Settlements
CANADIAN AMERICAN FINANCIAL CORPORATION (CANADA) LIMITED [Settlement Agrmt.]
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BCSECCOM #:
2000 BCSECCOM 367
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Document Type:
Settlement Agrmt.
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Published Date:
2000-12-28
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Effective Date:
2000-12-19
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Details:
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2000 BCSECCOM 367
IN THE MATTER OF THE SECURITIES ACT
R.S.B.C. 1996, c. 418
AND
IN THE MATTER OF CANADIAN AMERICAN FINANCIAL
CORPORATION (CANADA) LIMITED
Settlement Agreement
[para 1]
The following settlement of issues has been reached between Canadian American Financial Corporation (Canada) Limited ("CAFC") and the Executive Director.
Agreed Statement of Facts
[para 2]
As a basis for the undertakings referred to in paragraph 4 of this settlement agreement, CAFC acknowledges the following facts as correct:
2.1 CAFC is a federally incorporated company that has been registered as an extra-provincial corporation in British Columbia since December 24, 1975. It is not a reporting issuer under the Securities Act, R.S.B.C. 1996, c. 418 (the "Act”).
2.2 At all times material to this agreement CAFC was registered as a Scholarship Plan Dealer under the Act.
2.3 Pursuant to section 44 of the Securities Rules, B. C. Reg. 194/97 (the "Rules") CAFC, as a registered dealer, was obliged to establish and apply written prudent business procedures for dealing with clients in compliance with the Act and the regulations.
2.4 Pursuant to sections 47 and 65 of the Rules, CAFC was also obliged to designate a compliance officer to approve the opening of new client accounts, supervise transactions made on behalf of clients and ensure compliance with the Act and the regulations.
2.5 During the period from September 1998 to December 1999:
2.5.1 certain scholarship trust plan units were sold by representatives of CAFC at times when those representatives were not properly registered, in contravention of section 34 of the Act. CAFC retained commissions from these transactions; and
2.5.2 the compliance officer appointed by CAFC to review client transactions failed, in some cases, to review the scholarship plan enrollment applications and failed, in certain other cases, to make adequate inquiries to ensure that all trading activity was being conducted by properly registered personnel, in contravention of section 65 of the Rules.
2.6 CAFC displayed the name "Heritage Scholarship Trust Plans" in the reception area of its Vancouver office and on stationary, application forms and business cards used by its salespersons without making appropriate reference to CAFC as the registered dealer as required by NIN # 97/30.
2.7 CAFC did not take adequate steps to ensure that its internal policy of having representatives submit all proposed advertising materials to Head Office for prior review and approval was followed in each and every instance. As a result, at least three CAFC representatives were able to place recruitment advertisements that contained misleading or inappropriate information.
2.8 CAFC failed to adequately supervise at least one representative who hired individuals to attend at the residences of potential clients and talk to them for the purpose of trading in a scholarship plan, which is contrary to section 49 of the Act.
2.9 During the period August 22, 2000 to October 18, 2000 CAFC engaged the services of an agent in British Columbia who attended at residences in Vancouver to, among other things, identify people who were interested in receiving additional information about scholarship plans. The underlying purpose of these inquiries was to trade in scholarship plans. CAFC ought to have known that calling at residences for the purposes of trading in securities, either directly or through an agent, would contravene section 49 of the Act. CAFC subsequently contacted, at their residences, approximately 150 of the people who had expressed interest in receiving additional information, in contravention of section 49 of the Act.
Mitigating Facts
[para 3]
The Executive Director has taken into account the following as factors mitigating the sanctions which wouldotherwise have been sought:
3.1 The scholarship plans traded by CAFC are relatively low risk investments.
3.2 CAFC and its personnel were at all material times fully cooperative with staff of the British Columbia Securities Commission (the "Commission").
3.3 The majority of the persons referred to in sub-paragraph 2.5.1 were trainees who subsequently became registered.
3.4 CAFC has changed its procedures to ensure that no trainee trades in securities or receives compensation based in whole or in part on the number or value of scholarship plan units sold until they have been properly registered under the Act.
3.5 CAFC has voluntarily undertaken to have a registered representative meet with each of the clients who acquired the units referred to in paragraph 2.5.1 to ensure that these clients are properly informed about the nature of the investment and their rights and obligations as unit holders and offer each of them a right of rescission.
Undertaking
[para 4]
CAFC undertakes to:
4.1 Pay $22,500 to the Commission at the signing of this agreement, of which $10,000 represents the costs of the investigation.
4.2 Cause a registered representative to meet with each of the clients who acquired the units referred to in paragraph 2.5.1 to ensure that these clients are properly informed about the nature of the investment and their rights and obligations as unit holders and offer each of them a right of rescission. CAFC will report, in writing, to the Compliance Division of the Commission on this undertaking by March 15, 2001, indicating the name of the client, the registered representative that met with the particular client, the date of the meeting and whether rescission was accepted and paid.
4.3 In addition, by March 31, 2001, pay to the Commission the commissions retained by CAFC in the amount of $70 per scholarship trust plan unit that was not rescinded pursuant to the undertaking in paragraph 4.2, which will be contributed to the Investor Education Fund of the Commission.
4.4 Provide, by November 30, 2000, written confirmation that the deficiencies referred to in this settlement agreement, as well as those arising from Staff's compliance examination of CAFC in March 2000, have been rectified.
4.5 Comply fully with the Act, the Rules and all applicable regulations from the date of this agreement.
Waiver
[para 5]
CAFC waives any right it may have, under the Act or otherwise, to a hearing, hearing and review, judicial review or appeal related to, inconnection with, or incidental to this agreement.
DATED at Toronto, Ontario, on November 23, 2000.
CANADIAN AMERICAN
FINANCIAL CORP.(CANADA) LTD.
Authorized Signature
________________________________
Name (please print)
________________________________
Capacity
________________________________
Witness Signature
________________________________
Witness Name (please print)
________________________________
Address
________________________________
Occupation
DATED at Vancouver, British Columbia, on December 19, 2000.
Steve Wilson
Executive Director