Settlements
IRENE ROSE FRIESEN [Sec. 161 & Settlement Agrmnt.]
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BCSECCOM #:
2001 BCSECCOM 1073, 2001 BCSECCOM 1074
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Document Type:
Sec. 161 & Settlement Agrmnt.
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Published Date:
2001-11-15
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Effective Date:
2001-11-14
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Details:
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2001 BCSECCOM 1073
IN THE MATTER OF THE SECURITIES ACT
R.S.B.C. 1996, C. 418
AND
IN THE MATTER OF IRENE ROSE FRIESEN
Order Under Section 161
[para 1]
1. The Executive Director has entered into a Settlement Agreement with Irene Rose Friesen (“Friesen”), a copy of which is attached as Schedule “A”.
[para 2]
2. The Executive Director, considering it to be in the public interest to do so, orders, by consent, that:
2.1 under section 161(1)(d) of the Securities Act, R.S.B.C. 1996, c. 418 (the “Act”), Friesen is prohibited from serving as a compliance officer of any registrant for a period of 10 years from the date of this Order;
2.2 under section 161(1)(d) of the Act, Friesen is prohibited from serving as a partner, director or officer, other than a compliance officer, of any registrant until the later of:
2.2.1 two years from the date of this Order; and
2.2.2 the date she successfully completes the Partner Director Officer course;
2.3 under section 161(1)(c) of the Act, Friesen is prohibited from trading or advising in exempt securities which are covered by exemptions contained in sections 45(5), 46(j) and 74(4) of the Act and sections 89(a) and (b) and 128(a) and (b) of the Securities Rules, B.C. Reg. 194/97 until the later of two years from the date of this Order and the date she becomes fully registered under the Act; and
2.4 if Friesen become fully registered under the Act, she will be subject to strict supervision by her employer for a period of six months from the date of registration.
[para 3]
DATED at Vancouver, British Columbia on November 14, 2001.
Steve Wilson
Executive Director
2001 BCSECCOM 1074
SCHEDULE “A”
IN THE MATTER OF THE SECURITIES ACT
R.S.B.C. 1996, C. 418
AND
IN THE MATTER OF IRENE ROSE FRIESEN
Settlement Agreement
[para 1]
1. The following settlement of issues has been reached between Irene Rose Friesen (“Friesen”) and the Executive Director.
Agreed Statement of Facts
[para 2]
2. Solely for securities regulatory purposes in British Columbia and elsewhere, and as the basis for the undertaking and orders referred to in paragraphs 3 and 4 of this settlement, Friesen acknowledges the following facts as correct:
2.1 During the period between September 7, 1994, and May 27, 1999 (the “Relevant Period”), Friesen was registered under the Securities Act, R.S.B.C. 1996, c. 418 (the “Act”) as a registered representative restricted to trading in mutual fund securities.
2.2 Friesen has been employed as a registrant as follows:
2.2.1 from August 30, 1993 to November 18, 1994, with Vantage Securities Inc. (“Vantage”) as a mutual fund salesperson;
2.2.2. from November 23, 1994 to November 17, 1998, with Friesen Financial Securities Inc. (“Friesen Securities”) as a mutual fund salesperson;
2.2.3 from December 10, 1998 to May 27, 1999, with National Bank Financial Ltd. as an investment advisor restricted to mutual funds; and
2.2.4 from August 9, 1999 to the present with IPC Investment corporation (BC) Limited (“IPC”) as a mutual fund salesperson.
2.3 During the Relevant Period, Friesen was registered as an insurance broker through Friesen Financial Services Inc. (“Friesen Services”).
2.4 Friesen is currently registered as a registered representative restricted to mutual funds, subject to certain conditions imposed by the Executive Director.
2.5 Friesen Securities was registered under the Act as a mutual fund dealer from November 23, 1994, until November 22, 1998.
2.6 At all material times, Friesen was:
2.6.1 a director, officer, and shareholder of Friesen Services; and
2.6.2 an officer of Friesen Securities.
Compliance Audit Deficiencies
2.7 During a routine compliance audit performed by staff of the Commission at Friesen Securities in 1997 (the “Audit”), it came to the attention of staff that:
2.7.3 Most of the sales of the exempt securities that were made by Friesen were processed ‘off-book’, in that they were recorded on the books of Friesen Services rather than the registered dealer, Friesen Securities, as required. Friesen was advised that this practice was to cease immediately.
2.7.4 Despite being advised during the Audit to cease activities relating to advising in exempt activities, in May 1999 Friesen sent a letter to some of her clients to advise them of another opportunity for investment in exempt securities.
Exempt Product Advising
2.8 During the Relevant Period Friesen acted as an adviser without registration with respect to the sale of the exempt securities. In particular:
2.8.1 she sold exempt securities to a number of her mutual fund and insurance clients;
2.8.2 she participated with her husband, Jacob Norman Friesen, in a number of seminars and sales presentations for her clients relating to several of the exempt securities. It was Friesen and not the issuers who followed up with the clients and made the sales of the exempt securities; and
2.8.3 she suggested or recommended the sale of the exempt securities to a number of the clients.
Suitability
2.9 For a number of clients to whom Friesen recommended or traded in exempt securities during the Relevant Period, there was inadequate or no ‘know your client’ information and documentation on file.
2.10 Some of the trades in exempt securities by Friesen for her clients were not suitable investments for those clients, based upon the risk tolerance, level of investment knowledge, age, and stated investment objectives of those clients.
2.11 Some of Friesen’s clients redeemed other securities, including mutual funds, in order to complete some of the trades in the exempt securities recommended to them by Friesen.
2.12 Most of the exempt securities recommended by Friesen to her clients were speculative and high risk, although this was disclosed in the offering memorandum relating to the various offerings.
2.13 Some of the clients who purchased these exempt securities have suffered financial losses or devaluation of their investment portfolios as a result of their investment in the exempt securities recommended by Friesen.
2.14 Friesen received commission revenues from the sales of the exempt securities.
Activity contrary to the Act, the Rules and the Public Interest
2.15 Friesen acted as an adviser without registration with respect to the sale of the exempt securities, contrary to section 34 of the Act.
2.16 Friesen traded in exempt securities that were risky, illiquid and speculative and as a result were unsuitable investments for some of the investors. Friesen did not advise investors that the exempt securities were unsuitable, contrary to section 14 and 48 of the Securities Rules, B.C. Reg. 194/97 (the “Rules”).
Mitigating Factors
2.17 The Executive Director has taken into account the following facts as factors mitigating the sanctions, which would otherwise have applied in the public interest:
2.17.1 at the time Friesen was advising her clients with respect to the sale of the exempt securities, she was unaware that the conduct in question was contrary to the policies of the Commission or the requirements of the Act. Friesen considered her activities to constitute marketing activities reasonably associated with her authorization to sell exempt securities, and did not appreciate this conduct constituted unauthorized advising with respect to the sale of the exempt securities;
2.17.2 during the Relevant Period, Friesen was advised by the compliance offer at Vantage Securities that she was permitted to recommend exempt securities to her clients;
2.17.3 Friesen represents that she made no further exempt securities sales after the Audit;
2.17.4 pursuant to an agreement between Friesen and the Executive Director, Friesen’s registration has been subject to the following conditions since August 9, 1999:
· not to trade or advise in any exempt securities;
· to ensure that all know your client forms were up-dated and completed within a 6 month period or prior to any new transaction for the client, whichever was earlier; and
· strict supervision by her employer;
2.17.5 although Friesen was an officer of Friesen Securities, the directing mind of the company was her husband, Jacob Norman Friesen; and
2.17.6 Friesen has co-operated with Commission staff during its investigation.
Order
[para 3]
3. Friesen consents to an order by the Executive Director under section 161 of the Act (the “Order”) that:
3.1 Friesen is prohibited from serving as a compliance officer of any registrant for a period of 10 years from the date of the Order;
3.2 Friesen is prohibited from serving as a partner, director or officer, other than a compliance officer, of any registrant until the later of:
3.2.1 two years from the date of the Order; and
3.2.2 the date she successfully completes the Partner Director Officer course;
3.3 Friesen is prohibited from trading or advising in exempt securities which are covered by exemptions contained in sections 45(5), 46(j) and 74(4) of the Act and sections 89(a) and (b) and 128(a) and (b) of the Rules until the later of two years from the date of the Order, and the date she becomes fully registered under the Act; and
3.4 if Friesen becomes fully registered under the Act, she will be subject to strict supervision by her employer for a period of six months from the date of registration.
Undertaking
[para 4]
4. Friesen undertakes and agrees:
4.1 to comply fully with the provisions of the Act and the Rules;
4.2 to comply fully with the “know your client” record keeping requirements of the Act; and
4.3 to pay to the Commission the total sum of $10,000, $5,000 of which represents costs relating to the investigation.
Waiver
[para 5]
5. Friesen waives any right she may have, under the Act or otherwise, to a hearing, hearing and review, judicial review or appeal related to, in connection with or incidental to this agreement and any orders.
[para 6]
Dated at Vancouver, British Columbia, on November 13, 2001.
“Irene Friesen”
Irene Rose Friesen
“Mike Tsuboi”_____________________ )
Witness Signature )
)
Mike Tsuboi______________________ )
Witness Name (please print) )
)
12486 Alliance Dr._________________ )
Richmond, BC V7E 6J2____________ )
Address )
Assistant_________________________ )
Occupation
Dated at Vancouver, British Columbia, on November 13, 2001.
Steve Wilson
Executive Director