BCSC

Settlements

TERESA INEZ MARIE MITROU [Sec. 161 & Settlement Agrmnt]

BCSECCOM #: 2001 BCSECCOM 990, 2001 BCSECCOM 991	Document Type: Sec. 161 & Settlement Agrmnt
Published Date: 2001-10-12	Effective Date: 2001-10-10
Details:

2001 BCSECCOM 990

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

AND

IN THE TERESA INEZ MARIE MITROU

Order Under Section 161

[para 1]
1. The Executive Director has entered into a Settlement Agreement with Teresa Inez Marie Mitrou (Mitrou), 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)(c) of the SecuritiesAct, R.S.B.C. 1996, c. 418 (the Act), any or all of the exemptions described in sections 44 to 47, 74, 75, 98 or 99 of the Act do not apply to Mitrou until five years after the date of this Order;

2.1.1 except that Mitrou may rely on the exemption in section 45(2)(7) of the Act for trading in her own account, through one registered dealer;

2.2 under section 161(1)(d) of the Act, Mitrou resign any position that she holds as a director and officer of any issuer, and is prohibited from becoming or acting as a director or officer of any issuer, until the later of:

2.2.1 the date she successfully completes a course of study satisfactory to the Executive Director concerning the duties and responsibilities of directors and officers; and

2.2.2 five years after the date of this Order; except

2.2.3 Mitrou may continue to act as Corporate Secretary and Director of Main Systems Corporation, a non reporting issuer incorporated in British Columbia on May 16, 1991 (Main). Main is a computer consulting company owned and operated by Mitrou and her husband; and

2.3 under section 161(1)(d) of the Act, Mitrou be prohibited from engaging in investor relations activities until five years after the date of this Order.

Dated October 10, 2001.

Steve Wilson
Executive Director

2001 BCSECCOM 991

Schedule “A”
IN THE MATTER OF THE SECURITIES ACT
R.S.B.C. 1996, c. 418

AND

IN THE MATTER OF TERESA INEZ MARIE MITROU

Settlement Agreement

[para 1]
1. The following settlement of issues has been reached between Teresa Inez Marie Mitrou (“Mitrou”) and the Executive Director.

Agreed Statement of Facts

[para 2]
2. As the basis for the undertakings and orders referred to in paragraphs 4 and 5 of this settlement, Mitrou acknowledges the following facts as correct:

2.1 Mitrou is a teacher in Victoria, British Columbia, and was not registered under the Securities Act, R.S.B.C. 1996, c. 418 (the “Act”) from February, 1989, to December, 1997.

2.2 Mitrou was a director of Foster First Financial Corporation (“Foster First”), and the Compliance Officer of Foster First from December 18, 1997, to February 24, 2000, (the “Relevant Period”).

2.3 Foster First is a non-reporting issuer incorporated in British Columbia and was a registrant under the Act. Foster First was registered as a securities dealer from December 18, 1997, to April 26, 2000, and as a mutual fund dealer from April 26, 2000, to August 19, 2000.

2.4 During the Relevant Period, at least eleven (11) distributions of shares of Foster First were made to clients of Foster First. The shares of Foster First were not qualified for distribution to the public under section 61 of the Act and no exemptions from the registration and prospectus requirements of the Act were available.

2.5 Mitrou, due to her position as Compliance Officer of Foster First, knew or ought to have known of the illegal distribution of Foster First securities as set out in paragraph 2.4, and as a result acted contrary to sections 34 and 61 of the Act.

2.6 During the Relevant Period, at least 18 distributions of shares of Specialized Surgical Services Inc. (“Specialized”) were made to clients of Foster First. The shares of Specialized were not qualified for distribution to the public under section 61 of the Act and no exemption from the registration and prospectus requirement of the Act was available.

2.7 Further, Foster First, Specialized and Mark Webster Vaughan Foster (“Foster”), director and principal shareholder of Foster First, were connected parties within the meaning of section 75 of the Securities Rules, B.C. Reg. 194/97 (the “Rules”), which states, among other things, that a registrant and a person that has any relationship with the registrant are connected parties if such a relationship leads a reasonable prospective purchaser of securities to question whether the registrant and the person are independent of each other. In particular:

2.7.1 Foster was an officer of Specialized Surgical from January 1998, to June 1999;

2.7.2 Robert Murray, a Foster First employee, was a director of Specialized from May 21, 1998, to May 31, 1999;

2.7.3 Foster received a transfer of 100,000 shares of Specialized on or about March 27, 1998, and a further 100,000 shares of Specialized from treasury on October 8, 1999; and

2.7.4 Foster First entered into a contract with Specialized in which Foster First agreed to provide marketing and sales services and in return receive commissions and finance fees.

2.8 The securities of Specialized were risky, illiquid and speculative. During the Relevant Period, Foster First recommended that clients purchase securities of Specialized, notwithstanding that those securities were unsuitable for those clients, in breach of section 48 of the Rules. In some cases, the clients had an unsuitably high percentage of such holdings in their portfolios.

2.9 Some of the clients of Foster First were unsophisticated investors and relied heavily upon the professional advice and judgment of Foster First. In some instances, the clients transferred funds from money markets or T-bill accounts, and redeemed mutual funds, in order to complete purchases of Specialized.

2.10 In recommending the purchase of securities of Specialized to clients, Foster First was required to advise if the investments were unsuitable, given the investment needs and objectives of the client. Foster First failed to do this, contrary to sections 14 and 48(2) of the Rules.

2.11 Foster First had incomplete and inadequate know your client forms and information on file. Foster First failed to learn essential facts relative to clients to determine their general investment needs and objectives and the suitability of proposed investments, in breach of section 48(1) of the Rules.

2.12 During the Relevant Period, Mitrou, as a director and Compliance Officer of Foster First:

2.12.1 knew that there were distributions of securities of Specialized to clients of Foster First;

2.12.2 did not know Foster First clients were investing in Foster First;

2.12.3 did not review the Specialized Offering Memorandum used in the sale securities of Specialized to clients of Foster First;

2.12.4 was unaware of the corporate finance agreement between Specialized and Foster First;

2.12.5 did not review trades of exempt market securities;

2.12.6 did not review periodic client statements;

2.12.7 did not review Foster First’s March 5, 1999, response to the Compliance Examination Report of Foster First, dated January 1999, done by staff of the British Columbia Securities Commission (the “Commission”).

2.12.8 was unaware of loan agreements between Foster First and M.W. Foster and Associates, a company owned by Foster; and

2.12.9 did not ask to review bank statements or financial statements of Foster First.

2.13 Given the conduct described in paragraph 2.12, Mitrou failed to provide adequate supervision or to ensure compliance with the provisions of the Act and Rules with respect to the distributions of securities of Specialized and Foster First, contrary to section 65 of the Rules.

Mitigating Factors

[para 3]
3. The Executive Director has taken into account the following facts as factors mitigating the sanctions which would otherwise have applied in the public interest:

3.1 Mitrou did not personally solicit others to invest in Specialized or Foster First, and in one case, counseled against investment in Specialized.

3.2 Mitrou has been very cooperative with the staff of the Commission in its investigation relating to this matter.

3.3 Mitrou states that she faced serious difficulties in performing her duties as Compliance Officer at Foster First as only selected information and records were made available for her review. Mitrou resigned immediately upon learning of distributions of securities of Foster First to clients of Foster First. Until the date of her resignation, information about the distributions of securities of Foster First had been kept from her.

3.4 Mitrou has initiated legal proceedings against Foster First to recover unpaid wages of over $6,000.

3.5 Although in similar circumstances a significant payment to the Commission in the amount of $15,000 would be imposed, Mitrou has satisfied the Executive Director that she did not personally profit or gain from her involvement with Foster First, and is still owed over $6,000 in wages, with no prospect of recovery.

Undertakings

[para 4]
4. Mitrou undertakes:

4.1 to pay the Commission the sum of $5,000, of which $1,500 represents costs of the investigation;

4.2 to comply fully with the Act, Rules, and any applicable regulations and guidelines; and

4.3 Mitrou undertakes that she will not act as compliance officer, or apply for designation as compliance officer, for any issuer until five years after the date of the Order, as defined in paragraph 5.

4.4 Mitrou agrees she will not say anything, in writing or orally, which may contradict the terms of this settlement or call those terms into question.

Orders

[para 5]
5. Mitrou consents to an order by the Executive Director (the “Order”) that:

5.1 under section 161(1)(c) of the Act, any or all of the exemptions described in sections 44 to 47, 74, 75, 98 or 99 of the Act do not apply to Mitrou until five years after the date of the Order;

5.1.1 except that Mitrou may rely on the exemption in section 45(2)(7) of the Act for trading in her own account, through one registered dealer;

5.2 under section 161(1)(d) of the Act, Mitrou resign any position that she holds as a director and officer of any issuer, and is prohibited from becoming or acting as a director or officer of any issuer, until the later of:

5.2.1 the date she successfully completes a course of study satisfactory to the Executive Director concerning the duties and responsibilities of directors and officers; and

5.2.2 five years after the date of the Order; except

5.2.3 Mitrou may continue to act as Corporate Secretary and Director of Main Systems Corporation, a non reporting issuer incorporated in British Columbia on May 16, 1991 (“Main”). Main is a computer consulting company owned and operated by Mitrou and her husband; and

5.3 under section 161(1)(d) of the Act, Mitrou be prohibited from engaging in investor relations activities until five years after the date of the Order.

Waiver

[para 6]
6. Mitrou 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 Settlement Agreement.

[para 7]
DATED at Victoria, British Columbia, on October 4, 2001.

“Teresa Mitrou”
Teresa Mitrou

“Anne Derrett” )
Witness Signature )
)
Anne Derrett )
Witness Name (please print) )
)
3127 Henderson Road )
)
Victoria, BC )
Address )
Stationery, Printing )
Occupation

DATED at Vancouver, British Columbia, on October 9, 2001.

Steve Wilson
Executive Director