Settlements

DESJARDINS-LAURENTIAN LIFE GROUP INC., et. al. [Agreed Stmt]

BCSECCOM #:
Document Type:
Agreed Stmt
Published Date:
1997-11-14
Effective Date:
1997-11-07
Details:


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

AND

DESJARDINS-LAURENTIAN LIFE GROUP INC.

AND

IN THE MATTER OF LAURENTIAN FUNDS MANAGEMENT INC.


Agreed Statement of Facts and Undertakings


The following agreement has been reached between Desjardins-Laurentian Life Group Inc. (“Desjardins”) and the Executive Director:

1. As a basis for the undertaking referred to in section 3 of this agreement, Desjardins acknowledges the following:

(a) LISI is a corporation incorporated under the laws of Québec on January 8, 1991;

(b) on or about December 10, 1996, LISI filed with the British Columbia Securities Commission a Form 3 to be registered as a mutual fund dealer in British Columbia, pursuant to section 34 of the Securities Act, R.S.B.C. 1996, c. 418 (the “Act”);

(c) LISI is an affiliate of The Imperial Life Assurance Company of Canada (“Imperial Life”), a wholly-owned subsidiary of Desjardins-Laurentian Life Group Inc., which used to be the parent company of Laurentian Funds Management Inc. (now Strategic Value Funds Management Inc.) (“LFM”);

(d) all or substantially all of the directors, officers and salespersons who were registered to trade, or were designated to act as compliance officer or branch manager, in British Columbia on behalf of LFM at the time of the examination referred to in paragraph (p) will be transferred to LISI and will be trading on behalf of LISI;

(e) LFM is a corporation incorporated under the laws of Canada on April 15, 1971;

(f) on or about May 22, 1997, Strategic Value Corporation purchased LFM from Imperial Life and, as part of the purchase, Imperial Life retained an interest in the form of Equity Special Warrants in Strategic Value Corporation;

(g) the Laurentian group of mutual funds have been or will be renamed and included as part of the Strategic Value group of mutual funds and will be managed by portfolio managers related to Strategic Value Corporation;

(h) LFM has been registered, pursuant to section 34 of the Act as a mutual fund dealer since May 1, 1981;

(i) LFM and its partners, directors, officers and salespersons were, subject to section 49(3) of the Act, prohibited under section 49(2) of the Act from telephoning from within British Columbia any residence within or outside the province, for the purpose of trading in a security or exchange contract;

(j) LFM was required, pursuant to section 47 of the Securities Rules, R.B.C. Reg. 194/97, to designate, to approve the opening of new client accounts and supervise transactions made on behalf of clients, a compliance officer and, in the case of a branch office, a branch manager;

(k) LFM was required, pursuant to section 44(1) of the Rules, to establish and apply written prudent business procedures for dealing with clients in compliance with the Act and Regulations, including the Rules;

(l) LFM was required, pursuant to section 44(2)(a) of the Rules, to file a copy of its business procedures referred to in the previous paragraph and, pursuant to section 44(2)(b) of the Rules, to file a copy of any proposed amendment that would significantly change such business procedures at least 30 days before the amendment was to become effective;

(m) LFM was required, pursuant to section 27 of the Rules, to keep at its chief place of business in British Columbia a complete and accurate record of its business transactions and financial affairs that were conducted in British Columbia;

(n) LFM was required, pursuant to section 50(3) of the Rules, to inform its clients on every statement of account, or by other means that the British Columbia Securities Commission or Executive Director has approved, that certain information about LFM and individuals trading on its behalf, required to be furnished to clients or prospective clients under section 53(1) of the Rules, is available to clients on request;

(o) LFM was required, pursuant to section 7 of the Principles of Regulation Re: Distribution of Mutual Funds by Financial Institutions, to carry on business in such a way as to make it clear to its clients that there is a distinction between its mutual fund business and the activities of Imperial Life, for example, through a combination of physical separation and signage; and

(p) Commission staff, as part of a routine compliance examination of LFM on or about May 6 to May 14, 1997 determined that, at all relevant times:
          (i) LFM’s written marketing material and training manuals encouraged, and one or more of LFM’s partners, directors, officers or salespersons did engage in, the practice referred to in paragraph (i), namely telephoning from within British Columbia a residence within or outside the province, for the purpose of trading in a security;
          (ii) although LFM designated a compliance officer and branch managers to approve the opening of new client accounts and supervise transactions made on behalf of clients, as referred to in paragraph (j) the compliance officer or branch managers failed to approve the opening of new client accounts and supervise transactions made on behalf of clients;
          (iii) although LFM established and applied written prudent business procedures for dealing with clients in compliance with the Act and Regulations, including the Rules, as referred to in paragraph (k), it failed to file a copy of the procedures or failed to file any proposed amendment that would significantly change the procedures, as referred to in paragraph (l);
          (iv) LFM failed to maintain at its chief place of business in British Columbia a complete and accurate record of its business transactions and financial affairs that were conducted in British Columbia as referred to in paragraph (m);
          (v) LFM failed to inform its clients that certain information about LFM and individuals trading on its behalf is available on request, as referred to in paragraph (n); and

          (vi) LFM failed to carry on business in such a way as to make sufficiently clear to its clients that there is a distinction between its mutual fund business and the activities of Imperial Life, as referred to in paragraph (o), by, for example, failing to separate physically such activities in branches of Imperial Life and by carrying on its mutual fund business under the name of “Imperial Financial Services”, which business name was also used by Imperial Life in connection with insurance-related activities.
2. Desjardins has cooperated fully with Commission staff in the compliance examination and resolution of deficiencies identified by Commission staff during the compliance examination referred to in paragraph 1(p).

3. Desjardins undertakes to pay to the order of the Commission the sum of $25,000 on the execution of this agreement.

4. Desjardins waives any right it may have, under the Act or otherwise, to a hearing, hearing and review, judicial review or appeal relating to, in connection with or incidental to this agreement.


Dated at Montréal, Québec, on November 4, 1997.



________________________ )
Witness Signature )
Lorraine Bélisle___________ )
Witness Name (Please print) )
330 Oliva-Delage__________ ) DESJARDINS-LAURENTIAN LIFE GROUP INC.

St. Hilaire, QC J3H 5W9 )
Address ) per: Michel Thérien
Secretary ) President and Chief executive Officer
Occupation )
per: Pierre Rousseau
Vice-President, Corporate Affairs and
Assistant General Secretary

DATED at Vancouver, British Columbia, on November 7th, 1997.




Paul C. Bourque
Executive Director
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