring provisions. At that time,
there were no similar provisions in the securities laws and regulations in other countries
with well-developed capital markets, in Canadian anti-money laundering laws and regulations, or in the international standard for
anti-money laundering regimes, the 40 Recommendations of the Financial Action Task
Force (FATF).
2
Shortly thereafter, a number of initiatives were
undertaken that appeared likely to match and
perhaps exceed the proposed amendments to
Regulations 1300.1 and 1300.2. These included
the publication in October 2001 of the Basel
Committee for Banking Supervision report,
Customer Due Diligence for Banks, and the initiation of a review of the FATF 40 Recommendations, beginning with the publication in May
2002 of a consultation paper and request for
comments.
In light of these international developments,
the Association withdrew the proposed
changes to Regulations 1300.1 and 1300.2 in
order to ensure that the final changes were
consistent with developing international
standards. That development process was
completed on June 20, 2003 with the
publication by the FATF of its final revised
Recommendations.
On June 22, 2003, the IDA Board of Directors
approved amendments to Regulation 1300 relating to Know Your Client Requirements for
Non-Individual Accounts. The proposed
amendments to Regulation 1300 address the
issue of the need to know the beneficial owners behind a corporate account. The new
policy will require IDA Member firms, when
opening an initial account for a corporation or
similar entity, to identify and then verify the
identity of the beneficial owner. Verification
is to be completed as soon as is practicable and
in any case no later than six months.
Highlights of the amendments include:
• beneficial ownership information requirements refer to individuals, whether their
ownership is direct or indirect, as in ownership through other corporations or trusts;
• knowledge of beneficial ownership is not
required for certain types of corporations
and trusts;
• for new accounts of private corporations and
similar entities, the identity of the beneficial
owners must be obtained and verified;
• for new accounts of trusts, the identities of
•
the settlors and beneficiaries, where known,
must be obtained and verified;
where the identities of beneficial owners,
settlors or beneficiaries, as appropriate, are
not known for accounts open at the time the
changes are implemented, Members will
have one year after implementation to obtain the information.
In October 2001, the IDA conducted a survey of
IDA Member firms to identify the number of
non-individual accounts in Non-Cooperative
Countries and Territories (NCCT) jurisdictions.
The survey identified a total of 13,000 non-North
American offshore accounts. Of that number,
some 3,000 were located in NCCT jurisdictions.
Of these accounts, 740 were non-individual acAn exemption for the accounts of financial in- counts in the name of entities where the benefistitutions regulated in their home jurisdictions cial owners may not be fully disclosed.
and their affiliates is provided. However, the
Association is empowered to remove the ex- On March 6, 2002, the IDA announced an Action
emption for financial institutions in jurisdic- Plan to review the survey of offshore accounts
tions found by the Government of Canada or and provided a commitment to move quickly
international organizations of which Canada is in response to upcoming regulatory
a member to have deficient regulatory regimes. developments.
An exemption is also provided for publicly Sales compliance examination programs were
traded corporations, trusts and similar entities revised to ensure these 740 accounts were reand their affiliates.
viewed in the course of regularly scheduled
sales compliance reviews to identify the benIt should be noted that this proposal represents eficial ownership and determine if there are
a significant change from the current practice any signs of suspicious activity and to follow
and requirements in the industry today.
up with firms if there is evidence that an account has not been properly supervised. The
The new policy will be sent to the securities follow up work has determined that 387 of the
commissions for approval, following review 740 accounts were mistakenly included (in fact,
and public comment. The IDA will continue they were not non-individual accounts) which
to keep you informed about developments left 353 high-risk accounts. It has been detersurrounding this important policy.
mined that, although not on file, the beneficial
ownership was known by the firm with respect
IDA Offshore Account Survey Action
to 211 of these accounts.
Plan
While the rule changes described above cover A number of referrals have been made to IDA
all corporate accounts, both domestic and off- Enforcement and other regulatory agencies
shore, accounts located in countries without a concerning these accounts.
credible financial oversight system or which are
unwilling to assist investigations by foreign For more information, please contact:
authorities are of the most interest to regula- Paul Bourque
tors. Where the beneficial ownership of such Senior Vice-President, Member Regulation
accounts is unknown, the risks of abuse are (416) 865-3038 or [email protected].
particularly high. Any plan to manage the risks
arising from these kinds of accounts must identify these accounts and provide criteria for further review by the firm compliance department
and/or the regulators.
3
Our New Chair
Our New Vice-Chair
The Investment Dealers Association of Canada
is pleased to announce the appointment of G.F.
Kym Anthony, President and Chief Executive
Officer of National Bank Financial, as Chair of
the Association. Mr. Anthony was appointed
at the AGM held in St. Andrews by-the-Sea,
New Brunswick.
Also at the AGM, Brian Porter was appointed
as the Vice-Chair of the Board of Directors. Mr.
Porter is currently Executive Managing Director, Scotia Capital Inc.
Mr. Anthony began his career with CIBC Wood
Gundy and worked in Toronto, Calgary, London and Tokyo. From 1993 to 1998, he was
Chairman and Chief Executive Officer of TD
Securities and latterly Vice Chair of TD Bank.
Mr. Anthony previously served as Vice-Chair
of the Investment Dealers Association and has
been a member of the Executive Committee of
the Board.
Mr. Anthony is on the board of ComDev International and the Canadian Opera Company.
Mr. Porter has served over 22 years with Scotia
Capital in a broad range of senior management
roles. He oversees the execution and delivery
of products and services in Investment Banking, Corporate Banking, Mergers and Acquisitions, Institutional Equity Sales and Trading,
Equity Research and Equity Capital Markets.
Mr. Porter is a member of the Investment Dealers Association Executive Committee and Director of the Ombudsman for Banking Services
and Investments. He is also a Director and
Capital Campaign Chair of Bridgepoint Health
Foundation and a Director of Invest in Kids.
The 2003 - 2004 Board of Directors
At the AGM, a number of new directors were
confirmed in their appointments.
James Baillie, QC, and Michael Grandin were
appointed as Public Directors for two–year
terms. John Howard, QC and Alain Rhéaume
have agreed to serve their fourth two-year
terms as Public Directors. As well, Debra
Hewson, Vice-President and Chief Operating
Officer, Odlum Brown Ltd., will also sit on the
Board in her capacity as Chair, National Advisory Committee.
The following Industry Directors have also
been appointed to the Board for a two year
term: Frank Laferriere, Chief Operating
Officer and Chief Financial Officer, Berkshire
Securities Inc. and Thomas Monahan,
Managing Director, CIBC World Markets.
Colleen Moorehead, President, E*Trade
4
Canada Securities, and Gary Reamey,
Principal, Canada, Edward Jones, have been renominated and appointed to serve another
term as Industry Directors.
The IDA extends many thanks to the retiring
Directors for their contributions: Public Director, Marie-José Nadeau; Industry Director,
Michel Duchesne, Managing Director, RBC
Dominion Valeurs Mobilières Inc.; NAC Chair
Ray Smallwood, Vice-President and Director,
CIBC World Markets Inc.; and Industry Director and Past Chair of the IDA Bill Packham,
President and Chief Executive Officer, First
Associates Investments Inc.
Ken Nason
Association Secretary
87th Annual Meeting & Conference
The IDA’s 87th Annual Meeting and Conference
was held June 22-24 in St. Andrews by-the-Sea,
New Brunswick. The event was held at the
Fairmont Algonquin Hotel, and included a
powerful line-up of speakers and industry
leaders, a broad range of entertaining social
activities, and of course, a golf tournament.
The program of speeches, presentations and
panel discussions focused on the topic of Navigating Through Uncharted Waters as the industry deals with major change. IDA Chair Terry
Salman opened the conference with his address entitled Self-Regulation Works Best by Putting the Public Interest First. IDA President and
CEO Joe Oliver addressed the very topical issue of regulatory reform in his speech, Regulatory Reform: Who’s on First? He also discussed
the findings of the Charles River Report, Estimating the Incremental Costs of Multiple Securities
Regulators in Canada, an independent study on
regulatory burden. (See cover story).
Ian Russell again pleased the crowd with his
presentation on the status of the securities industry, entitled Through the Crucible of Fire.
Lively panel discussions were held to address
current issues facing the industry. View from
the Regulators featured David Brown, Chair of
the Ontario Securities Commission, Stephen
Sibold, Chair and CEO of the Alberta Securities Commission and Pierre Godin, Chair of
the Québec Securities Commission. The Leaders Panel, Strategic Positioning in Response to
Regulatory Reform, Difficult Markets and Structural
Change, included Frank Laferriere, Brian Porter and Bruce Ramsay.
The IDA was pleased and privileged to welcome Howard Lutnick, President of Cantor
Fitzgerald. Not only is he a recognized expert
on financial markets and financial services technology, he is also the head of one the hardest
hit companies in the September 11 tragedy. He
held the audience rapt, sharing his story and
expressing his thanks to the industry for their
support during that difficult time.
James Webb, a Vietnam war hero and former
Secretary of the U.S. Navy, was the keynote luncheon speaker, discussing Government Ethics in
the Post-Iraq War Era. Barbara Stymiest, CEO
of the TSX; Luc Bertrand, President and Chief
Executive Officer of Montréal Exchange; Ralph
Acampora, Managing Director of Prudential
Securities; Arnaud de Borchgrave, Editor at
Large, United Press International; and Donald
Putnam, Chairman, CEO and Managing Director, Putnam Lovell NFB Securities Inc., also
addressed the delegates over the three-day
conference. Sessions were also held with Tom
Schneeweis, CISDM/Isenberg School of Management; Steven Larke, Vice President, TD
Newcrest; Stan Hartt, Chairman, Citigroup
Global Markets Canada Inc.; James Kiernan,
President & CEO, Cornerstone Capital Partners; and Garry Jones, CEO & President,
Brokertec Europe Ltd. Copies of speeches and
presentations are available at the IDA website
(Media, Events & Speeches/Annual Conference/Conference 2003/Speeches).
Several key policy initiatives were approved
at the Board of Directors Meeting, including
new measures to deal with offshore accounts
and new measures for inclusion in Policy 11 Analyst Standards.
Delegates and guests were treated with down
home Atlantic Canada hospitality and entertained by the sounds of Fiddles & Feet and
Raylene Rankin & Friends. The conference concluded with a black tie gala and cabaret.
Thanks are due to the 2003 Conference Planning Committee for their efforts in making this
a successful conference: Chair Phipps
Lounsbery, CIBC World Markets Inc.;
Deborah Armour, Raymond James Ltd.; John
5
Fitzpatrick, TD Securities Inc.; Lonsdale Holland, Beacon Securities Limited; Mary Jacobs,
CIBC World Markets Inc.; Al McLaughlin, RBC
Dominion Securities Inc.; Georges Paulez,
Mirabaud Canada Inc.; and Kristine Vikmanis,
BMO Nesbitt Burns Inc.
Next year’s conference will be held in Mont
Tremblant, Québec at the Fairmont Tremblant
from June 13-16, 2004.
Connie Craddock
Vice-President, Public Affairs
The Fairmont Algonquin
Kym Anthony receives the
Chair’s Pin from Terry Salman.
2002 - 2003 Chair
Terry Salman
Terry Salman presents Howard
Lutnick with a gift.
6
The President’s
Report
It is my role to review the highlights of the
Association’s activities and accomplishments
during the past year, with an emphasis on our
SRO responsibilities. I also want to recognize
the impressive contribution of the many industry volunteers and dedicated staff in achieving our goal of fostering integrity and efficiency
in the Canadian capital markets.
securities crime. I have also written several
provincial Ministers of Justice calling for the
creation of special courts that can effectively
deal with lengthy and complex cases involving corporate and securities malfeasance.
In that connection, I am pleased that the Final
Report of the Five Year Review Committee recommended that the Ontario Securities Act be
amended to provide SROs with the additional
enforcement powers that we had requested.
They include jurisdiction over former employees, the ability to file decisions of disciplinary
panels as decisions of the courts, to compel
An extended bear market, corporate scandals, witnesses to attend disciplinary hearings and
war, strained relations with our most important to seek a court-ordered monitor, as well as
trading partner, SARS, Mad Cow disease - statutory immunity from civil liability. These
surely these ingredients are sufficient to fulfill powers will permit the IDA to discharge its
the Chinese curse, “May you live in interesting enforcement responsibilities more effectively.
times.” The year has not been an easy one for
investors or for the capital markets, with a Regulatory reform has been another key priority
whole series of events impacting on investors’ and your Association has taken a leadership role
confidence and trust in the integrity of the in the ongoing public debate. We have
market place – issues at the core of our reviewed and provided our positions on the
mandate. Restoring investors’ confidence has various options for new regulatory structures.
been a key priority for your Association and I The Association provided comments on the BC
am pleased to report on several very significant Securities Commission’s two concept papers
initiatives undertaken this year.
and draft legislation, the OSC’s Fair Dealing
Model, the Uniform Securities Legislation
Policy 11 - Analyst Standards, approved by our Blueprint, and the Wise Persons’ Committee
Board of Directors yesterday, will enhance in- consultation paper. We will also submit our
vestor confidence with tough but fair rules and views to the provincial Ministerial committee
guidelines that address conflicts of interest. The and continue to dialogue with governments and
successful launch last fall of the Ombudsman regulators with the objective of bringing our
for Banking Services and Investments, com- regulatory expertise and capital markets
bined with our national arbitration program, knowledge to this important public debate.
means that we have the best of class consumer
redress mechanism.
We have also taken every opportunity to raise
the important issue of the content of regulaThe Association welcomes the federal tion. While who regulates is, of course, imporgovernment’s announcement last week of the tant, what and how are equally critical. Costs
creation of six Integrated Market Enforcement also matter, if we are to have competitive and
Teams dedicated solely to capital markets healthy Canadian capital markets. That’s why
fraud cases. We had earlier recommended to we commissioned the Charles River Study on
the government the creation of specialized in- the costs of regulation as a constructive contritegrated units, combining policing and regu- bution to this important debate. We also prelatory resources and expertise to put additional sented the Association’s position on
teeth into the investigation and enforcement of Sarbanes-Oxley and governance reforms to the
7
Senate Committee on Banking, Finance and
Commerce and appeared before the House Finance Committee on the capital markets implications of bank mergers. Finally, we
presented before the Commission des finances
publiques de l’Assemblée nationale du
Québec, in respect to Bill 107, which restructured Québec’s securities regulation.
I am pleased to report a successful year for both
our Member Regulation and Industry Relations
and Representation Departments.
Member Regulation substantially achieved all
its benchmarks and performance measures in
2002. It expanded the use of risk assessment
strategies that allow the Association to better
identify, prioritize, mitigate and eliminate
high-risk situations. The result will be more
effective regulation, at reasonable cost. Financial Compliance fully implemented its risk assessment model on April 1st and was able to
re-allocate examiner resources from low-risk
to high-risk firms. Enforcement also fully
implemented its risk assessment model with
the approval of Policy 8 in June and the October 15 launch of Comset, the web-based complaints and settlement reporting system.
Member Regulation completed an important
reorganization with the creation of two new
positions: Vice-President, Québec and VicePresident, Professional Standards.
The Vice-President, Québec is responsible for
the Montréal regional office and front-line decision making for all operational regulatory
decisions in Québec. The new position demonstrates the IDA’s commitment to the highest
standards of regulation and to a strong presence
in Québec. We were delighted that Carmen
Crépin accepted the senior position in Québec
for the IDA and we have valued her contribution during the past year. Her involvement and
that of an exceptional, strong District council,
as well as a long history of serving Québec investors, position the IDA well in the forthcoming application for official recognition.
8
Maysar Al-Samadi was appointed to the new
position of Vice-President, Professional Standards with responsibilities for national coordination of CSA oversight examinations, as
well as managing internal and external reporting requirements and implementation of a
quality assurance program.
Registration, Finance and IT staff worked to
complete the National Registration Database
project. It went live on March 31, 2003. The first
three-year cycle of Continuing Education concluded December 31, 2002. This was a significant achievement not only for the Association
but also for the industry.
Your Association has worked effectively in
partnerships with other regulators in Canada
and internationally. The Enforcement
Department established partnerships with the
Securities and Exchange Commission and the
North American Securities Dealers Association.
In addition, it undertook an unprecedented
number of joint investigations with four
securities commissions and two other SROs.
Other joint projects included the Conflicts of
Interest Rules, the Debt Market Regulation
Project, the Offshore Accounts Survey and the
first conference ever held in Canada on selfregulation. This was such a successful event,
with over 250 delegates, that we intend to offer
an SRO conference program next year in
Toronto and Montréal. We are also working
with fellow Canadian Capital Markets
Association members on the important STP
initiative, the move to straight-through
processing.
Terry Salman has just reported in some detail
on our Industry Relations and Representation
accomplishments, which demonstrate our commitment to reach out to all our Members. Your
Association also represented Member firms in
a number of areas critical to the Canadian capital markets. During the past year, we have spoken across the country on the state of our capital
markets and the urgent need for regulatory
reform. We have articulated Association posi-
tions and views through television and print
media coverage and presented papers at international regulatory conferences.
Outgoing Chair’s
Address
I want to express my appreciation to Terry
Salman for his leadership and support during
a challenging and productive year. In spite of
heavy responsibilities at his firm, Terry has
devoted himself unstintingly to the IDA. In
addition to an exhaustive speaking schedule
across the country, Terry also found the time
to chair our special Board Committee on Policy
11 and to participate in an array of issues.
I have always believed that it is far more important to look ahead to see what’s coming than
to focus on the view in the rearview mirror.
However, it’s necessary from time-to-time to
review where you’ve been to make sure that
your course remains true and your commitment firm.
A year ago at Whistler, I outlined several iniThe input of staff has also been critical to tiatives that would guide my energies as your
achieving our goals. We have a terrific team Chairman. I said we would work for the adopof bright, energetic and devoted professionals tion of public policies that would serve the
who are making a positive contribution to growth of effective and efficient capital markets and that we would commit to increasing
Canada’s capital markets.
our regulatory activities and efficiencies. I comI am looking forward to working with Kym mitted that we would support policies to
Anthony, our incoming Chair. The Association strengthen the small and mid-sized business
benefits greatly from its ability to attract senior sector and we would work to build on the sucindustry professionals with exceptional back- cess of the Regional Dealers Committee and
grounds who are willing to devote time and its contribution of ideas and policy initiatives
experience, on behalf of the industry, other to our regional firms.
market participants and investors.
So, how have we done? Specifically, we pressed
Finally, I want to thank the hundreds of indus- for changes to federal tax law that would bentry professionals who devoted so generously efit small business financing and venture capiof their time to our Board, District Councils and tal, and were successful in influencing changes
committees. You provide the input that justi- to the Limited Partnership rules and improvefies a self-regulatory approach to the securi- ments to capital gains rollover provisions that
ties industry by assuring that our policies and will encourage greater institutional investment
public positions are principled, of high qual- in venture capital.
ity and broadly representative of the entire
membership. Your contribution is essential to
the continued strength of the Association and
its ability to protect the integrity and enhance
the competitiveness of the Canadian capital
market.
Joseph J. Oliver
President & CEO
Annual General Meeting, June 23, 2003.
We proposed a tax measure which would assist junior public markets in Canada by lowering the inclusion rate on capital gains for new
issues by small, publicly-listed companies.
Sadly, the government did not include this measure in this year’s budget, but we will be redoubling our efforts to have it included in the future.
We were instrumental in the government’s
decision on the phased elimination of capital
taxes on corporations and we promoted
changes that will increase the RRSP
9
contribution limits. These are initiatives that
will benefit all Canadians.
Recognizing the growing importance of the income trust sector of our capital markets, we
worked with both provincial and federal governments to secure beneficial changes to this
market. In Ontario, we argued persuasively to
introduce legislative amendments that would
limit the liability for unit holders of income
trusts.
We also brought to the attention of the Federal
authorities an anomaly of Federal tax law
whereby income trusts are not recognized as
securities for the purpose of lending and borrowing. Our efforts generated a response from
the Finance Department indicating that this will
be corrected in future legislation and we’re
working with the Finance officials to advise
them on how this can be done.
The IDA provided specific proposals to the
BC government designed to expand the role
of Vancouver’s designation as an International
Financial Center. Taking a chapter from the
success of Montreal as a vibrant IFC, we suggested changes that are currently under consideration. If adopted, these changes will
maximize the potential of Vancouver’s IFC
and promote investment growth in BC’s financial sector.
There is no question that access to capital is
the lifeblood of all business and in particular
to small and medium sized businesses. Over
the past year the IDA has provided vigorous
support for the reform of private placement
rules to provide companies with greater flexibility in structuring and distribution. Our efforts contributed significantly to the adoption
of “Multilateral Instrument 45-103” by a majority of provinces. While it is an important first
step in harmonizing the private placement
rules in this country it is also an indication that
we have more work to do to ensure that companies can achieve access to capital with maximum ease and flexibility.
10
Regulatory reform has long been a goal of the
IDA. Over the past twelve months, reform has
not only been at center stage but the spotlight
is burning brighter and hotter than ever before.
The IDA sees regulatory reform as not only
necessary, but essential for the operation of
healthy capital markets.
Healthy capital markets are built on trust governed by effective regulation. Sadly, we have
seen just how quickly the trust we have worked
so long to build can evaporate. And while the
IDA embraces the belief that our rules and regulations must first and foremost protect the investing public, they must also do so in a way
that does not create prohibitive costs and cumbersome procedures.
This does not force us to choose between what
is best for the investing public and what will
benefit the capital markets. The needs and interests of both are identical. The public wants
to know that the playing field is level, fair and
transparent. If it is not, they will simply refuse
to invest. At the same time, we want to pay a
fair and competitive price for the regulation we
seek. It’s a fact that capital goes where it is
treated best and we can never forget that the
cost of regulation is ultimately borne by the
consumer.
The IDA has and is providing active support
for regulatory reform in Canada in presentations and submissions – both public and private – to the Uniform Securities Legislation
project of the CSA, the BCSC’s New Proposals
for Securities Regulation, the Ontario
government’s Five-Year Review of securities
legislation, the Provincial Finance Ministers’
Working Committee studying ways of streamlining our regulatory regime, and the Federal
government’s Wise Persons’ Committee. Literally many hours have been spent by the Executive Committee and senior IDA staff
preparing and advocating our views.
I am personally very proud of the work that
we have done in the formulation of IDA Policy
11 governing the conduct of research analysts
at Member firms. We formed a sub-committee
of the IDA Board, which I chaired, that comprised a majority of our public directors, including Tom Allen, Alain Rhéaume, John
Howard and our President Joe Oliver. The subcommittee provided direction and oversight to
the rule-making process. It was a challenging
task to craft effective and practical rules that
mirrored the recommendations of the Crawford
Committee on Analyst Standards, and closely
matched the U.S. rules embedded in NASD
Policy 2711. One of our key objectives was to
harmonize Canadian and U.S. rules on analyst
standards so that research produced by Canadian and U.S. analysts can flow freely within
the North American marketplace.
This is a momentum that we must maintain,
and I have no doubt that our incoming Chair,
Kym Anthony, will fulfill that role with a
forceful and effective style that has
characterized his entire professional career.
The current debate on corporate governance in
Canada and the United States has increased the
focus on the composition and structure of Boards
of Directors. We at the IDA take this debate very
seriously, and I am very proud of the fact that
in the past year we were able to add Michael
Grandin and Jim Baillie to our board as public
directors. Their intimate knowledge of the capital markets and their impeccable credentials and
character are a most welcome addition to an already outstanding Board of Directors. I would
like also to thank the retiring directors for their
To address the regulatory burden faced by our contribution in particular, Marie- José Nadeau,
regional dealers with respect to multiple regu- Bill Packham, Ray Smallwood and Michel
latory environments, the IDA initiated a study Duchesne.
by Charles River Associates into the true costs
of our current regulatory system. The results I would be remiss if I did not acknowledge the
of this study have just been delivered to your depth of talent and tireless support of the IDA
Board and will be released to the public.
senior staff. Without the energy and intellectual capital of Joe Oliver, Ian Russell, Paul
For the first time, we have a statistically valid, Bourque, and Keith Rose and all the dedicated
quantitative analysis of the cost of our current support staff, it would be impossible for this
multi-jurisdictional regulatory system. Anec- organization to achieve its regulatory and addotally, the public, the investment industry, vocacy responsibilities. To all of you, I would
politicians and regulators have known the sys- like to say, thank you, for your support durtem needed to be reformed to make it more effi- ing my year as your Chairman.
cient. Now, we have an accurate benchmark that
tells us just how far we have to go. This study While much has been accomplished in the past
will reinforce our recommendations and pro- year our agenda going forward is full and chalvide added momentum to regulatory reform.
lenging. We are in the process of shaping the future of the capital markets and it’s a future in
Continual communication of the policies and which the IDA has a critical role to play. We want
proposals of the IDA is critical. We cannot rely fair, effective, efficient, competitive and prosperon others to make our arguments for us. This ous capital markets for all Canadians. It’s a tall
year, as your chairman, I embarked on an am- order but we can settle for no less.
bitious speaking agenda. From St. John’s Newfoundland to Victoria, I had the pleasure on To the Board and to everyone at the IDA you’ve
ten separate occasions to speak to a broad made this a year to remember. Thank you.
cross-section of Canadians whose influence
will have a profound impact on the future of Terrance K. Salman
our capital markets.
Chair, 2002 - 2003
11
Chair’s Address
Rose is stepping easily into his shoes. A great
compliment to the IDA has been the addition
of the head of the Québec region, Carmen
It is a great honour for me to be appointed Chair Crépin. She is not only well known and reof the Investment Dealers Association and I ac- spected, but is well versed in all of the major
cept the position with humility and determi- issues of the day and I know that we will rely
nation. The 87th year of the IDA promises to be on her heavily in the coming year, especially
exciting. It promises to be challenging, if not as it relates to the recognition issue in Québec.
difficult. And it promises compelling opportunities that lie before us as an industry and as We also have a very strong Board of Directors.
an Association.
Jim Baillie, Q.C. and Michael Grandin as great
new public directors, fill out the independent
For the past several years, I have had the plea- directors roster of Ken Copland, Marie-José
sure of serving on your Executive Committee Nadeau, Ruth Goldbloom, Alain Rhéaume,
under past Chairs Chuck Winograd, Jacques John Howard and Paul Hill. We will be relyMénard and Bill Packham, and as Vice-Chair ing on these directors’ navigational expertise
under Terry Salman. All have served their man- as we traverse some of the dangerous and undates with commitment and dedication to our charted waters that lie ahead.
collective task at hand: to enhance the industry
as a whole for the benefit of all capital market I don’t need to remind any of you that these
participants and stakeholders. In particular, I are indeed difficult times. We have endured
would like to express my respect and admira- the longest bear market in almost 30 years, we
tion for your outgoing Chair, Terry Salman. live in an environment of tremendous regulaTerry and I have crossed paths over the last tory flux, a lack of investor confidence, corpotwenty-odd years and his energy, drive and de- rate and market scandals, and a global economy
termination expressed in the service of this or- that is having a huge challenge generating
ganization are worthy of all of our appreciation. business investment and jobs.
As an Association, we are fortunate to have an
extremely able and experienced management
team and Board to draw upon and to support
us. Of course, our President and CEO, Joe
Oliver, by virtue of his knowledge, experience
and tenacity, is as well versed on the major issues facing our industry as anyone in this
country. As Chair of the Member Regulation
Oversight Committee, I had the privilege to
work with Paul Bourque a great deal. I can
assure you that this important area of the IDA
is in very safe and professional stewardship.
Brian Porter will see this first hand as he takes
over the Chair of this committee.
You all know Ian Russell, of course, and his
invaluable contribution to the Association over
many years. We have lost the steady hand of
Sandy Grant our Senior Vice-President, Finance
& Administration, to retirement, but Keith
12
However, when there are times of uncertainty,
there is opportunity, and as long as we keep
our eyes on the prize - efficient, effective and
fair regulation leading to a transparent and
level playing field for investors - our capital
markets will prosper.
And what about the year ahead? What are we
to face? There is virtually no aspect of the IDA’s
operating umbrella that is not facing some degree of review or pressure.
To some extent the next year will see us carry
through on programs and issues which are already underway. New and unforeseen issues
will inevitably arise during the year, including further consolidation in the financial services industry. That being said, as I see it, the
following are our top priorities going into the
next year.
Québec Recognition:
No wait, we really mean it this time! In addition
to bringing the recognition issue to a head, Bill
107 has created the framework for a new,
powerful agency which will have an important
voice in the structure and regulation of the
capital markets in Canada. I believe there is a
new receptivity to recognition and to
influencing the capital markets in a constructive
way in Québec. I will be moving to Montréal
myself and Joe, Carmen and I will be working
very hard on this issue.
Regulatory Reform:
As you know, there are many initiatives underway at the federal and provincial levels,
both at the government and at the regulatory
level, whose objective is to make Canada’s
regulatory system more efficient, competitive
and responsive to developments in global
markets. It is critical that we stay on top of all
of these, specifically the CSA Uniform Legislation Project, the provincial Ministerial Committee and the Wise Persons’ Committee. We are
providing in-depth commentary and responses
to all of these. It is imperative that these initiatives lead to constructive change for the capital markets and not be wasted effort.
Personally, I am less concerned about the resulting overall regulatory structure than I am
about reducing costs and increasing efficiency.
The passport system of registration would be
an example of such a step which would provide a meaningful improvement to the industry. I am also very much about protecting
regional input and differences.
It is also important that we are seen to be acting swiftly and decisively on the issue of offshore accounts. Your Board has a new by-law
in hand to keep us at the forefront of this issue
now that the OECD task force has issued its
recommendations.
The development and monitoring of the
Ombudsman for Banking Services and
Investment to help them meet their objectives
of providing a user-friendly, accessible,
independent and free consumer redress system
is an example of this.
As we all know, investor confidence is a fragile, complex feeling. It has been damaged by
scandals, misleading financial reporting, unethical behaviour in our industry, a disappointing economy, and financial losses in the
market.
We cannot control what others do or the direction of the markets, but we can control the ethics and culture of each of our firms and of the
industry supporting the capital markets. High
ethical standards are the result of day-to-day
decisions made in the context of a culture of
good and sound values, not platitudes. After
all, people differ little on what they call evil,
but unfortunately, they differ greatly on what
they call excuseable.
Investors need to know that we stand for ethical dealing and we need to act and behave accordingly.
Membership:
We must continue to enhance the involvement
of Members in the activities of the IDA, including policy development. This includes the
strengthening of the advocacy agenda of the
Regional Dealers Committee, which addresses
concerns about regulatory burden, their influence in the IDA and small business financing.
I must say that I face the prospect of regulatory reform and the coming year with much the
same perspective as Chesterton: the reformer
is always right about what is wrong. He is generally wrong about what is right. Change for
change’s sake will not be helpful. Progress
Investor Confidence:
should mean that we are changing the world
Many initiatives are well underway relating to to fit the vision. Instead we always seem to be
this issue through sound policy, effective changing the vision.
compliance and tough but fair enforcement.
13
In closing, I look forward to serving you in the
upcoming year and my door, e-mail and phone
are always open.
This past year has been a challenging one but
progress has been made. There is much to be
done.
Kym Anthony
Chair 2003 - 2004
Compliance with
US Tax Laws –
Beneficiaries of
RRSPs and RRIFs
A Notice issued by the US Internal Revenue
Service (IRS) during April 2003 subjected US
citizens and residents to complex US filing requirements if they owned, contributed to, or
made withdrawals from, Registered Retirement
Savings Plans (RRSPs) or Registered Retirement
Income Funds (RRIFs). Failure to file the forms
could have resulted in severe penalties.
On June 16, a delegation representing the IDA,
IFIC and The American Chamber of Commerce
in Canada met with U.S. Treasury and IRS officials to propose a streamlined tax reporting
system for RRSPs and RRIFs. Additionally, a
press release outlining the issue was distributed on 8 July, which resulted in some supportive articles. The individuals in the
delegation were Jamie Golombek of AIM
Trimark (representing IFIC), Jim Yager of
KPMG LLP and Morag MacGougan of the IDA.
On August 1, the IRS issued a new notice (the
August Notice) that provides some relief to
those who at least attempt to comply. However, those who ignore the filing requirements
may still be assessed severe penalties.
14
The August Notice acknowledges that, although Treasury and the IRS are working toward implementation of an alternative,
simplified reporting regime for RRSPs and
RRIFs for future taxable years, no Form 3520
or 3520-A is required to be filed for the 2002
tax year if the beneficiary of a RRSP or RRIF:
• makes or has made an appropriate election
pursuant to the Canada/US Income Tax
Treaty to defer the income in the plan, and
• received no distribution from the plan during the 2002 tax year.
The August Notice also provides that if an
individual, RRSP, or RRIF has filed a Form
3520 or 3520-A, but has failed to provide all
appropriate information, the IRS may request
the individual or plan to provide the
information. However, unless the IRS requests
such information and the individual or plan
fails to provide the IRS with the information
requested, no individual or plan that files or
has filed a Form 3520 or 3520-A will be subject
to failure-to-file penalties.
In addition, the August Notice provides that
where an individual has filed his or her 2002
return on a timely basis without making the
election to defer tax pursuant to the Canada/
US Income Tax Treaty with respect to a RRSP
or RRIF, and that individual would like to
make the election for the 2002 tax year, he or
she may make the election by filing an
amended 2002 return in the appropriate format up to October 15, 2003.
The IDA will continue to work on behalf of its
Members to advocate less onerous reporting
requirements to U.S. tax authorities. Member
firms interested in further information on this
issue should refer to all 3 of the following Bulletins: 3158, 3177 and 3184.
Morag MacGougan
Ontario Regional Director
Private Client
Conference Day
NRD Update
A NRD Operational Policy and Procedures
(OPP) Committee has been formed comprised
This year, our Annual General Meeting was pre- of IDA and CSA representatives. The mandate
ceded by our first Private Client Conference Day. of the OPP Committee is to make decisions
We started the evening before with dinner at the about administrative policy and procedural isRossmount Inn. It proved to be an exceptional sues that arise through the shared use of NRD,
evening with great food and an opportunity to to ensure consistent and effective use of the sysget acquainted. The inn overlooks Minister’s tem by regulators.
Island where the railroad tycoon, Van Horne,
built a summer home in the late 1800s.
The IDA and CSA announced several important
changes to alleviate workload demands during
Just short of 50 people registered for the semi- the NRD transition period. The anticipated
nar which began at 8:00 a.m. on Saturday and workload following the launch of the system has
ended at 5:00 p.m. The six speakers gave excel- been increased due to the problems with the data
lent presentations ranging from Marketing your converted to NRD from regulators’ legacy sysBrokerage Business to How money gets laundered in tems. The changes include the following:
the Securities Industry. Speakers included • A system enhancement allows easier corMichael Lipkin of Environics Research Group;
rection of errors in registration and apDuncan MacPherson, MacPherson & Associproval categories.
ates Inc.; Chris Mathers, President, KPMG Cor- • Previously, any change to the registration
porate Intelligence Inc.; and Dr. Nancy Mathis,
information regarding an individual inPh.D., President & CEO Mathis Instruments Ltd.
cluded in the converted data required a firm
Ralph Acampora, a lively technical analyst from
to update the individual’s complete inforPrudential Securities Inc., also provided a very
mation through NRD. Now this requireentertaining presentation.
ment is triggered only if the change is
material. This will allow firms to do most
Despite the beautiful weather and the sounds
of their updating during the April 2004 to
of folks splashing in the pool next to the meetMarch 2006 period during which all uping room, the speakers kept us engaged and a
dates have to be completed so that they can
wealth of information was shared and exbetter plan and control the updating.
changed throughout the course of the day. A • Deadlines for filing certain NRD submissurvey dictated that the majority were not only
sions were extended to November 15, 2003.
glad they attended the seminar, but would en- • NRD standard reports are now available in
courage their colleagues to do so.
editable format to help firms compare the
NRD data to their own internal records.
David Beazley
In addition to these changes another release of
Atlantic Regional Director
NRD is scheduled for early fall with further
enhancements to the system.
Lisa Anderson
Coordinator, NRD Project
15
Intermediary
Obligations under
National
Instrument 54-101
However, the proposed amendment will not
likely be implemented by the deadline.
Accordingly, the IDA (on behalf of its Members)
will make an application to the CSA in the next
few weeks to seek the required exemptive relief
to bridge the gap of time from the deadline until
the amendment comes into force.
Communication with Beneficial
Owners of Securities of a Reporting
Issuer
A further notice will be issued by September
2003 to update the status of the exemptive relief application.
On July 1, 2002, National Instrument 54-101
Communication with Beneficial Owners of Securities of a Reporting Issuer became effective. (Member Regulation Notice MR-0150, June 27, 2002).
Ian Russell
Senior Vice-President, Industry Relations and
Representation
National Instrument 54-101 requires that Members obtain certain instructions from clients
who are beneficial owners of securities of reporting issuers as to whether they object to the
disclosure of their personal information to the
reporting issuers and other third parties or,
alternatively, wish to receive certain materials
from the reporting issuers.
CDSX
Implementation
Update
Members who hold securities on behalf of clients in accounts that were opened before July 1,
2002, where the clients were deemed non-objecting beneficial owners (NOBOs) under former
National Policy Statement 41 Shareholder Communication, are required under the Instrument to obtain new instructions from all of these
deemed NOBOs before January 1, 2004.
Over the past six months, a working group of
the IDA Regional Dealers Committee has represented IDA Members in negotiations with extenders of credit and CDS surrounding the
move to a more modern clearing and settlement
system called CDSX. The working group has
been very successful at providing input and
encouraging revisions to the process that, in the
end, benefited all market participants. The group
was instrumental in the discussions that resulted
in all participants receiving value for BBB rated
debt and in the development of an approach to
capping central counterparty services that prevents one institution from introducing an unacceptable amount of risk to the system while
treating all CDS participants equally.
As compliance with the deadline may prove
difficult for some Members, the CSA is
proposing an amendment to the instrument to
eliminate the requirement for Members to
obtain new instructions from deemed NOBOs.
CDS, after receiving regulatory approval (or
non disapproval) for rule changes earlier in the
week, used the weekend of July 19-20 to
convert approximately 5,000 securities from the
old system into CDSX. CDS informed the
More particularly, since July 1, 2002, Members
are required to provide each new client (for
accounts opened after July 1, 2002) with an ‘explanation to client’ and a ‘client response form’,
and obtain instructions from the client before
holding securities on its behalf.
16
community that the partial conversion was a
success and while there were a couple of issues
that cropped up shortly after the conversion,
they have been resolved and transactions
involving the 5,000 securities are settling on
schedule in CDSX. The next significant event
will take place during the weekend of August
22-23 where the remaining 30,000+ securities
will be converted into CDSX.
The best practices and standards are the result
of over three years of work by industry volunteers, including many staff members from the
IDA. Joe Oliver sits on the CCMA board of
directors, and the IDA is represented on the
Program Steering Committee, Finance Committee, Communication and Education Working Group and the Best Practices and Standards
Oversight Committee.
Once the full conversion has occurred, the
community will spend the next 12 months
(known as the transition period) discussing and
negotiating the final version of the CDSX Risk
Model. Some of the major topics to be
addressed over the transition period include
formal solutions for assigning value to certain
equity and debt securities, the development of
a portfolio approach to determining risk, and
more complete back-testing of the model that
will ensure the CDSX Risk Model collects
sufficient collateral from participants to protect
the system yet is not too onerous that it
negatively impacts the competitive landscape
of the Canadian capital markets.
The CCMA followed-up on the June 9 announcement with a June 17 Kick-Off Event,
held in Toronto. Institutional best practices
information sessions have also been held
across the country. Comments from industry
participants were due by August 15, 2003.
Best practices and standards for retail trade
processing and dematerialization are to be
published later this year, with all final best
practices and standards due to be published
in December 2003.
Ian Russell
Representation
STP Update
For a copy of the best practices and standards,
or for other information, please go to the STP/
T+1 section of the IDA website, www.ida.ca,
under Industry Issues & Info.
Keith Rose
Senior Vice-President, Finance
& Administration
CanPX
CCMA releases STP Best Practices
and Standards
Commissions in British Columbia, Alberta,
Ontario and Québec have approved and pubOn June 9, the Canadian Capital Markets As- lished for public comment the recommendasociation (CCMA) released best practices and tion that CanPX be designated as Information
standards for Straight-Through Processing, or Processor for corporate debt securities under
STP. The best practices and standards gov- National Instrument 21-101, Marketplace Operaern interfaces between Canadian securities tions for a period of three years. The comment
market participants for institutional trade pro- period for all jurisdictions will end on Septemcessing, entitlements and securities lending. ber 11, 2003.
IDA President Joe Oliver participated in the
media conference announcing this major STP IRR staff, in conjunction with the IDA Capital
milestone.
Markets Committee and the CanPX Board,
17
played a key role in managing the CanPX transparency project, meeting the regulatory requirements to become the designated
information processor and putting in place a
sound business model for the corporation.
Today, CanPX provides real-time pricing of all
Government of Canada treasury bills and
bonds and provincial bonds traded through the
inter-dealer brokers as well as a subset of corporate bonds priced by the major dealers.
Coverage includes real-time best bid and offer
price, size and yield along with real-time trade
data including size, yield and aggregate daily
trade volumes. Available globally via the
internet at www.canpx.ca and via Moneyline
Telerate, CanPX is used daily by almost 4,000
subscribers, and discussions continue for expanding distribution via Reuters, ILX and
other vendors.
Ian Russell
Representation
Policy 11—Analyst
Standards
Policy 11 has been resubmitted to the securities commissions for a period of public review
and comment following modifications approved by the Board of Directors in June. The
policy is posted on the website at Regulation/
Regulatory Proposals.
The Board of Directors approved an additional
disclosure requirement at its June meeting. We
have changed the proposed requirement that
firms must report ‘Pro Group’ holdings of over
5% and instead adopted the approach of NASD
Rule 2711 that requires disclosure when a
Member and its affiliates, but not its employees, beneficially own 1% or more of any class
of the issuer’s equity securities.
18
Adopting the NASDR approach will promote
harmonization between U.S. and Canadian
rules. It will also permit U.S. research to be
available in Canada and Canadian research
relating to Canadian firms to be distributed in
the U.S., a result that will be positive for both
Canadian investors and Canadian corporations.
Policy 11 will cover all securities, both equity
and debt, subject to a number of exceptions in
the policy, while the NASD rule only applies
to equity securities at the moment. While differences exist between fixed income and equity
markets, the potential for conflict exists in both
markets. Therefore, we see no justification in
principle to exempt fixed income research from
Policy 11, although technical accommodations
will be introduced.
Deborah Wise
Legal and Policy Counsel, Regulatory Policy
Need to order
brochures?
Look to
www.ida.ca!
A new page is coming soon to the Membership
in the IDA section of the website, called Ordering Brochures. Here you will find easy directions and links for ordering or finding various
brochures and publications from the IDA.
Member firms are required to provide their clients with copies of the IDA’s Investor Protection
for Clients of IDA Member Firms. The Ordering
Brochures page includes instructions and links
for obtaining printed copies of the brochure,
or the materials necessary to have the brochures
produced by a different supplier.
Instructions and links are also provided for ordering the Strip Bond Information Statement, another required document. Please note that the
IDA has changed printers for the Statement.
IDA Member
Seminars
The IDA will be holding Member seminars this
autumn. The purpose of these seminars is to
educate financial staff of Member firms who
are involved in financial filings, on regulatory
issues. These seminars provide a forum to
update Members on the latest issues in the inHere you will also find links to other IDA pub- dustry and provide Members with an opporlications such as the IDA Report, and capital tunity to discuss relevant and topical issues
with the IDA staff.
markets research papers.
Other materials listed on the Ordering Brochures page include:
• IDA door stickers
• Syndicate Practices Handbook
• Policy 5
Look for Ordering Brochures at www.ida.ca
under Membership in the IDA.
Morag MacGougan
The IDA’s pre-selected printer,
The Graphicshoppe, has recently
developed a new order submission website, called OrderNet,
found at www.ordernet.ca. First
time users must fill out a profile
on the IDA registration page,
www.ordernet.ca/idaregister.asp,
and will receive a UserID and Password by email within 24 hours.
For step-by-step instructions on
using OrderNet, please visit the
Ordering Brochures page at
www.ida.ca.
This year, seminars will be held in Toronto on
September 4, in Calgary on September 19 and
in Montreal on October 14. The Toronto seminar will consist of a morning general session
and afternoon workshops; the Calgary and
Montreal seminars are structured as general
sessions.
Topics for the seminars include:
• Introducing Carrying Arrangements
• Web-based Financial Filings
• Common Examination Findings
• Custodial Agreements and Reconciliations
• CIPF Update
• Regulatory Update
• Client Guarantees
• Insurance Update
• Business Continuity
• Capital Deficiencies and Early Warning
Problems
• IDA website
• Q & A Session
Paul Bourque, Senior Vice-President, Member
Regulation will be the keynote speaker in
Toronto.
Maysar Al-Samadi
Vice-President, Professional Standards
19
Member Services
IDA Member Services was represented this year
at the IDA Conference in St. Andrews by-theSea, New Brunswick. Information on all of the
programs negotiated by IRR staff with various
vendors was on display at the Member Services booth. The booth provided Member Services with the opportunity to showcase the
price advantages of volume purchasing available to the IDA’s Member firms.
A new national communications offering for
IDA Members was also launched in New
Brunswick. Member firms can now take advantage of group discounts, negotiated between IDA Megatrade and Bell Canada in the
areas of audio conferencing, web conferencing
and webcasting. More information on these
products will also be mailed out and will be
available on the IDA website in the near future.
A reminder to IDA Members that the following programs are available to IDA Member
firms at preferred rates:
• Home & Auto* Insurance available through
The Personal Insurance Company
• Employee Benefits Programs available
through Baynes & White
• FIB Program through Marsh Canada
• Bell Mobility wireless package
• Megatrade Communication Services
We are also currently working on other exciting opportunities to take advantage of the
Association’s purchasing power. If you have
any suggestions for programs you would like
us to investigate, please send us a message at
[email protected].
*excluding Manitoba, Saskatchewan and BC due to
government-run plans.
Eileen Brady
Member Services Coordinator
20
The Role of Member
Regulation in Policy
Development
The IDA carries out a public interest mandate
to provide front-line regulation services on
behalf of the public. This public interest mandate includes the development of regulatory
policy, an important responsibility of all selfregulatory organizations like the IDA. The
public interest is safeguarded by rigorously
separating regulatory operations from other
parts of the organization. Technology systems
maintain built-in internal firewalls. Non-regulatory staff cannot access information belonging to regulation functions. These activities
have been structurally separated from the rest
of the organization to ensure that regulatory
decisions are not inappropriately influenced
by the firms and individuals who are the subjects of those decisions.
Policy development, however, is not exclusively and solely the purview of the Member
Regulation Division. Effective regulation is
based on an intimate understanding of how
markets work in practice. Self-regulation
makes industry expertise available to deal
with specialized, technical issues and broadbased policies. That’s an invaluable resource professionals who are uniquely positioned to
deal with the question: how will it work on the
ground? That is why not only Member Regulation staff contributes to policy development,
so does the industry. (For a list of IDA policy
committees and membership please see
www.ida.ca/About the IDA.)
The objective of the IDA in the development
of regulatory policies is the same as the
securities commissions - protect investors and
enhance the competitiveness of Canadian
capital markets. As an SRO, the IDA can draw
upon the knowledge and expertise of IDA staff,
in both Member Regulation and Industry
Relations and Representation (IRR) as well as
its Members, organized regionally across
Canada as provincial District Councils and
issue-specific industry committees. This
expertise is different than the government
regulatory agencies and, indeed, this is the
value self-regulatory organizations bring to the
development of regulatory policy. This
principle is enshrined in the preamble to the
Ontario Securities Act.
However, due to the conflict inherent in selfregulation, there must be checks and balances
on the regulatory development process to ensure the appropriate balance is achieved. The
first and most important check is the requirement of the Board to approve every policy instrument. IDA staff and industry committees
have the power to recommend, but the Board
decides. The policy development process provides for extensive consultation in order to
achieve consensus. IDA staff works with industry committees and CSA staff to accomplish this
objective. Consensus is generally achieved. In
this context, consensus usually means a rule that
is perfect in no one’s opinion but workable in
everyone’s. Consensus, while preferable, is not
inevitable nor is it required. In those infrequent
cases where consensus cannot be achieved the
differing IDA staff and committee views are presented to the Board. The public directors on
the Board play a key role in mediating the balance. There has never been an occasion in which
the eight public directors have been out voted
on a public interest policy.
In addition, the CSA Oversight Agreement provides for a rule approval protocol. This requires all IDA public interest policies to be
published for public comment and ultimately
approved by the CSA. This process guarantees that the IDA could never implement a
policy that was in the Members’ interests and
contrary to the public interest.
IDA staff bring professional qualifications in
law and accounting as well as extensive
industry and regulatory experience to all
policy development work. While consensus
is important, that is not the objective of the
policy development process. The objective is
to achieve the best regulatory balance. The key
role of IDA staff is to develop, articulate and
advocate informed, sensible policy positions.
Paul Bourque
Richard Corner
Appointed VicePresident,
Regulatory Policy
The IDA is pleased to announce the appointment of Richard Corner to the position of VicePresident, Regulatory Policy.
Richard joined the IDA’s Regulatory Policy
Department as Manager, Regulatory Policy, in
February 1997 as a result of the merger of TSE
member regulation functions with those of the
IDA. Two years later he was promoted to Senior Manager and a year following that to Director, a role he has held for the past three years.
During his tenure in the Regulatory Policy Department, Richard has been involved in the development/amendment of a number of
significant financial compliance related rules.
Richard also represents the IDA on a number of
industry committees including those of the Canadian Investor Protection Fund, the Montréal
Exchange, the Canadian Derivatives Clearing
Corporation and the Canadian Depository for
Securities Limited. To assist in the ongoing efforts of the IDA to educate their Member firms
and others on the rules of the IDA, Richard has
presented for the last six years at the annual
Members and panel auditors seminars on rule
changes that have taken place during the year
and rule change initiatives that are underway.
21
Prior to joining the IDA, Richard worked at the
TSE from March 1995 to January 1997 as Specialist, Capital and Margin Policy; a role similar to the role he took on when he joined the
IDA.
Richard began his career as an auditor and
worked in the financial institutions audit practices of both Peat Marwick Thorne and Coopers & Lybrand for a period spanning nearly
ten years prior to joining the TSE. Richard received a Bachelor of Commerce degree from
Queen’s University in 1985 and became a Chartered Accountant in 1989.
National Advisory
Committee
The National Advisory Committee 2003-2004
met on Sunday June 22, 2003 in St. Andrews
by-the-Sea, New Brunswick. This year’s Chair
is Debra Hewson, Odlum Brown Securities Ltd.
The Regions Report
Atlantic Region
The major event in our region was, of course,
an Annual General Conference at St. Andrews
by-the-Sea. By all reports it was a success with
a good turnout, excellent speakers, and near
perfect weather.
Atlantic Canada has had its share of committees
come here to discuss securities regulatory reform. In fact, the IDA participated in a panel
discussion at which an Inter-Provincial Securities framework was advanced by a steering committee of Ministers. The Wise Persons’
committee also traveled to Halifax to try to determine if a National Securities Committee is
feasible. Both left with a better understanding
that any structure would have to take into account that there are regional differences in our
country, which dictate regional participation.
On June 16, the Province of Nova Scotia passed
legislation under the Securities Act which inThis year’s committee includes: Ronald Beer, cludes changes to the private placement rules.
RBC Dominion Securities Inc.; Alan Dunnett, The additional exemptions are:
RBC Dominion Securities Inc.; Brad Ens, CIBC 1) the private issuer exemption;
Wood Gundy; Robert Jennings, Jennings Capi- 2) the family, friends and business associates
tal Inc.; Nelson MacDonald, Citigroup Global
exemption;
Markets Canada Inc.; Robert O’Hanley, CIBC 3) the accredited investor exemption;
World Markets Inc.; Gérard Taillon, BMO 4) the offering memorandum exemption.
Nesbitt Burns Ltée/Ltd.; John W. Fitzpatrick,
TD Securities Inc.; and Tom Purves, Scotia Capi- The new exemption most likely to be used is
tal Inc.
the offering memorandum exemption. It requires the disclosure of considerable informaThank you to all District Council Chairs from tion about the issuer including a blunt reminder
the 2002-2003 Committee for all of their contri- to the purchaser of some of the risks of investbutions throughout the year. Special thanks ing, and that he/she may lose the entire investgo to departing National Advisory Committee ment and may not be able to resell the securities.
Chair Ray Smallwood, CIBC World Markets
Inc. for his outstanding contributions.
In June, the Governor of the Bank of Canada,
David Dodge, spoke to the local Chamber of
Commerce and he and the Board of Directors
Glenn Knowles
of the Bank hosted a dinner. Governor Dodge’s
Pacific Regional Director
speech was very frank and stimulated a great
question and answer session.
22
Les O’Brien was recently appointed Chair of securities regulation in Canada, as part of the
the Nova Scotia Securities Commission. He consultations being conducted by the
was formerly Vice Chair and replaced Mr. Committee.
Robert MacLellan.
Subjects discussed included the passport system and the notion of a principal authority, the
Have a great summer.
processing of investor complaints, the registration and enforcement process, and the Act reFor more information, please contact:
specting l’Agence nationale d’encadrement du
David Beazley
secteur financier (Bill 107).
Atlantic Regional Director
The Committee began its consultations in
Vancouver last June 23 and these are continuQuébec District
ing across the country, in order to foster initiaDistrict Council 2003-2004
tives that will encourage market
The Québec District held its annual meeting competitiveness, as well as investor protection.
on May 6 at the McCord Museum. Gérard
Taillon, Vice-President, Director, and Branch Annual Conference 2004
Manager at BMO Nesbitt Burns, has taken over The Québec regional office is proud to be the
the reigns as the new Chair. Mr. Taillon’s fo- host of IDA Members at the 88th Annual Gencus is to ensure a balance between regulation eral Meeting and Conference, June 13-16, 2004
and the realistic practice of industry activities. at Mont Tremblant.
We also take this opportunity to extend our
most sincere thanks to Jacques Lemay, Imme- For more information, please contact:
diate Past Chair, who completed his two-year Carmen Crépin
term. His contribution to the IDA’s activities Vice-President, Québec
has been much appreciated.
Continuing Education
On May 29, over 60 investment advisors attended a continuing education day, held in
Québec City. Workshops covered estate planning, money laundering, income tax, and advisor liability under the complaints process.
Assistant Deputy Minister of Finance André
Legault addressed a luncheon conference on
Québec’s new support structure for the financial industry.
Ontario Region
Ontario District Annual Meeting
The Ontario District Annual Meeting was held
on Thursday, May 29 at the National Club in
Toronto. The regular meeting business was
conducted and the nominees for the 2003 - 2004
Council were announced.
By unanimous vote, the following individuals
were elected to join the Ontario District CounAnother continuing education day is planned cil for 2003 - 2004: Brian Acker, Acker Finley
for September 25, 2003 for advisors in the Inc.; Mark Lyon, Hampton Securities Limited;
William McIlroy, Canaccord Capital CorporaMontréal area.
tion; David Prestwich, Dominick & Dominick
Presentation to the Ministerial Securities Inc.
Committee
On July 7 and 8, Québec District Chair Gérard Peter Deeb of Hampton Securities, the retiring
Taillon addressed the Ministerial Committee on Ontario District Council Chair, was thanked for
the subject of an inter-provincial plan for all of his contributions during the past year.
23
The ODC’s Chair for
2003 - 2004 is Nelson
MacDonald
of
Citigroup Global
Markets Canada Inc.
The ODC’s Vice Chair
for 2003 - 2004 is
Daniella Dimitrov of Daniella Dimitrov and
Dundee Securities Nelson MacDonald
Corporation.
Morag MacGougan
Prairie Region
Alberta District
The 2003 Alberta District Council Annual Meeting and Reception was held in May at the
Calgary Petroleum Club. The ADC thanked
outgoing Chair Dave Sanders for his work over
the past two years and welcomed Rob
Jennings of Jennings Capital as the incoming
Chair. In addition, Ruby Wallis of First Energy was elected to the position of Vice-Chair.
Over 60 people, including members of the
ADC, local Branch Managers, staff of the
Alberta Securities Commission, other special
guests and staff of the IDA, attended the reception.
The ADC is pleased to report that it will be
hosting its golf tournament again this year. The
event is scheduled for September 18 at Glen
Eagles of Cochrane.
The District is also looking forward to hosting
the Regional Dealers Committee Meeting,
scheduled to be held in Calgary this September.
Saskatchewan District
The Saskatchewan District Council held an Industry Luncheon in conjunction with the 2003
SDC Annual Meeting that took place in Saskatoon in May. The SDC is pleased to announce
24
that it was very successful in its Council recruitment efforts and will welcome eight new
members to SDC for the 2003-2004 council year.
Manitoba District
In May, the IDA Executive returned to
Manitoba for their annual visit. While in
Manitoba the Executive met with both the
Manitoba Securities Commission and the provincial government. In addition, they hosted
the annual Business Leaders Dinner in
Winnipeg.
During the visit the Manitoba District Council
held its Annual Meeting as well as a very successful Recognition Dinner. This year both tenure and educational achievement were
recognized by the MDC.
The MDC hosted its Third Annual Charity Golf
Classic. The tournament raised over $22,000
in support of the local Children’s Hospital
Foundation.
Terry Melling
Prairie Regional Director
Pacific Region
Presentation to CIRI
Warren Funt, Vice-President, Member Regulation, Western Canada, addressed the Canadian Investor Relations Institute on May 27 at
their annual conference in Victoria, BC. He
spoke on the Association’s Policy 11 - Analyst
Standards.
Provincial Ministerial Review of Securities
Regulation
Alberta Minister of Revenue, the Honourable
Greg Melchin, recently chaired a series of
provincial and territorial meetings regarding
securities regulations in Canada and intraprovincial regulatory framework. In late June,
Warren Funt made presentations to the British
Columbia, Alberta and Manitoba provincial
ministers responsible for securities regulations.
Other IDA executives made similar
presentations in the other jurisdictions.
The Committees
Report
Canadian Payments Association Annual
Conference
More information on IDA committees, including
Glenn Knowles, Pacific Regional Director, at- their mandate, composition and membership, is
tended the CPA’s Annual Conference held in available on the IDA website in the About the IDA
June. Glenn is a member of the CPA’s Stake- section.
holder Advisory Council as well as the H Rules
Compliance and Legal Section
Working Group.
Pacific District Council Elections
At the region’s Annual General Meeting held
in June, Neil MacDonald, First Associates Investments Inc. and Gordon Medland, Leede
Financial Markets Inc. were elected as industry members to the Pacific District Council. In
addition, the following industry members were
re-elected: John Brighten, Global Securities
Corporation; Elizabeth Petticrew, BMO Nesbitt
Burns Inc.; Doug Salberg, Raymond James Financial Planning Ltd.; Daniel Siu, Golden
Capital Securities Ltd.; John Thompson, Union
Securities Ltd.; and Brian Worth, United Capital Securities Inc.
The Compliance and Legal Section has struck
a new sub-committee to examine amendments
to Form No. 2, the New Client Application
Form. The Form will be redesigned to accommodate different types of accounts and business structures such as institutional or discount
brokerage accounts.
The Ontario Securities Commission will be releasing its Fair Dealing Model Concept Paper
shortly. The CLS anticipates preparing a detailed and comprehensive response.
The IDA is offering a seminar regarding the impact of privacy legislation on August 19, 2003.
U.S. Criminalization of U.S. Securities The seminar will also be available via web cast
Law Seminar
on the IDA’s website. Privacy issues will beThe Pacific Region will host a seminar, What to come of greater concern to Members as the feddo when the FBI calls, with securities lawyer pan- eral privacy legislation is scheduled to come
elists from New York and Washington, DC. into force on January 1, 2004. For more inforThe seminar has been postponed to the fall due mation on the seminar please contact Morag
to the panelists’ work and travel commitments. MacGougan at (416) 943-6991 or Michelle
Alexander at (416) 943-5885.
Glenn Knowles
Michelle Alexander
Senior Legal and Policy Counsel, Regulatory
Policy
The IDA welcomes its
newest Member firm:
Daily Survey of Money Market Rates
Committee
ATB SECURITIES, INC.
Effective: July 8, 2003
The Committee met for the first time in June to
discuss issues pertaining to the daily survey
of money market rates currently posted by
25
Moneyline on pages 3197 and 3198 and on the
Reuters CDOR page. The rates from this survey are used to price Bankers’ Acceptances
syndicates, as the reset rate for the swap markets, and as the settlement price for BAX (BA
futures) contracts listed on the Montréal Exchange. The Committee is made up of market
participants, the Montréal Exchange and the
Bank of Canada and is chaired by the IDA.
At the meeting, Committee members reported
that the survey results have been very stable over
the past six months and the IDA noted that complaints received had been minimal. The group
discussed the potential for an alternative rate
setting for the swap markets. The IDA committed to investigate whether there was enough
interest in this initiative to strike a working
group of swap market participants who would
debate the merits of using an alternative rate
setting for their markets. Minutes from the meeting are posted on the IDA website.
Chris Woolcock
Financial Analyst
Capital Markets Committee
The Capital Markets Committee met on three
occasions since the last IDA Report. Topics discussed included: updates to transparency and
amendments to Companion Policy 21-101; the
status of the CanPX application as Information
Processor; improvements to the Market Trade
Reporting System; an update on the proceedings of the Money Market Survey Committee;
the RS Inc. Market Integrity Notice of May 2003
pertaining to Listed Debt Securities; ranges for
Government of Canada auctions; and an update on analyst disclosure requirements for
fixed income markets.
Jon Cockerline
Director, Capital Markets
26
Regional Dealers Committee
The Regional Dealers Committee held a forum
as part of the IDA Annual General Meeting and
Conference in St. Andrews by-the-Sea, NB. The
forum was co-chaired by Robert Caldwell of
First Associates Investments Inc. and Ross
Sherwood of Odlum Brown Ltd. Mr. Caldwell
briefed everyone on the issues addressed by
the committee during the past year.
The following presentations were made to the
Forum:
• Linda Hohol, President of the TSX Venture
Exchange, spoke about the opportunities
for business growth using the exchange for
listings support and the benefits of using
the Capital Pool Program as an offering vehicle.
• Rozanne Reszel, President and Chief Executive Officer of The Canadian Investor
Protection Fund, updated the committee on
the coverage provided to their clients by the
Fund.
• Roberta Wilton, President of the Canadian
Securities Institute, outlined the strategic
direction of the CSI and the services provided to the dealer community.
• Peter Virvilis, Executive VP Operations,
Treasurer, Canaccord Capital Corporation,
spoke on the topic of CDSX System X and
the issue of accommodating the concerns
of regional dealers.
The program ended with a brief breakout session during which time the dealer representatives made suggestions on issues that should
be addressed during the upcoming year.
The Regional Dealers Committee is planning
to hold its autumn meeting on September 18
in Calgary.
Terry Melling
Praire Regional Director
(403)260-6378 or [email protected].
Regulatory Update
New rules now in effect
Capital and Margin Requirements for Convertible
Securities: The proposed amendments seek to
modify the margin rules for convertible securities to recognize that the maximum margin
requirement for a convertible security should
be closely related to the requirement for the
underlying security. The proposed changes
were approved at the January 2002 Board and
the final approval was received from the securities commissions on July 2, 2003. Bulletin
3174 was issued on July 18, 2003.
Upcoming rule changes
Rules that will become effective in the coming
months include:
Definition of Approved Persons, By-law 1: The
Association will be adding a definition of approved persons to By-law 1 in order to assist
Members when reviewing various rules in the
IDA Rule Book that contain this term. The
amendment was approved at the January 2003
Board and IDA staff are awaiting securities
commission approval.
Referral Arrangements: As a result of the CSA
Distribution Structures Position Paper, the IDA
developed By-law 29.6A to address under what
circumstances referral fees and commission
splitting would be permitted. The proposed
rules ensured compliance with the CSA Paper
and clarified the Association’s current position
on these issues. The amendments were approved by the IDA Board. After comments
from Member firms, the IDA withdrew the bylaw from CSA review in order to redraft it to
broaden the permitted parties who may enter
into referral arrangements. The amendments
were approved at the June 2002 Board and IDA
staff are now awaiting securities commissions
approval. The staff at the OSC and ASC has
expressed concerns with permitting ongoing
commission splitting and are suggesting that
one flat referral fee be permitted. The by-law
has been withdrawn.
Amendments to Advertising and Sales Literature:
The Association has revised By-law 29.7 to include in the definition a reference to electronic
communication. The by-law has also been
amended to eliminate the requirement for prior
approval of all correspondence and sales literature. The IDA has also prepared a draft
notice to offer guidance on this matter. The
Compliance and Legal Section reviewed and
approved changes to the by-law. The amendments were approved at the October 2002
Board and submitted to the securities commissions for approval. The commissions provided
additional comments that were discussed at
the May CLS meeting. The CLS decided to reconvene the subcommittee to discuss changes
to the by-law.
Conflicts of Interest and Client Priority: A number
of incidents related to Members’ equity positions in listed companies occurred late in the
summer of 1996 that caused the industry to
convene the Joint Industry Committee on Conflicts of Interest to review the issues and make
recommendations. The Committee’s Final Report was issued in September 1997 after conferring with the SROs to confirm support for
the recommendations. A significant aspect of
the rule implementation is the required system modifications (required by the SROs and
Member firms to provide the capability to
properly monitor compliance with the rule
changes). An earlier version of the client priority rule was approved at the October 2001
Board. The IDA has currently been working
with the securities commissions and exchanges
to jointly revise the conflicts of interest and client priority rules. The rules were approved at
the October 2002 Board and submitted to the
securities commissions for approval. However, based on comments received from Member firms, the IDA is now contemplating a
revision to the definition of “pro group.”
27
Proposed Methodology for Margining Equity Securities: A working group of the FAS Capital Formula Sub-committee has developed an
improved margin rate methodology that tracks
an individual security’s market risk and sets a
margin rate for the security based on the measured risk. This proposed methodology determines market risk by measuring both the
price risk and liquidity risk components of
market risk. The proposal was approved at
the June 2001 Board and was approved in concept by the ASC, BCSC, OSC and SSC in February 2002. IDA staff are now in the process of
developing a testing program to determine the
potential impact of these proposals on IDA
Member firms.
Capital Share and Convertible and Exercisable Security Offsets: The objectives of the amendments
are to broaden the application of the existing
rules for such securities to include securities
with cash payment features and to introduce
new rules that would permit offsets involving
short positions in such securities. The amendments were approved at the October 2002
Board and by the securities commissions in
May 2003. IDA staff are awaiting joint implementation with the Montréal Exchange.
Capital Trust Securities: Proposed amendments
to Regulation 100 have been developed to establish specific rules relating to the margining
of capital trust securities. The amendments
were approved at the June 2002 Board. IDA
staff are awaiting joint implementation with the
Montréal Exchange.
Confirmations for Managed Account Transactions:
The objective to the amendment is to relieve
Members from sending and customers from
having to deal with confirmations that the customers do not want. Regulation 200.1(h) provides an exemption for accounts managed by
external portfolio managers provided that the
customer consents and a confirmation is sent
to the external portfolio manager. The proposed change was approved at the June 2003
commissions approval.
Amendment to the Insurance Requirements: A
housekeeping amendment to the insurance
requirements was made to remove all references to mail insurance under Regulation 400.2
Financial Institution Bond Clause (C) - In Transit and Regulation 400.5(a). It will provide a
more concise definition of what must be covered under the financial institution bond and
Swaps and Related Offsets: The objectives of the avoid confusion with respect to what must be
amendments are to simplify the wording of the covered under mail insurance. The amendexisting rules relating to positions in and off- ment was approved at the January 2001 Board
sets involving interest rate swaps and to intro- and approved by the securities commissions.
duce new rules that would specify the capital IDA staff are now awaiting joint implementaand margin requirements for positions in and tion with the Montréal Exchange.
offsets involving total performance swaps. The
amendments were approved at the October Broker-to-Broker Trade Matching Utility: The As2002 Board. IDA staff are awaiting joint imple- sociation has revised Regulation 800 to facilitate Straight Through Processing (STP) for
mentation with the Montréal Exchange.
non-exchange trades between Members. The
Equity Derivatives and Related Offsets: The objec- industry, through the Canadian Capital Martives of the amendments are to simplify, kets Association, is currently moving towards
broaden the application of and correct known STP in order to remain competitive with U.S.
errors in the existing rules and expand the num- markets and to reduce the costs and risks inber of offsets available through the introduc- herent in current settlement systems and protion of new rules. The amendments were cesses. This is to be accomplished by
approved at the April 2003 Board and IDA staff mandating the use of the new Broker-to-Broare awaiting securities commissions approval. ker Trade Matching Utility for non-exchange
28
trades. The amendments were approved at the
October 2002 Board and submitted to the securities commissions for approval. The IDA
has responded to the comments received from
the commissions.
Beneficial Ownership: Current rules and industry practice require those authorized to trade
on behalf of corporations, trust and similar
entities to be identified and documented.
Regulation 1300 has been amended in order to
address the issue of the need to know the benDiscretionary vs. Managed Accounts: The Sub-com- eficial owners behind corporate accounts. The
mittee of the Compliance and Legal Section proposed Regulation was approved by the
(CLS) drafted amendments to Regulation 1300 June 2003 Board and has been submitted to
to separate the characteristics of discretionary securities commissions for approval.
and managed accounts. The line between these
two types of account structures has been blurred Day Trading: Prior to the development of these
over time and, as a result, a hybrid discretion- proposals, there were no by-laws or regulaary account has been proposed, which contains tions that addressed the unique issues that arise
controls to ensure appropriate checks and bal- with respect to day trading. As there were a
ances are in place. The amendments were ap- number of day trading promoting firms seekproved at the June 2001 Board. The securities ing membership in the Association and day
commissions provided comments on the pro- trading is an extremely risky activity, the need
posed amendments to which IDA staff refor rules specific to the unique investor prosponded. The securities commissions have now tection concerns relating to day trading was
provided additional comments, in particular, apparent.
that the proposed amendments will increase the
ease for a Member to operate permanent dis- The proposed regulations delineate the duties
cretionary accounts that are, in essence, man- of a Member firm with respect to:
aged accounts. The IDA will be submitting a • ensuring that a day trading account is apresponse to these comments shortly.
propriate for a particular client before the
opening of such an account
Managed Accounts: The Managed Accounts sec- • warning clients of the risks associated with
tions of Regulation 1300 have been revised by
day trading
the Portfolio Management/Managed Accounts • protecting the client from financial loss
Sub-committee. The revisions make the applithrough the implementation of strict levercation of Regulation 1300 to accounts managed
age limits, in the form of margin requireby sub-advisers plain. The revisions also
ments.
change the Portfolio Management Committee’s
function to an annual review of policies and The proposed Regulation 2500 was approved
procedures. In addition, the regulation has at the June 2001 Board and submitted to the
clarified and simplified the requirements for securities commissions for approval. The comreviews of managed accounts, including per- missions provided additional comments and
mitting reviews on an aggregate basis of ac- the IDA is currently preparing a response
counts for which investment decisions are based on comments received.
made centrally and applied over a large number of accounts. The proposed rules were ap- Policy 1 - Relationships Between Members and Fiproved at the October 2001 Board. The nancial Services Entities: Sharing of Office Premises:
securities commissions provided comments on The Association has revised Policy 1 now that
the proposed amendments to which IDA staff the securities commissions’ Principles of Reguresponded. The securities commissions have lation, upon which Policy 1 was based, have
now provided additional comments and the been revoked and replaced with a considerIDA will be submitting a response shortly.
ably simplified National Instrument 33-102
29
Regulation of Certain Registrant Activities.
The revised policy will remove many provisions, such as the requirement that Member
firm branches situated in a financial institution
be physically separated and have separate
signage. The policy now primarily addresses
the issue of the sharing of premises between
investment dealers and mutual fund dealers,
insurance companies and other entities. The
proposed policy was approved at the June 2003
commissions approval.
type. The amendment has now been approved
in concept by the securities commissions. The
next step will be the performance of industry
testing to determine the potential financial/
operational impact of this proposal on Member firms.
Capital Requirements Relating to Custodial Arrangements: Proposals have now been finalised
to amend the current capital requirement for
the situation where a custodian would otherwise qualify as an acceptable securities location, except for the fact that the Member firm
Minimum Standards for Institutional Accounts: has not entered into a written custodial agreePolicy 4 has been prepared by the CLS Institu- ment with the custodian. It is believed that
tional Issues Sub-committee. The policy will these proposed revised capital requirements
set out the minimum industry standards as they are more reflective of the risk of not having a
relate to institutional account supervision. The custodial agreement in this situation, but that
policy was approved at the April 2003 Board they still provide a sufficient incentive to the
and IDA staff are awaiting securities commis- Member firm to execute the standard custodial
sions approval.
agreement. The amendments were approved
at the October 2002 Board and approved by the
Analyst Standards: Based on the recommenda- securities commissions. IDA staff are awaittions put forth by the Crawford Report, the ing joint implementation with the Montréal
Association has drafted Policy 11. It was ap- Exchange.
proved at the June 2002 Board and submitted
to the securities commissions for approval. The For more information, please contact:
commissions and IDA Member firms provided Richard Corner
additional comments and the IDA has prepared Vice-President, Regulatory Policy
a response based on comments received. A re- (416) 943-6908 or [email protected].
vised version of the policy was approved at
the April 2003 Board and IDA staff are awaiting securities commissions approval. An
amended version was approved at the June
2003 Board, and has been submitted to the commissions for approval.
Stay Up-to-Date on IDA
Account Concentration Charge: The proposed
amendments to Form 1 – Proposed Schedule
15 will establish limits on an IDA Member
firm’s exposure to one or more arms-length
counterparties. Exposures incurred in excess
of these limits will trigger a capital charge to
the Member firm that is representative of the
increased risk due to concentration. The charge
will apply to all counterparties and not just
“acceptable institutions” as concentration risk
may arise in dealings with any counterparty
30
Policy Developments
Visit the Regulation section
at www.ida.ca to access
the most recent
Regulatory Updates
&
Regulatory Proposals.
Enforcement:
Disciplinary
Decisions
the period from November 1999 to April 2000,
it failed to maintain adequate supervisory procedures at the North Toronto branch by failing
to ensure that the branch manger was conducting proper account supervision related to R.S.’s
trading activities.
As a national self-regulatory organization of the CaPenalty: $65,000 fine; $20,000 costs.
nadian securities industry, the IDA enforces rules
and regulations regarding the sales, business and fiGerrardo (Jerry) Salvatore
nancial practices of its Member firms. Investigating
(No. 3143/03)
complaints and disciplining Members are part of the
Violation: Mr. Salvatore acknowledged that
IDA’s regulatory role.
during January 1998 he failed to exercise due
diligence to ensure that recommendations
The IDA’s Enforcement Department may conduct an
made for the transfer of a client account were
investigation of a Member firm or registered person as
appropriate for the client and in keeping with
the result of an investor complaint, or where it is conthe client’s investment objectives.
sidered necessary or desirable to ensure compliance
Penalty: $10,000 fine; $5,000 costs.
with IDA by-laws, regulations or policies. A Member
firm or registered person can be summoned to a hearGarry Turpin
ing and, if it is found that a violation has occurred,
(No. 3144/03)
disciplinary penalties may be imposed. Whenever the
Violation: Mr. Turpin acknowledged that durIDA takes a disciplinary action against a Member firm
ing January 1998 he failed to properly superor registered employee, notice of the penalty is pubvise the handling of the account of a client, to
lished in the form of a Disciplinary Bulletin distribensure that recommendations made in regard
uted to securities regulators and the media.
to the transfer of the client’s account by Mr.
Salvatore, a Registered Representative OpRobert Roy Morrison
tions, were suitable for the client.
(No. 3141/03)
Violation: Mr. Morrison acknowledged that: Penalty: $15,000 fine; $5,000 costs.
• from November 1998 to April 2000, he failed
to maintain written evidence to support the Shofique Ahmed
monthly and daily supervision of client (No. 3145/03)
accounts related to a certain registered rep- Violation: Mr. Ahmed acknowledged that:
• on or about October 21 and November 8,
resentative.
2001, he misled three clients as to the value
• from November 1999 to April 2000, he failed
of their accounts.
to properly supervise the trading activity
in nine accounts of five clients of a certain • on August 13, 2001, he borrowed funds
from a client, without the knowledge, conregistered representative to ensure that the
sent or authorization of the Member firm.
recommendations made were appropriate
for the clients and in keeping with their in- Penalty: $10,000 fine; re-write CPH; filing of
monthly supervision reports by any Member
vestment objectives.
Penalty: $35,000 fine; re-write Branch Manger’s employer for 12 months following any re-apexamination; prohibition of re-approval to act proval; $5,000 costs.
in any supervisory capacity for a period for
Zona Paulette Armstrong
three years; $4,000 costs.
(No. 3155/03)
Violation: Ms. Armstrong:
Scotia Capital Inc.
• failed to exercise due diligence to ensure
(No. 3142/03)
that the recommendations made for
Violation: Member firm admitted that during
31
numerous client accounts were appropriate
for the clients and in keeping with the
client’s investment objectives;
• failed to learn the essential facts or failed
to update the essential information in client account documentation relative to two
client accounts;
• prepared price lists used by Nesbitt for the
purposes of pricing certain U.S. corporate
debt securities for clients’ month end statements, and on at least three occasions, the
prices of at least three of the securities appearing on the price lists were inflated, and
therefore, materially, incorrect; and
• failed to fully cooperate with the investigation conducted by the Association’s Enforcement Department.
Penalty: Permanent bar; $205,000 fine; $241,000
disgorgement of commissions; $50,000 costs.
Paul Mark Herd
(No. 3157/03)
Violation: Mr. Herd admitted that he:
• engaged in conduct unbecoming a registered representative by trading excessively
in his client’s Canadian Dollar Margin Account for the purposes of earning commissions;
• engaged in conduct unbecoming a registered representative by being less than
forthright with the management of his Member firm as to the extent of his client’s participation in the trading activity being
undertaken in his account; and
• exercised discretion in effecting trades in
his client’s Canadian Dollar Margin Account, in respect of which the client had not
given his written authorization for the exercise of such discretion and which had not
been accepted as a discretionary account.
Penalty: $30,000 fine; $50,000 disgorgement of
commissions; re-write CPH; $5,000 costs.
Warren J. McCaffrey
(No. 3151/03)
Violation: Mr. McCaffrey engaged in conduct
unbecoming or detrimental to the public interest by engaging in nine counts of diverting
32
funds and misappropriation in several clients’
accounts, falsification of documents, forging
signatures and of having deceived a client by
concealing her funds’ misappropriation.
costs.
Gaston English
(No. 3161/03)
Violation: Mr. English was found guilty of 43
violations, namely:
• on instructions of a third party, he executed
a trade on behalf of an Indonesian resident
before an account was opened in the client’s
name;
• by opening client accounts on behalf of five
Indonesian residents at the request of a third
party and without having communicated
with the clients, he failed to use due diligence to learn the essential facts relative to
each client and to the acceptance of each account; failed to complete a new account form
for each of them containing the minimum
prescribed information; failed to obtain valid
written powers of attorney authorizing a
third party to give trading instructions for
these accounts and by agreeing to sell a significant number of securities in these accounts, at the request of an insider of the
issuer of the securities in question, failed to
use due diligence to ensure that the acceptance of these orders was within the bounds
of good business practice;
• opened accounts in the names of two corporate entities without having completed
a new account form containing the minimum prescribed information and without
having obtained a certified true copy of a
resolution of the corporations authorizing
the opening of an account and agreed to
execute trades in the accounts, on instructions of a third party, without first having
obtained a resolution from the corporations authorizing the third party to place
orders on those accounts;
• opened an account in the name of a charitable foundation, on instructions from a
third party, without having obtained a cer-
tified true copy of a resolution of the directors of the foundation authorizing the opening of the account and a resolution enabling
specifically designated persons to deal with
the account;
• by signing in his capacity as the person responsible for supervising the opening of
accounts, approved the opening of seven
client accounts for which he, as a registered
representative, had incorrectly completed
the new account forms;
• accepted instructions from a third party to
transfer assets held in the accounts of two
clients to other accounts, without first having obtained a valid power of attorney for
such purpose;
• failed to ensure monthly statements of account containing all prescribed information
were produced for the accounts of several
clients;
• opened accounts in the names of three corporate entities having their place of business in Alberta, two individuals residing
in Alberta and five individuals residing in
Indonesia, although he did not hold any
registration authorizing him to carry on activities in such jurisdictions;
• at the request of an insider, allowed securities to be deposited in the name of Resolution Capital Inc. at General Trust and
partially withdrawn the same day to settle
the sale of the said securities in the accounts
of the insider’s two sons held with the Member, allowed an additional number of securities to be deposited therein and then
withdrawn for delivery to said insider and
allowed securities to be held therein on
behalf of a foundation, without corresponding entries being made in the Member’s
books and records.
Penalty: $50,000 fine; re-write CPH and the
Partners, Directors and Senior Officers Qualifying Examination; $22,000 costs.
Resolution Capital Inc.
(No. 3161/03)
Violation: The Member firm:
• failed to use due diligence to learn the es-
•
•
•
•
sential facts relative to accounts accepted
for five clients, allowed accounts for seven
clients to be opened without sufficient
documentation and failed to establish adequate procedures to supervise the opening of client accounts by allowing the
opening of these accounts to be approved
and ratified by the person who had opened
these accounts in an inappropriate manner;
failed to use due diligence to ensure that
the acceptance of orders by Gaston English
for the accounts of seven clients was within
the bounds of good business practice and
to ensure that the handling of client business by Gaston English for ten clients was
within the bounds of ethical conduct, consistent with just and equitable principles of
trade and not detrimental to the interest of
the securities industry:
failed to maintain at all times a proper
system of books and records relating to
client accounts and to trading activity
within those accounts;
engaged in business conduct which is unbecoming in that, at the request of an insider, it allowed securities to be held in the
name of Resolution Capital Inc. at General
Trust, without any counter party being recorded in its books and, without the corresponding entries being made in the
appropriate records, it then allowed part of
the said securities to be withdrawn to settle
the sale of the said securities in the accounts
of the insider’s two sons held with Resolution Capital Inc., it allowed securities to be
received in that account and then withdrawn
for delivery to a third party and it allowed
the remaining securities to be held therein
in the name of Resolution Capital Inc.;
while not holding any registration as a
dealer in such jurisdictions, it allowed its
representative, who was also not authorized
in such jurisdictions, to open accounts with
the respondent in the name of three corporate clients having their places of business
in the province of Alberta, two individuals
residing in the province of Alberta and five
individuals residing in Indonesia and to
33
make trades in such accounts;
allowed its representative, acting on the instructions of a third party, to execute a trade
in the name of an Indonesian resident, without an account being open in that name;
• failed to produce, for the accounts of nine
clients, monthly statements of account containing all of the prescribed information and
it completely failed to produce such statements for the account of a foundation.
Penalty: $50,000 fine; $22,000 costs.
operated a client account in the name of a
trust that had been terminated and used the
account to carry out his personal trading;
• directed client correspondence to various
addresses, including his personal address;
• engaged in unauthorized trading in a
client’s account;
• failed to disclose his interest in a number
of client accounts;
• carried out transactions without benefit to
the trading parties, and which had the result of overstating SJS’s capital position;
Mark Julian Klyman
• fixed prices for four securities that were not
(No. 3163/03)
fair market prices for those securities;
Violation: Mr. Klyman admitted that between • effected transactions between SJS inventory
August 1999 to October 1999, he exercised disaccounts and corporations controlled by
cretion in effecting trades for a client in accounts
him that were not within the bounds of good
in respect of which the client had not given
business practice and which unduly
written authorization and the Member firm had
prejudiced SJS’s capital position;
not accepted as discretionary accounts.
• failed to exercise due diligence to ensure
Penalty: $5,000 fine; $858.34 disgorgement of
that all necessary account documents were
commission.
obtained and complete;
• traded in registered debentures between
Ramon Albert Porcellato
client and non-client accounts while the
(No. 3160/03)
debentures were not in a tradable form;
Violation: Mr. Porcellato admitted that:
• conducted trading in client accounts with• between November 2000 and January 2001,
out funds and allowed accounts to trade for
he effected trades for himself in the account
a prolonged period of time without adof a client with the knowledge and consent
equate margin;
of the client, but without the knowledge and • traded in a corporate client’s account for
consent of the Member firm;
several months prior to the client’s incor• in or about January 2001, he misled the
poration; and
Member firm regarding the nature of deb- • failed to question documents purportedly
its in the account of a client; and
signed by clients that appeared, on their
• between November 2000 and January 2001,
face, to be forgeries.
he entered false or misleading foreign ex- He also carried out discretionary trading in a
change rates on trade tickets for trades he ef- client’s account, from 1997 to 1999.
fected for himself in the account of a client.
Penalty: $45,000 fine; 12 months strict super- costs.
vision; re-write CPH; $5,000 costs.
Winnie W.S. Tang
John James Illidge
(3167/03)
(No. 3165/03)
Violation: Ms. Tang admitted that she failed
Violation: Mr. Illidge admitted that between to observe the high standards of ethics and con1997 and 1999 he:
duct in the transaction of business conduct or
• opened an account in the name of a a practice which was unbecoming and not in
fictitious corporate client for the purpose the public interest by misappropriating funds
of concealing his own trading activities;
from the Member firm to client accounts, in•
34
•
cluding her own.
Penalty: Permanent Bar; $150,000 fine; $25,000
costs.
Alex Popovic
Vice-President, Enforcement
IDA REP RT
The IDA Report is published four times a year
by the Investment Dealers Association of
Canada, Public Affairs Department. We welcome feedback. Please send correspondence
to:
Connie Craddock
Vice-President, Public Affairs
121 King Street West, Suite 1600
Toronto, Ontario M5H 3T9
Tel: (416) 943-5870 Fax: (416) 364-0753
Email: [email protected]
The Investment Dealers Association of
Canada is the national self-regulatory organization and representative of the securities industry. The Association’s mission
is to protect investors and enhance the efficiency and competitiveness of the Canadian capital markets.
35
INVESTMENT
D E A L E R S
ASSOCIA
TION
ASSOCIATION
OF CANADA
www
.ida.ca
www.ida.ca
Info/Complaint Line
(877) 442-4322
CALGARY
Suite 2300
355 Fourth Ave. S.W.
Calgary, Alberta
T2P 0J1
Tel.: (403) 262-6393
Fax: (403) 265-4603
HALIFAX
TD Centre, Suite 1620
1791 Barrington St.
Halifax, Nova Scotia
B3J 3K9
Tel.: (902) 423-8800
Fax: (902) 423-0629
MONTRÉAL
Bureau 2802
1 Place Ville Marie
Montréal, Québec
H3B 4R4
Tel.: (514) 878-2854
Fax: (514) 878-3860
TORONTO
Suite 1600
121 King St. W.
Toronto, Ontario
M5H 3T9
Tel.: (416) 364-6133
Fax: (416) 364-0753
Ce rapport est aussi disponible en français sur demande.
The Investment Dealers Association of Canada is the national self-regulatory
organization and representative of the securities industry. The Association’s mission is
to protect investors and enhance the efficiency and competitiveness of the Canadian
capital markets.
VANCOUVER
Suite 1325
P.O. Box 11614
650 West Georgia St.
Vancouver, BC
V6B 4N9
Tel.: (604) 683-6222
Fax: (604) 683-3491
Printed on recycled paper
IDA REP
RT
A newsletter published by the
Representing Members Interests
The Investment Dealers Association is actively involved, on a regular and ongoing basis, in
representing Members concerns and interests to governments and other organizations. Since
our last issue, the IDA has been active on a number of fronts.
House of Commons Finance Committee
The IDA was invited to appear before the House
of Commons Finance Committee regarding Bill
C-38, an omnibus bill containing amendments
to federal financial legislation. In his brief to the
Committee (available on the IDA web site at
www.ida.ca) IDA President and CEO Joe Oliver
urged the government to move quickly to
introduce legislative and regulatory amendments
that would enable securities firms to join the
Canadian payments system at the earliest
opportunity. He also called on the government
to develop a coordinated federal-provincial
approach to their proposed client adjudication
system that is cost-effective and uniform,
benefiting clients dealing across the institutional
spectrum in Canada, and minimizing costs for
financial institutions, including IDA Member
firms. What should be avoided, he said, is a
limited system that fails to cover all consumers
but nevertheless duplicates other systems already
in place. He concluded that the proposed federal
Ombudsman is not needed to compete with the
existing IDA arbitration system for the securities
industry, but rather should be structured to
complement it.
Executive Committee Visits
An Executive Committee visit to Alberta is
scheduled for November 21-23, 2000. IDA Board
Chair Jacques Ménard and CEO and President
Joe Oliver, accompanied by Prairie Regional
Director Terry Melling and Senior Vice-President
Capital Markets Ian Russell, are scheduled to:
· meet with IDA Members in Edmonton and
Calgary,
· host a Business Leaders Luncheon in
Calgary,
·
·
meet with the Alberta Securities
Commission and
meet with the Hon. Steve West,
Treasurer, Government of Alberta.
Terry Melling
Prairie Regional Director,
(403) 262-6393 or [email protected]
CSA Transparency Proposals for
Debt Markets
The CSA proposals for reform of domestic
markets released July 31 separate debt and
equity markets in respect of imposing
regulatory policy. The proposals for the
debt markets focus principally on efforts
to improve the transparency of over the
counter debt markets.In the CSA Proposals
for regulating debt and equity markets
released last July, CSA staff set out
specific proposals for domestic debt
markets that focussed primarily on market
transparency and market integrity.
The transparency proposals were
controversial and unconventional, as full
real time transparency was proposed for
prices and transaction volumes in the IDB
markets, as well as in market-maker books
and from alternative trading systems.
Foreign jurisdictions have essentially
restricted transparency initiatives on the
IDB or wholesale markets.
The IDA and Bank of Canada have raised
objections to the CSA transparency
proposals, noting in particular that the pre-trade and
post-trade transparency of traded prices and volumes
from market-makers, in real time, increase risk
exposure to the dealers, reduce a willingness to make
two-way markets and result in higher transaction
costs. CSA staff have acknowledged these arguments
and are seeking an acceptable transparency
compromise that can provide extensive debt market
transparency without the negative impact on overthe-counter dealing.
The IDA Capital Markets Committee and Primary
Dealer Money Market Committee agree that
effective transparency of the over-the-counter
markets is a necessary condition to promote liquid
and efficient markets. In this regard, IDA Member
firms have been, and continue to be, committed to
improving the transparency of debt markets through
participation in the CanPx project. The Committees
believe the optimal policy approach is to finalize the
planned CanPx project, which will be fully
operational by year-end.
The Committees have formed a Transparency
Working Group comprised of senior executives
responsible for the fixed income operations of IDA
Member firms to work with the CSA to develop an
effective transparency agenda for fixed income
markets in Canada.
Ian Russell
Senior Vice-President, Capital Markets
National Escrow Rules
In response to CSA proposals to reform existing
escrow rules, the Corporate Finance Committee
recommended these rules be replaced with an
alternative mechanism that would not put domestic
markets at a competitive disadvantage vis-à-vis US
equity markets. The Committee proposed a
disclosure model patterned on the control block
selling rules. The CSA has to date rejected this
proposal. Discussions are ongoing with the CSA, and
the Committee is hopeful of a positive outcome.
2
Ian Russell
IDA Efforts to pursue an RRSP Exemption
in the United States
The IDA has been active in encouraging individual
US states to provide the necessary regulatory relief
that would permit Canadian broker-dealers to deal
with the securities, including Canadian securities and
mutual funds, in the RRSP accounts of their clients
resident in those particular states. Twenty US states
have adopted the necessary securities exemptions
under state law, recognized and adopted by the
NASAA Amendments to the Uniform Securities Act,
and provided Canadian dealers with limited
registration procedures or exemptions to transact
business in the RRSP accounts of their clients.
The state of Arizona recently issued for comment a
proposal for relief for Canadian broker-dealers in
respect of the RRSP accounts of their clients resident
in Arizona. The proposed rules do not provide the
necessary exemption for Canadian securities in the
RRSP accounts and would also provide Canadian
dealers with a limited registration procedure rather
than an exemption. The Association has submitted a
response to the Rules, arguing for an exemption and
will take similar initiatives with other US states that
have not already agreed to the necessary securities
exemptions and Canadian broker-dealer exemption/
limited registration for transactions in RRSP
accounts. It is anticipated that California will issue a
similar proposal for some form of an RRSP
exemption. The IDA will follow up directly with
California regulators to press for the appropriate
exemption. Submissions to the Arizona State
regulators are posted on the IDA web site at
www.ida.ca.
Ian Russell
Broadening the Exemption from Federal
Withholding Tax for Cross-Border
Repurchase Transactions
IDA Members Employee Benefits
Plan
The Income Tax Act contains provisions that permit
Canadian dealers to borrow and lend US government
securities on a cross-border basis without the
imposition of federal withholding tax. US federal
agency bonds have displaced US Treasury bonds as
the liquid benchmark securities in US debt markets.
It has become increasingly difficult and expensive
to borrow US Treasury bonds for specific portfolio
transactions. The IDA has made representation to
the federal Department of Finance to broaden the
exemption from federal withholding tax to include
US agency debt. This would enable Canadian dealers
and their clients to borrow securities in the US agency
market and execute cross-border repurchase
transactions in US dollar-denominated debt in an
efficient and cost-effective way.
The IDA is pleased to announce the implementation
of a Benefits Plan to be used by Members of the
Association, to cover their employees across the
country.
Ian Russell
·
Suitability
Health Coverage
The Plan has been designed with maximum
flexibility to accommodate the uniqueness of our
Members while offering competitive pricing through
the combined purchasing power of the membership.
The Plan offers:
Life and Disability Coverage
·
·
·
The Association has submitted a proposal to the CSA ·
outlining our views on suitability for full service
brokers. The paper recommends a trade-by-trade
suitability regime very similar to that now in place ·
in the United States. In this model, suitability
recommendations are only triggered when
recommendations are made. A separate account or
business unit is not required.
The IDA, through working sub-committees, has been
reviewing suitability requirements for its Members
over the past year. In April, 2000, the CSA provided
relief from suitability requirements for discount
brokers and those Member firms that create separate
business units. This paper offers a proposal for
further relief from suitability requirements for fullservice Members.
Greg Clarke
Wide range of life coverage with high nonmedical maximums.
Comprehensive disability coverage with high
non-medical maximums.
Dependent life coverage for Member employees
spouse and children.
Employee-pay optional benefits for those
choosing additional coverage.
Comprehensive drug coverage with the
convenience of a drug card (no claim for
paperwork, no more waiting for cheques).
Unlimited health coverage including private and
semi-private hospital coverage, practitioner
coverage, vision care benefits and extensive outof-province and country coverage for all Member
employees travel needs.
Dental Coverage
·
·
·
·
Complete dental coverage with flexibility to meet
Members corporate needs.
Basic services including diagnostic
examinations, cleaning, scaling, fluoride
treatments.
Major services including bridges, crowns and
caps.
Orthodontic coverage.
3
Baynes & White, the consultant to the IDA on the Nova Scotia Securities Commission is considering
Plan, are working with the Association to make delegating registration functions to the Association.
personal contact with each Member firm. They can Each province has embraced a prudent fiscal strategy.
be reached directly at:
Consultations across Atlantic Canada with the
industry, business leaders, potential issuers, thinkPhone
(416) 863-9159
tanks like the Atlantic Provinces Economic Council,
Toll Free
1-877-525-3623
the professions, leaders in the media and others have
[email protected]
e-mail
yielded a substantial consensus that the Atlantic
_________________________________
provinces should adopt an integrated and uniform
approach to capital market activities.
The Districts Report
The evolution of the CDNX and Member
involvement in local financings has created a new
appreciation for the potential contribution of the
It has been a stimulating summer in Atlantic Canada.
industry in this region. Twenty-six companies in the
Tall Ships, a re-enactment of the landing of the
region are listed and traded on the CDNX, and others
Vikings in Newfoundland, and multiple cultural
have already graduated to the TSE and NASDAQ.
events resulted in non-stop activity. The Atlantic
District Councils launched their new years in a
One of the challenges going forward is to continue
variety of creative ways.
to improve the delivery of services to Member firms
in the region. The IDA is now well known as a selfFollowing the IDAs good news story issued about
regulator, but the trade association side is not as
New Brunswick in the spring, the Association has
well known or understood by local Members.
just published the outlook for Prince Edward Island,
District Councils will be meeting more frequently.
and according to Stan Kumagai, our senior
They will be looking at ways to communicate more
economist, PEI is riding the crest of a surge in
effectively with Member firms and to enhance the
economic growth. A recent survey of Chambers of
profile of the industry in their districts.
Commerce indicates increasing shortages of labour
in a variety of categories. We participated with the
CSI recently in high quality career fairs for
Jim Stevens
universities in Halifax and St. Johns, Newfoundland, Atlantic Regional Director
and were pleasantly surprised at the number of (902) 423-8289 or [email protected]
employers competing for graduates, including local,
regional, and large international companies. The
Ontario District
economy of the region does appear to be
experiencing structural changes, and this includes
The Ontario District has been busy this past summer
the provinces which are not oil and gas producers.
dealing with issues that affect our region and the
industry as a whole. Below is a brief overview of
On the legislative front New Brunswick has assigned
those issues. For more details, the relevant web site
a high priority to enacting a modern securities act,
addresses have been provided.
Newfoundland has activated its securities
commission, Nova Scotia is about to announce
I. OSC / FSCO Merger Update
changes affecting its securities commission, and
Prince Edward Island has challenged us to make the
Finance Minister Ernie Eves has appointed his
business case for updating its legislation. Nova Scotia
Parliamentary Assistant, David Young, to lead
and Newfoundland have invited us to assist them
with the delivery of equity incentive programs. The
Atlantic Region
4
consultations with consumers, investors, pension
plan members and industry participants regarding
the Governments plan to merge the Ontario
Securities Commission (OSC) and the Financial
Services Commission of Ontario (FSCO) to form
a single financial service regulator in Ontario.
A discussion paper entitled Improving Ontarios
Financial Services Sector Regulation:
Establishing a Single Financial Services
Regulator is available on the FSCO web site at
www.ontarioinsurance.com. The IDA has issued
a response to the Discussion Paper.
II. SRO Membership - OSC Rule 31-507
On August 18, the OSC published Rule 31-507
which states that all securities dealers and brokers
must be a member of a SRO, recognized by the
Commission. An existing securities dealer or
broker registrant must become a SRO member
as of the date of their first renewal of their
registration following March 1, 2001. An
existing securities dealer or broker registrant
must also provide the SRO with notice of its
intention to make an application for membership
by January 1, 2001.
The complete Rule can be found in the Whats
New section on the OSC web site at
www.osc.gov.on.ca
Members instead of all IDA Members
individually, with regard to the August 2000
contract renewal for the sale of CSBs. The Retail
Sales Committee struck a working group made
up of representatives from Goepel McDermid
Inc., Merrill Lynch Canada Inc., Odlum Brown
Ltd., and RBC Dominion Securities Inc. The
negotiations resulted in an increase in
commission on the sale of CSBs from the
previous 20 basis points to 23 basis points.
V. Retail Sales Committee - New Chair
and Vice Chair
The Retail Sales Committee has appointed Tom
Monahan of CIBC World Markets Inc. to assume
the role of Chair, and Lorne Harper of Royal
Investment Services to serve as Vice Chair of
the Committee.
Our thanks to Gary Reamey of Edward Jones for all
his work and input as Chair of the Retail Sales
Committee. Thanks also go out to Germain Carrière
for his work as Vice Chair and his continued support
as a member of the Retail Sales Committee.
Morag MacGougan
III. Financial Planning Proficiency Exam
Pacific District
The pilot of the Financial Planning Proficiency
Examination was written on Monday, October
2. The securities commissions asked the IDA,
along with other institutions, to elicit volunteers
from our Membership to write the exam and
provide feedback.
BC Business Summit 2000
Giving businesses in British Columbia a voice to
positively influence the business climate and social
decision-making in the province, is the purpose of
the BC Business Summit 2000 conference which
took place on November 18 and 19 in Vancouver.
The BC Business Summit 2000 was organized by
Thank you to all who participated in this pilot
52 business organizations and industry associations
exam.
whose memberships collectively represent more than
90% of all private sector employers in British
IV. Canadian Savings Bonds Contract
Columbia. Believing in the importance of the Summit
Negotiations
the IDA has been involved since 1998 and is active
on numerous committees including the Steering
This year the federal government decided to Committee. Our District Council members have been
negotiate with a representative group of IDA
5
kept updated on the progress of the preparations of
the Summit and were encouraged to attend. A
complete outline of the Summit agenda can be found
on the IDA web site at www.ida.ca.
Generally, it was agreed upon that there are many
types of accounts where the standards of the Know
Your Client rules are effective. However, the IDAs
proposal is to develop a concept of increased
monitoring of a defined group of high-risk
The conference gives businesses, small, medium and accounts. Details still must be worked out on the
large, the opportunity to voice their opinions and final policy as it goes through the normal policy
concerns on various issues regarding conducting formulation process with the expertise and
business in BC. The objective is to build on the suggestions from the industry.
learning and the initiatives of the BC Business
Summit 98 and the Panel on Securing BCs Future Regional News
in 1999, and to provide input for a forward looking
The B.C. Womens Hospital Foundation announced
vision for the future of BCs economic future.
the second quarter results for the annual Invest in
The need for economic growth and change in BC Women Challenge. First time participant, Goepel
was stressed by the various speakers including McDermid, leads its competitors for the second
economists, demographers, pollsters and globalists. consecutive quarter.
The keynote speaker for the opening session was
Mary Harney, T.D. Tanaiste, (Deputy Prime The Challenge program was launched in 1997. Each
Minister) and Minister for Enterprise, Trade and of the Challenge competitors sets aside a $100,000
Employment for the Republic of Ireland. Ms. Harney portfolio that they will invest for a one- year period.
has been central in the process of economic change Proceeds from all investments go to B.C. Womens
and renewal that has reshaped Ireland over the past Hospital Foundation. Since the programs inception,
decade making it the fastest growing economy in $192,492.82 has been raised.
the European Union and the Western world. The lineup of other speakers was also very impressive, to Other participating financial service companies
mention a few: former Olympic ski champion Nancy include: CIBC World Markets, HSBC Asset
Greene Raine; David Baxter Executive Director of Management, Odlum Brown, Richmond Savings
the Urban Futures Institute; Darrell Bricker, Investments and Toronto Dominion. The kind of
President and COO, Canadian Public Affairs Practice collaboration and healthy competition among B.C.s
at the Angus Reid Group. Others will include leaders established financial service providers has served
representing the full spectrum of BCs business B.C. Womens Hospital well. Their support has
community.
enabled us to expand and enhance our services to
meet the ever increasing demand, says B.C.
Womens Foundation Chair, Alan Snowden.
Vancouver Visits
Peter Bailey, Senior Vice-President, Trade
Association, was in Vancouver to visit with heads of
our Member firms and attend a meeting with Doug
Hyndman, Chair of the BCSC, Steve Wilson,
Executive Director of the BCSC and Warren Funt.
The main focus for discussion was the very heated
issue of the need to pierce the Corporate Veil and
determine beneficial ownership of offshore private
companies. The outcome was successful in reaching
a compromise satisfactory to both the BCSC and IDA
Members.
6
The Victoria, Vancouver Island members held their
annual IDA golf tournament on September 7 at the
Cordova Bay Golf Course in Victoria. The day was
thoroughly enjoyed by 62 players, while raising more
than $6,000.00 for the charity, Help Fill A Dream
Foundation, an organization which helps fill the
dreams of terminally ill children and their families.
In August and September, Warren Funt travelled to
Victoria, Penticton, Kelowna, Vernon and Kamloops
to meet with Members within their regions and to
present an update on industry developments. The
meetings were well received and the discussions
helped to give a sense of the industry outside of the
Vancouver centre.
Warren Funt
Prairie Region
all the changes underway, the traditions of the trading
floor are now a thing of the past.
Meeting of Regional Directors
On October 18th, 2000, IDA Regional Directors met
at the Associations Montréal offices. Senior Trade
Association Vice-President Peter Bailey chaired the
meeting attended by Fernande Lanoix, Morag
MacGougan, Terry Melling, Warren Funt and Jim
Stevens.
The Alberta District Council held their Annual
Charity Golf Tournament during the month of June. Board of Directors Meets in Montréal
The tournament raised $4,000 which was donated
to Edmontons Festival of Trees, a fundraiser for the More than 70 enthusiastic guests were in attendance
University Hospital.
as the Honourable Leo Kolber, Senate of Canada,
addressed the Associations Industry Dinner held on
The Manitoba District Council held their Annual October 18 th at the Intercontinental Hotel in
Charity Golf Tournament during the month of Montréal. Senator Kolbers speech addressed issues
August. The tournament raised $2,000 which will related to the impact of future legislation on the
be donated to the Childrens Wish Foundation and Canadian financial services sector. Senator Kolber
the Childrens Hospital.
is the Chair of the Senate Standing Committee on
Banking and Commerce.
In early October Joe Oliver, President and CEO;
Peter Bailey, Senior Vice-President, Trade On October 19th, Members of the Board of Directors
Association; Ian Russell, Senior Vice-President, and the National Advisory Committee held their
Capital Markets; and Terry Melling, Prairie Regional Quarterly Meetings.
Director, visited the province of Manitoba where they
met with the Manitoba District Council, the
Manitoba Securities Commission and the Minister
of Consumer and Corporate Affairs. In conjunction
with the trip to Manitoba and directly following,
Peter Bailey and Terry Melling visited with Member
firms with head offices in Winnipeg and Saskatoon.
Terry Melling
Prairie Regional Director
Quebec District
Stock Exchange Developments
Hon. Leo Kolber, speaker at IDA Industry Dinner.
See you in Quebec!
The Montreal Exchange has undertaken its Quebec Members are looking forward to hosting the
demutualization process and, as of October 1, the next Annual Meeting and Conference of the IDA at
Exchange has become a for-profit company. With the Manoir Richelieu in Malbaie, Charlevoix County,
7
just outside Québec City. Dont forget to mark your calendars nowJune 16-19.
Fernande Lanoix,
Quebec Regional Director
Regulatory Update
New rules now in effect:
The Association recently announced Amendments to the Cash Account Rule set out in Form 1. These
amendments will modify the requirements for cash accounts to:
â Tighten and conform the credit practices followed by Member firms with respect to customer cash
accounts;
â Establish implicit margin rates that a Member firm must apply when determining the sufficiency of
collateral within a customer cash account; and
â Specifically require that security positions used as collateral for cash debit balances be included as an
amount loaned exposure for the purposes of calculating the security concentration charge on Schedule
9 of Form 1.
IDA Bulletin #2750, which was issued on July 19, 2000, sets out the timetable for the phased-in
implementation of these amendments as follows:
â October 1, 2000 - Start of Testing: Members should have systems modifications complete in order to
test the new rule.
â October 1, 2000 to November 30, 2000 - Testing Period: Members should be testing systems required
for the implementation of the new rule.
â December 1, 2000 - Implementation Date: Effective implementation date of the new rule.
â December 1, 2000 to January 31, 2001 - Safe Harbour Period: Members should be using the new
rule. During this time, while Members should be using the new rule in their capital calculations, Members
will not be charged with a capital deficiency or be deemed to be in Early Warning if such situation is
due to the amendments to the rule.
Member firms looking for additional details on these rule amendments may wish to consult previously
issued IDA Compliance Interpretation Bulletin C-134.
The Association recently announced the implementation of a new list, the List of Securities Eligible for
Reduced Margin. This list replaces the List of Option Eligible Securities as the basis for determining
which listed securities may be margined at rates of less than 50%. Bulletin #2732 and Member Regulation
Notice MR-030 announced the implementation of this new list. To give Member firms a chance to adjust to
these new requirements, the effective date of this new list was set at September 8, 2000 (10 business days
from the date of publication of the List of Securities Eligible for Reduced Margin prepared using information
as at June 30, 2000 - Member Regulation Notice MR-042).
8
Association staff are now in the process of preparing the List of Securities Eligible for Reduced Margin
using information as at September 30, 2000. This list will be published within the next few weeks through
the issuance of a member regulation notice.
Upcoming rule changes:
Rules that will become effective in the coming months include:
·
Exemptions Requests and Exemption Hearings: Under proposed Policy No. 6, Part I Proficiency
Requirements and Part II Course and Examination Exemptions, the District Councils have the power
to grant discretionary exemptions. The proposed amendments will set out the procedure for those
circumstances where applicants determine that they wish to seek an exemption from the applicable
District Council.
·
Electronic Signatures: Considerable attention has been paid to the recently enacted Canadian Personal
Information Protection and Electronic Documents Act, the U.S. Electronic Signatures Act and various
other Electronic Signature legislation being enacted in other provinces. The IDA will be drafting rules
that will be able to meet technological advances.
·
U.S. Withholding Tax Regulation Amendments: These IRS tax regulation amendments come into effect
on January 1, 2001. To prepare for these amendments, the joint IDA/CBA U.S. Withholding Tax Working
Group was formed in early 1998 with a mandate to develop a standard Canadian financial institution
withholding tax agreement. The development of this agreement was seen as being critical if Member
firms wished to continue to provide their customers the ability to invest in U.S. securities at reasonable
withholding tax rates. The alternative, to provide significantly greater customer account documentation
to the IRS, was not seen as a viable alternative.
The working group has met on regular occasions over the past two years to develop a standard agreement,
negotiate the terms of this agreement with the IRS and when the IRS announced their intention to have
one global agreement, negotiate concessions to this global agreement on behalf of Canadian financial
institutions. Negotiations are still ongoing with the IRS with respect to the transitional relief issue.
Specifically, Member firms are still trying to negotiate to gain further transitional relief from the IRS
with respect to the documentation maintained for their existing customer base either in the form of:
â The acceptance of other forms of documentary evidence such as the use of SIN cards in combination
with the T5 reporting regime; or
â The receipt of additional time (as much as 2 years) to perform the necessary file repapering.
Should these negotiations succeed, the working group feels that they would be in a position to recommend
the use of this global withholding tax agreement. It should be noted however, that should a Member
firm wish to enter into this agreement with the IRS (and become a Qualified Intermediary under the
terms of the agreement), enhanced know your client procedures/documentation requirements will
have to be adopted.
In order to assist Member firms in learning about these regulation changes, a frequently asked questions
page has been posted on the IDA web site. This page will be updated once negotiations are finalized.
Further, a questionnaire was recently circulated to Member firms requesting that they report on their
preparedness to adhere to these new regulations. The results of the questionnaire responses received to
date indicate that a significant number of Member firms are unprepared for this rule change. Member
firms should note that failure to prepare may result in a loss of U.S. securities business to other firms.
9
10
·
Referral Arrangements and Trade Names: As a result of the CSA Distribution Structures Position Paper,
the IDA is currently developing rules to address under what circumstances referral fees and commission
splitting may be permitted and when trade names may be employed by the Member and its salespersons.
The rules are intended to ensure compliance with the CSA Paper and to clarify the IDAs current
position on these issues.
·
Policy No. 2 Minimum Standards for Retail Account Supervision: A subcommittee of the Joint Industry
Compliance Group has been in the process of reviewing Policy No. 2 and revising various provisions
contained therein. It is anticipated that the revised policy will be submitted to the next Board meeting
for approval.
·
Day Trading: There has recently been a great deal of focus on the NASDs proposed rule change on
this issue. The IDA will be drafting a regulation creating certain proficiency requirements for those
wanting to participate in day trading activities as well as to regulate day trading strategy providers.
·
A Policy on Reporting Requirements: This policy has been developed and approved by the Joint
Industry Compliance Group. This policy requires applicable Members and their Partners, Directors,
Officers, and RRs to report to the applicable Member firm and/or SRO items such as material changes
in registration information, customer complaints, securities related claims pending or disposed, civil
litigation claims, settlement agreements, the commencement of internal investigations, etc. The policy
is currently under further development by IDA staff.
·
Capital requirements for Underwriting Commitments: Amendments that will modify Regulation 100.5
and Schedule 2A of Form 1 that set out the capital requirements for underwritings. While there are
several amendments, the ones of most consequence are the adoption of lower margin rates (for 25%
and 50% margin rate securities) during the underwriting period, the establishment of a lower capital
requirement (subject to certain conditions) where expressions of interest have been received from
exempt list purchasers and the revision of the acceptable form of new issue letter for capital requirement
reduction purposes.
·
Discretionary vs. Managed Accounts: The IDA is currently drafting amendments to Regulation 1300.3
and 1300.5 to separate the characteristics of discretionary and managed accounts. The line between
these two types of account structures has been blurred and as a result, discretionary accounts must be
restricted and used only as a temporary measure, instead of the current practice of these accounts being
consistently renewed annually.
·
Relief from Suitability: The Association, in conjunction with the Joint Industry Compliance Groups
Full-Service Brokers Suitability Sub-Committee, has been reviewing suitability requirements for its
Members over the past year. The Canadian Securities Administrators issued a Press Release on April
10, 2000 providing relief from suitability requirements for discount brokers and those Member firms
that create separate business units. In response to the Press Release, the Association submitted a
proposal to the CSA requesting further relief from suitability requirements for full-service Members.
The IDA is currently awaiting comments from the CSA.
·
Corporate Accounts and Know-Your-Client Requirements: As a result of a recent case before the
British Columbia Securities Commission, the Association was asked to review practices in the industry
with respect to when Members firms should determine the beneficial owners of corporate accounts. A
Corporate Veil Sub-Committee has been set up to review the issue and will be submitting a proposal to
require Members to determine the beneficial owners of private and other unknown corporations whenever
possible.
·
Equity Margin Rate Project: This project has now been underway for roughly nine months. The objective
of this project is to replace the existing margin rate methodology used for equity securities, (which is
based on market price per share), with a methodology that more accurately tracks market risk. In order
to develop a replacement methodology, various methodologies have been reviewed with the requirements
that:
â The methodology selected would have to accurately track an individual securitys market risk by
measuring both price risk and liquidity risk; and
â The methodology selected would have to be reasonably simple to implement both from an operational
and investor education standpoint.
The methodology selected and referred to as the basic margin rate methodology is essentially a
methodology for determining a customized margin rate for each equity security. At this point a review
of the assumptions to be used in this new methodology along a study of the impact this approach would
have on overall margin rates is underway.
·
Responsibilities of Compliance Officer and Ultimate Designated Person: These proposed rules will
clearly set out the role and responsibilities of the Chief Compliance Officer as opposed to those of the
Ultimate Designated Person who will be required to be a Chief Executive Officer, Chief Operating
Officer, President or other similar position that has been granted decision-making authority.
·
Trade date/settlement date margining: The purpose of this proposal is to amend Note #5 in the General
Notes and Definitions of Form 1 to allow Member firms to margin one block of accounts on one basis
(either on a settlement date or trade date basis) and the other block of accounts on another basis provided
that one of the two blocks is limited to acceptable institution, acceptable counterparty, regulated entity
and investment counsellor accounts. The method chosen by the Member firm for an account will have
to be used consistently from month to month. The objective of this proposal would be to allow a
Member firm to margin its retail accounts on one basis (most likely trade date basis) and its institutional
accounts on a different basis (most likely on a settlement date basis).
·
Capital and margin requirements for S&P/TSE 60 Index products: Amendments that will modify
Regulations 100.2, 100.8, 100.9, 100.10 and 100.12 to include requirements for the S&P/TSE 60 Index
products that are the same as the existing requirements for Toronto 35 Index products.
·
Cessation of the Quarterly Operations Questionnaire (QOQ) and Review of the Form 1 (Joint Regulatory
Financial Questionnaire and Report) (JRFQ&R): Amendments that will modify the form and content
of the information being reported through the JRFQ&R and the Monthly Financial Report (MFR) as
well as result in the cessation of the QOQ. The objective is to identify opportunities for rationalizing
the regulatory burden of reporting without compromising the regulators ability to monitor and review
the operations of members.
Keith Rose
Vice-President, Regulatory Policy
11
Enforcement: Disciplinary Decisions
As a national self-regulatory organization of the Canadian Securities Industry, the IDA enforces rules and
regulations regarding the sales, business and financial practices of its Member firms. Investigating
complaints and disciplining Members are part of the IDAs regulatory role.
The IDAs Enforcement Division may conduct an investigation of a Member firm or registered person as
the result of an investor complaint, or where it is considered necessary or desirable to ensure compliance
with IDA By-laws, Regulations or Policies.
A Member firm or registered person can be summoned to a hearing and, if it is found that a violation has
occurred, disciplinary penalties may be imposed. Whenever the IDA takes a disciplinary action against a
Member firm or registered employee, notice of the penalty is published in the form of a Disciplinary
Bulletin distributed to securities regulators and the media.
HSBC James Capel Canada Inc.
(now HSBC Securities (Canada) Inc.)
(No. 2748/00)
institution as defined. Such practice had an adverse
effect on MRSs risk-adjusted capital and indicated
a flaw in its internal control systems.
Violation: Due to technological difficulties and,
consequently, reconciliation problems arising from
the acquisition of Moss Lawson & Co. and Gordon
Capital Corp., HSBC reported risk-adjusted capital
(RAC) deficiencies for the periods December 1998
and January 1999. An injection of capital by HSBC
in February 1999 rectified the firms RAC
deficiencies. The Joint Regulatory and Financial
Questionnaire and Report for the period ending
December 1998 indicated that HSBC did not
maintain adequate books and records as prescribed
because such books and records did not accurately
reflect the status of certain accounts for internal
reconciliation purposes.
Penalty: $35,000 fine and $4,150 towards costs of
the investigation.
the investigation.
(No. 2751/00)
Marc Guillemette
(No. 2749/00)
Violation: Misappropriated five share certificates
from a client and conducted personal financial
dealings with a client without knowledge of his
Member firm.
Penalty: $110,000 fine and permanent prohibition
from employment in any capacity by a Member firm.
Frederick Monte Ponech
Violation: Effected trades in a client account upon
MRS Securities Services Inc.
instructions from a third party when there was no
written Trading Authorization permitting such
(No. 2752/00)
trading activities. Failed to use due diligence to learn
Violation: From October 1997 to mid-1999, MRS essential facts about his client and to ensure that his
Securities Inc. (MRS) deposited its business recommendations and every order accepted were
receipts and client cash into the bank account of a appropriate and in keeping with clients investment
related Loan and Trust Company before it transferred objectives and risk tolerance.
the funds into its own bank account, usually within
a day. The related company was not an acceptable
12
Penalty: $6,500 fine; six month supervision upon misrepresented account balances in a series of letters
return to the industry; rewrite CPH exam and $4,000 and fictitious account statements sent to the client.
towards costs of the investigation.
Penalty: $10,000 fine; six months suspension;
rewrite CPH; twelve months strict supervision and
Taurus Capital Markets Limited
$4,000 towards costs of the investigation.
(No. 2757/00)
Violation: Failed to maintain adequate internal
controls to ensure proper repatriation of back-office
operations.
the investigation.
Stephen Parke
(No. 2758/00)
Violation: Exercised improper discretionary trading
activities in a client account.
Penalty: $10,000 fine, rewrite CPH exam and $900
Peter Przygoda
(No. 2747/00)
Ian Scott - Moncrieff
(2764/00)
Violation: Exercised improper discretionary trading
activities in two client accounts and failed to ensure
that a New Client Application Form reflected
essential facts about the clients investment
objectives and risk tolerance.
Penalty: $15,000 fine; rewrite CPH and $6,500
James Donald Wooster
(2766/00)
Violation: Failed to use due diligence to learn
essential facts relative to a client and to ensure that
recommendations were suitable and in keeping with
the clients investment objectives and risk tolerance.
Violation: Failed to use due diligence to learn
essential facts about his client and to ensure that Penalty: $12,500 fine; rewrite CPH and $2,000
recommendations were suitable and in keeping with towards costs of the investigation.
clients investment objectives and risk tolerance.
Penalty: $5,000 fine; disgorgement of commissions
in the amount of $2,500; rewrite CPH exam; six
months strict supervision and $2,500 towards costs
of the investigation.
Warren Babb
(No. 2761/00)
Violation: Failed to follow clients instructions to
sell certain holdings in his account, causing losses
to the client; failed to advise Member of a client
complaint and failed to advise subsequent Member
employer of current client dispute. Without the
knowledge of either member employer, Babb
promised to compensate client for his losses and
Gary Stewart Brookes
(2767/00)
Violation: Failed, in his capacity as a Branch
Manger, to ensure that an updated New Client
Application Form reflected the true objectives and
risk tolerance of a retired client, thereby prevented
member firm from learning essential facts relative
to the client.
Penalty: Formal reprimand and $500 towards costs
of the investigation.
Note: In accepting the negotiated penalty noted
above, the Pacific District Council stressed that had
the violation occurred in the present day, instead of
13
1995 (when there were no established Guidelines in or advised on the security on behalf of the client
and Penalties), it would expect that the negotiated without complying with his Member firms internal
penalty would be considerably higher.
policies governing private securities transactions and
without complying with relevant industry standards.
Traded in the security without recording the
Robert William Stevenson Beaty
transaction on the books of his Member firm and
(2774/00)
without sending his client confirmation in respect
Violation: Failed to use due diligence to ensure that of or monthly statements disclosing the transaction.
recommendations were appropriate and in keeping
with clients investment objectives and risk tolerance. Penalty: $19,000 fine; rewrite CPH and $3,000
Traded in a security on behalf of a client and directly towards costs of the investigation.
and indirectly participated in the distribution of the
security without a receipt for a prospectus having For more information, please contact:
been obtained as required under section 42 (now Fred Maefs
section 61) of the Securities Act. Failed to ensure Vice-President, Enforcement
that the trade in or distribution of the security was (416) 943-6904 or [email protected]
exempt from the requirement of section 42. Traded
The IDA Welcomes New Members
14
Company
Date
KingsGate Securities Limited
July 17, 2000
Solium Capital Online Inc.
July 17, 2000
ITG Canada Corp.
August 2, 2000
Sheridan Securities Inc.
August 14, 2000
Leyland, McLachlan Advisory Group Incorporated
September 19, 2000
Peak Securities Inc.
September 29, 2000
Canada Invest Direct Inc.
October 20, 2000
15
INVESTMENT
D E A L E R S
ASSOCIATION
OF CANADA
www.ida.ca
CALGARY
Suite 2300
355 Fourth Ave. S.W.
Calgary, Alberta
T2P 0J1
Tel.: (403) 262-6393
Fax: (403) 265-4603
HALIFAX
TD Centre, Suite 1620
1791 Barrington St.
Halifax, Nova Scotia
B3J 3K9
Tel.: (902) 423-8800
Fax: (902) 423-0629
MONTRÉAL
Bureau 2802
1 Place Ville Marie
Montréal, Québec
H3B 4R4
Tel.: (514) 878-2854
Fax: (514) 878-3860
TORONTO
Suite 1600
121 King St. W.
Toronto, Ontario
M5H 3T9
Tel.: (416) 364-6133
Fax: (416) 364-0753
Ce rapport est aussi disponible en français sur demande.
The Investment Dealers Association of Canada is the national self-regulatory organization (SRO) and trade
association of the securities industry. The Associations role is to foster fair, efficient and competitive capital
markets by encouraging participation in the savings and investment process and by ensuring the integrity of
the marketplace.
VANCOUVER
Suite 1325
P.O. Box 11614
650 West Georgia St.
Vancouver, BC
V6B 4N9
Tel.: (604) 683-6222
Fax: (604) 683-3491
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