BCSC

Notices of Hearing & Temporary Orders

JACOB NORMAN FRIESEN, et. al. [Sec. 161]

BCSECCOM #: 2000 BCSECCOM 29	Document Type: Sec. 161
Published Date: 2000-09-12	Effective Date: 2000-09-06
Details:

2000 BCSECCOM 29

IN THE MATTER OF THE SECURITIES ACT
R.S.B.C. 1996, c. 418

AND

IN THE MATTER OF JACOB NORMAN FRIESEN
AND IRENE ROSE FRIESEN

Notice of Hearing Under Section 161

[para 1]
TAKE NOTICE that a hearing will be held (the “Hearing”) to give Jacob Norman Friesen (“Jay Friesen”) and Irene Rose Friesen (“Irene Friesen”) (collectively, the “Respondents”), an opportunity to be heard before the British Columbia Securities Commission (the “Commission”) considers whether it is in the public interest to make the following orders:

1. that the Respondents’ registration be suspended, cancelled or restricted or that conditions be imposed on the Respondents pursuant to section 161(1)(f) of the Securities Act, R.S.B.C. 1996, c. 418 (the “Act”)

2. that any or all of the exemptions described in sections 44 to 47, 74, 75, 98 or 99 of do not apply to the Respondents, pursuant to section 161(1)(c) of the Act;

3. that the Respondents resign any position they hold as directors or officers of any issuer, pursuant to section 161(1)(d) of the Act;

4. that the Respondents be prohibited from becoming or acting as directors or officers of any issuer, pursuant to section 161(1)(d) of the Act;

5. that the Respondents be prohibited from engaging in investor relations activities, pursuant to section 161(1)(d) of the Act;

6. that the Respondents pay an administrative penalty, pursuant to section 162 of the Act;

7. that the Respondents pay the prescribed fees or charges for the costs of or related to the Hearing, pursuant to section 174 of the Act; and

8. any other order the Commission may deem appropriate under the circumstances.

[para 2]
AND TAKE NOTICE that the Commission will be asked to consider the following facts and allegations in making its determinations:

Introduction

1. The Respondents are residents of British Columbia.

2. During the period between February 5, 1992 and May 27, 1999, Jay Friesen was registered under the Act as a registered representative restricted to mutual funds. Jay Friesen was employed by, among others, Vantage Securities Inc. (“Vantage”), Friesen Financial Securities Ltd. (“Friesen Securities”), and Levesque Securities Inc. (“Levesque”). Jay Friesen was also registered as an insurance broker through Friesen Financial Services Ltd. (“Friesen Services”). In the result, Jay Friesen was or ought to have been familiar with the requirements of the Act and the Securities Rules, B.C. Reg. 194/97 (the “Rules”).

3. During the period between February 5, 1992, and May 27, 1999, Irene Friesen was registered under the Act as a registered representative restricted to mutual funds. Irene Friesen was employed by, among others, Vantage, Friesen Securities and Levesque. Irene Friesen was also registered as an insurance broker through Friesen Services. In the result, Irene Friesen was or ought to have been familiar with the requirements of the Act and the Rules.

4. Friesen Securities was registered under the Act as a mutual fund dealer from November 1994 to November 1998, during which time, the Respondents were employed by and were the directing minds of Friesen Securities. At the same time, the Respondents were registered as insurance brokers with Friesen Services and were the directing minds of Friesen Services.

5. Jay Friesen served as the designated compliance officer for Friesen Securities from the period March 19, 1997 to November 17, 1998.

6. The Respondents are currently registered as registered representatives restricted to trading in mutual fund securities, subject to certain conditions imposed by the Executive Director, and both are employed by IPC Investment Corporation (BC) Limited (“IPC”) a registered securities dealer and portfolio manager.

Trading in Exempt Products

7. From 1992 to 1999, while they were employees of Friesen Securities and while employed by other registrants, the Respondents participated in distributions of in excess of $16 million of limited partnership units and other securities pursuant to exemptions from the registration and prospectus requirements under the Act (the “Exempt Product Distributions”) to approximately 190 mutual fund and insurance clients.

8. The Respondents organized and held a number of seminars and sales presentations for their clients relating to several of the exempt product issuers. It was the Respondents who followed up with the clients and effected the distributions of exempt products.

9. Some clients of the Respondents redeemed other securities, including mutual funds, in order to complete some of the Exempt Product Distributions recommended to them by the Respondents.

10. Certain exempt products recommended by the Respondents to their clients were speculative and high risk.

11. The commission revenues paid to Friesen Securities and Friesen Services for the Exempt Product Distributions during the period referred to in paragraph 7 were in excess of $1.5 million.

12. The commissions received from the Exempt Product Distributions ranged between 3% to 63% and averaged 34% of the combined total annual revenues of Friesen Securities and Friesen Services.

Suitability

13. The Respondents frequently recommended that their clients purchase securities in risky or speculative ventures such that some of the clients had an unsuitably high percentage of such holdings in their portfolios.

14. The Respondents were required to make inquiries of each client to learn the essential facts relative to the client to determine the investment needs of the client and the suitability of a proposed investment, pursuant to section 43(1) of the Securities Regulation, B.C. Reg. 270/86 (the “Regulation”) and section 48(1) of the Rules.

15. In making recommendations as described in paragraph 13, the Respondents were required to advise of the unsuitability of a proposed purchase or sale for the client, if that were the case. They failed to do this, contrary to section 43(1) of the Regulation and section 48(2) of the Rules.

16. The Respondents were required to deal fairly, honestly and in good faith with their clients. By recommending that the clients purchase investments that were unsuitable for them, given the clients’ investment needs and objectives, the Respondents acted in a manner that was contrary to section 14 of the Rules and the public interest.

Advising in Exempt Product without Registration

17. When they recommended that their clients participate in the Exempt Market Distributions, the Respondents could not rely upon the exemptions from registration as advisers contained in section 44(2)(e) of the Act, because the advice they gave was not reasonably in fulfilment of their duty to ensure the suitability of the proposed purchase for the client as required by section 44(3)(b) of the Act, but rather the advice was given to induce the investors to make the investment.

18. Certain clients were unsophisticated investors and relied heavily upon the professional advice and judgment of the Respondents as registrants.

Failure to Keep Proper Books and Records

19. Friesen Securities was required to record all purchases and sales of securities in the daily blotter or other record of original entry pursuant to section 30 of the Regulation and section 29 of the Rules. The Exempt Product Distributions effected by the Respondents were recorded on the books of Friesen Services rather than the registered dealer, Friesen Securities, contrary to section 30 of the Regulation and section 29 of the Rules.

20. During the period that Jay Friesen served as the designated compliance officer for Friesen Securities he failed to approve new accounts and to adequately supervise transactions of the registrant, contrary to section 42 of the Regulation and section 63 of the Rules.

21. As the directing minds behind Friesen Securities, the Respondents were responsible for Friesen Securities’ compliance and business procedures. The Respondents knew or ought to have known that the documents maintained at Friesen Securities’ head office did not comply with sections 30 and 40 of the Regulation and sections 29 and 44 of the Rules, which required Friesen Securities to establish and apply written prudent business procedures for dealing with clients.

22. As the directing minds of a registrant, the Respondents were required to ensure that the registrant complied with the record keeping and reporting requirements set out in the Act, the Regulation and the Rules. Their failure to do so was contrary to the public interest.

[para 3]
AND TAKE NOTICE that the Respondents may be represented by counsel at the Hearing and make representations and lead evidence. The Respondents are requested to advise the Commission of their intention to attend by contacting the Secretary to the Commission at 1200 - 865 Hornby Street, Vancouver, British Columbia, V6Z 2H5.

[para 4]
AND TAKE NOTICE that the Respondents are required to attend at the 7th Floor Hearing Room, 865 Hornby Street, Vancouver, British Columbia, on Wednesday, September 20, 2000 at 9:00 a.m., if they wish to be heard before the Commission sets a date for the Hearing.

[para 5]
AND TAKE NOTICE that determinations may be made in this matter if the Respondents or their counsel do not appear at the Hearing.

DATED at Vancouver, British Columbia, on September 6, 2000.

Steve Wilson
Executive Director