Decisions
RANDALL KANE GARROD [Decision]
|
BCSECCOM #:
2001 BCSECCOM 1023
|
Document Type:
Decision
|
|
Published Date:
2001-10-29
|
Effective Date:
2001-10-26
|
|
Details:
|
|
2001 BCSECCOM 1023
COR#01/116
IN THE MATTER OF THE SECURITIES ACT, R.S.B.C. 1996, c. 418
AND
IN THE MATTER OF RANDALL KANE GARROD
HEARING
PANEL
Brent W. Aitken
John K. Graf
Roy Wares
ORAL HEARING
September 11 and 12, 2001
FINAL SUBMISSIONS
October 19, 2001
DECISION
October 26, 2001
APPEARING FOR COMMISSION STAFF
Kristine M. Mactaggart
DECISION OF THE COMMISSION
[para 1]
This is a hearing under section 161(1) of the Securities Act, R.S.B.C. 1996, c 418. The notice of hearing, dated November 14, 2000, alleges that the respondent Randall Kane Garrod, a registrant, misappropriated funds from a client for his own use and benefit.
[para 2]
Commission staff seeks an order against Garrod prohibiting his use of exemptions under the Act, prohibiting him from acting as a director or officer of any issuer and prohibiting him from engaging in investor relations activities. Staff also seeks orders that Garrod pay an administrative penalty and the costs of the hearing.
BACKGROUND
[para 3]
At all relevant times Garrod was registered under the Act as a mutual fund salesperson and was employed by PFSL Investments Canada Ltd., also a registrant. One of his clients was Mr. John Lyesen. Lyesen’s portfolio included mutual fund units issued by Mackenzie Financial Corporation.
[para 4]
Lyesen received annual distributions from Mackenzie. In January 1999 Mackenzie’s cheque payable to Lyesen for his annual distribution in the amount of $655 was returned to Mackenzie by Canada Post because Lyesen had moved. Mackenzie then sent the cheque to Garrod (shown on Mackenzie’s records as Lyesen’s representative) for forwarding to Lyesen.
[para 5]
Instead of forwarding the cheque to Lyesen, in May 1999 Garrod deposited the cheque to his own bank account. Garrod later withdrew all of the funds in that account.
[para 6]
Lyesen pursued the matter of his missing cheque with Mackenzie and, discovering that the cheque had been cashed, he approached the RCMP. In June 2000 Garrod was charged criminally in connection with the matter and on June 26, 2001 Garrod pled guilty to one count of theft under $5,000 and was convicted. On September 26, 2001, Garrod was sentenced to a jail term of 30 days to be followed by 90 days’ probation and was ordered to make restitution.
FINDINGS
[para 7]
The notice of hearing alleges:
“2.11 The conduct of Garrod, as alleged, amounts to a transaction or series of transactions in furtherance of a trade, when Garrod knew or ought to have known that his conduct would perpetrate a fraud on the Client contrary to section 57 [of] the Act and the public interest.
“2.12 Garrod abused his position as the registered salesperson of the Client. Garrod, a registrant, failed to deal fairly, honestly and in good faith with the Client contrary to section 14 of the Securities Rules, B.C. Reg. 194/97 . . . and the public interest.”
[para 8]
Section 57 of the Act says:
“57. A person in or outside British Columbia must not, directly or indirectly, engage in or participate in a transaction or series of transactions relating to a trade in or acquisition of a security . . . . if the person knows, or ought reasonably to know, that the transactions or series of transactions
. . .
“(b) perpetrates a fraud on any person in British Columbia . . . .”
[para 9]
Section 14(2) of the Rules says:
“14. (2) A registered . . . salesperson . . . of a dealer or adviser must deal fairly, honestly and in good faith with the clients of the dealer or adviser.”
[para 10]
Garrod stole money from his client Lyesen, a clear contravention of section 14 of the rules and we so find.
[para 11]
We make no finding regarding the alleged contravention of section 57. To find a contravention of that section, we would have to conclude that Garrod’s theft of Lyesen’s money was a transaction relating to a trade in or acquisition of a security. This theft was not in relation to a trade in a security; Garrod simply intercepted funds belonging to Lyesen and converted them to his own use.
[para 12]
The health of the capital markets depends on the reliance that investors place on the integrity and honesty of registrants. Conduct like Garrod’s damages the integrity of the markets themselves and cannot be condoned.
DECISION
Therefore, considering it to be in the public interest, we order:
1. under section 161(1)(c) of the Act, that the exemptions described in sections 44 to 47, 74, 75, 98 or 99 do not apply to Garrod for a period of fiveyears;
be prohibited from becoming or acting as a director or officer of any issuer, and
(a) be prohibited from engaging in investor relations activities
for a period of five years from the date of this order, and
4. under section 162, that Garrod pay an administrative penalty of $5,000.
We also order, under section 174, that Garrod pay the costs of or related to the hearing.
[para 14]
October 26, 2001
FOR THE COMMISSION
Brent W. Aitken, Commissioner
John K. Graf, Commissioner
Roy Wares, Commissioner