INVESTMENT DEALERS ASSOCIATION OF CANADA

Transcription

1 INVESTMENT DEALERS ASSOCIATION OF CANADA IN THE MATTER OF: THE BY-LAWS OF THE INVESTMENT DEALERS ASSOCIATION OF CANADA AND ZYGMUNT JANIEWICZ NOTICE OF HEARING TAKE NOTICE that pursuant to Part 10 of By-law 20 of the Investment Dealers Association of Canada (the Association), a hearing will be held before a hearing panel (the Hearing Panel) on Tuesday, August 16, 2005, in the Cortes Island Room, The Fairmont Hotel Vancouver, 900 West Georgia Street, Vancouver, British Columbia, at 10:00 a.m., or as soon thereafter as the hearing can be heard. TAKE FURTHER NOTICE that pursuant to Rule 6.2 of the Association Rules of Practice and Procedure, that the hearing shall be designated on the: The Standard Track The Complex Track THE PURPOSE OF THE HEARING is to determine whether Zygmunt Janiewicz (the Respondent) has committed the following contraventions that are alleged by the Association: Count 1 Between January 2000 and May 2000, the Respondent, while employed as a Registered Representative and a Registered Options Representative at Global Securities Corporation, a member of the Association, failed to use due diligence to ensure that the recommendations he made and the transactions he placed for the account of client AN were appropriate for AN and in keeping with AN s investment objectives, contrary to Association Regulation (c) and/or Association By-Law 29.1 (as they were in effect at the time).

2 - 2 - Count 2 Between January 2000 and May 2000, the Respondent, while employed as a Registered Representative and a Registered Options Representative at Global Securities Corporation, a member of the Association, effected discretionary transactions in the account of client AN, without AN s authorization, and without the account having been designated and approved as a discretionary account by Global Securities Corporation, contrary to Association Regulations and and/or Association By-Law 29.1 (as they were in effect at the time). PARTICULARS TAKE FURTHER NOTICE that the following is a summary of the facts alleged and to be relied upon by the Association at the hearing: 1. In or around November 2002, Market Regulation Services Inc. referred this matter to the Association. Respondent s Registration 2. The Respondent was first employed in the securities industry as a Registered Representative with Georgia Pacific Securities Corporation in Vancouver from January 10, 1996 to December 1, On July 9, 1997, the Respondent became a Registered Options Representative. 3. Beginning on or about December 2, 1997, the Respondent was employed as a Registered Representative and a Registered Options Representative with Global Securities Corporation (Global). The Respondent first worked at Global s head office in Vancouver and then on or about December 9, 1999 he transferred to Global s branch office in Kelowna. The Respondent terminated his employment with Global on or about October 3, From October 10, 2000 to October 24, 2000, the Respondent was employed as a Registered Representative, a Registered Options Representative, and a Registered Futures Contract/Futures Contract Options Representative with Union Securities Limited in Kelowna. 5. Since October 24, 2000, the Respondent has not been registered in any capacity with the Association. AN s Accounts 6. On or about February 23, 1999, AN opened a US dollar margin account (the US Margin Account) and a Canadian dollar margin long account (the Canadian Long Account) at Global.

3 In or around March 1999, AN transferred approximately $182,174 worth of assets from an account at another Member firm into the Canadian Long Account. AN never deposited any funds into the US Margin Account, it was secured by the assets in the Canadian Long Account. 8. AN s New Account Form (NAF) for the US Margin Account indicated, among other things, that: she was a 41 year old housewife; she had no investment experience with options, preferred shares, commodities/futures, and speculative investments; she had moderate experience with common shares, bonds, money market, new issues, and mutual funds; her investment objectives were 50% income and 50% growth; and her estimated total net worth was $500,000 ($200,000 of estimated liquid assets and $300,000 of estimated fixed assets). 9. The Respondent was the Registered Representative who signed the NAF and at all material times he was the Registered Representative of record for the Canadian Long Account and the US Margin Account (collectively, the Accounts). 10. Around the time the Accounts were opened, AN informed the Respondent, among other things, that she was a single mother of two children and she relied on her investments to provide her with income. She further informed the Respondent that she wanted her portfolio to be managed in a conservative manner. Transactions in the US Margin Account 11. The first transaction in the US Margin Account was placed on or about June 28, However, most of the transactions in the US Margin Account occurred between January 2000 and May 2000 (the Transaction Period). 12. During the Transaction Period, the Respondent effected approximately 65 transactions in the US Margin Account (the 65 Transactions). With one exception, all of the 65 Transactions involved the buying or selling of put options. In particular: 34 of the 65 Transactions were the buying of put options; 30 of the 65 Transactions were the selling of put options; and 1 of the 65 Transactions was the purchase of shares. 13. AN did not own any of the underlying securities for the 34 put options that the Respondent purchased on her behalf. Particulars of the 65 Transactions are set out in Schedule A, which is attached to and forms part of this Notice of Hearing. 14. As a result of the 65 Transactions, AN incurred commission costs of approximately $16,690 USD, of which the Respondent received approximately half.

4 The following chart sets out the net equity balance of the US Margin Account from June 1999 to November 2000: Statement for the Period Ending Net Equity Balance (USD) June 30, 1999 $ July 31, 1999 $-1, August 31, 1999 $ September 30, 1999 $-1, October 31, 1999 $-11, November 30, 1999 $-7, December 31, 1999 $4, January 31,2000 $-1, February 29,2000 $47, March 31,2000 $39, April 30,2000 $-36, May 31,2000 $-47, June 30,2000 $-46, July 30,2000 $-46, August 31,2000 $-48, September 30,2000 $-50, October 31, 2000 $-52, November 30, 2000 $-52, In total, AN withdrew $8,500 USD from the US Margin Account. 17. AN did not understand option trading, and did not appreciate the risk factors involved in option trading. 18. The 65 Transactions were not suitable for AN given her investment objectives, financial situation, investment knowledge, and investment experience. Discretionary Trading 19. During the Transaction Period, AN had some discussions with the Respondent regarding the Accounts, and she received her monthly statements and transaction conformation slips for the Accounts.

5 The Respondent used his discretion with respect to the type of security, quantity, price, and/or timing of the transaction for approximately 44 of the 65 Transactions (the Discretionary Transactions), without AN s authorization and without the US Margin Account having been accepted and approved as discretionary by Global. Particulars of the Discretionary Transactions are set out in Schedule B, which is attached to and forms part of this Notice of Hearing. GENERAL PROCEDURAL MATTERS TAKE FURTHER NOTICE that the hearing and related proceedings shall be subject to the Association s Rules of Practice and Procedure. TAKE FURTHER NOTICE that pursuant to Rule 13.1, the Respondent is entitled to attend and be heard, be represented by counsel or an agent, call, examine and cross-examine witnesses, and make submissions to the Hearing Panel at the hearing. RESPONSE TO NOTICE OF HEARING TAKE FURTHER NOTICE that the Respondent must serve upon the Association a Response to the Notice of Hearing in accordance with Rule 7 within twenty (20) days (for a Standard Track disciplinary proceeding) or within thirty (30) days (for a Complex Track disciplinary proceeding) from the effective date of service of the Notice of Hearing. FAILURE TO RESPOND OR ATTEND HEARING TAKE FURTHER NOTICE that if the Respondent fails to serve a Response or attend the hearing, the Hearing Panel may, pursuant to Rules 7.2 and 13.5: (a) (b) proceed with the hearing as set out in the Notice of Hearing, without further notice to the Respondent; accept as proven the facts and contraventions alleged by the Association in the Notice of Hearing; and (c) order penalties and costs against the Respondent pursuant to By-law 20.33, and PENALTIES & COSTS TAKE FURTHER NOTICE that if the Hearing Panel concludes that the Respondent did commit any or all of the contraventions alleged by the Association in the Notice of Hearing, the

6 - 6 - Hearing Panel may, pursuant to By-law and By-law 20.34, impose any one or more of the following penalties: Where the Respondent is/was an Approved Person: (a) (b) a reprimand; a fine not exceeding the greater of: (i) $1,000,000 per contravention; and (ii) an amount equal to three times the profit made or loss avoided by such Approved Person by reason of the contravention. (c) (d) (e) (f) (g) (h) (i) suspension of approval for any period of time and upon any conditions or terms; terms and conditions of continued approval; prohibition of approval in any capacity for any period of time; termination of the rights and privileges of approval; revocation of approval; a permanent bar from approval with the Association; or any other fit remedy or penalty. Where the Respondent is/was a Member firm: (a) (b) a reprimand; a fine not exceeding the greater of: (i) $5,000,000 per contravention; and (ii) an amount equal to three times the profit made or loss avoided by the Member by reason of the contravention; (c) (d) (e) suspension of the rights and privileges of the Member (and such suspension may include a direction to the Member to cease dealing with the public) for any period of time and upon any conditions or terms; terms and conditions of continued Membership; termination of the rights and privileges of Membership;

7 - 7 - (f) (g) expulsion of the Member from membership in the Association; or any other fit remedy or penalty. TAKE FURTHER NOTICE that if the Hearing Panel concludes that the Respondent did commit any or all of the contraventions alleged by the Association in the Notice of Hearing, the Hearing Panel may pursuant to By-law assess and order any investigation and prosecution costs determined to be appropriate and reasonable in the circumstances. DATED at Vancouver, this 16 th day of May, Warren H. Funt Vice-President, Western Canada Member Regualation INVESTMENT DEALERS ASSOCIATION OF CANADA P.O. Box Suite 1325, 650 West Georgia Vancouver, BC V6B 4N9 Telephone: (604) Facsimile: (604)

8 - 8 - Schedule A 65 Transactions in the US Margin Account (page i of ii) Activity Quantity Description Price Settlement Date Type US $ 1 10-Jan-00 Buy 10 Put 100 Ballard PWR Feb Jan-00 Sell 10 Put 100 Dell Comp Feb Jan-00 Sell 10 Put 100 Gateway 2000 Mar Jan-00 Buy 10 Put 100 Dell Comp Feb Jan-00 Buy 10 Put 100 Gateway 2000 Mar Jan-00 Sell 10 Put 100 CNET Feb Jan-00 Buy 10 Put 100 Lycos Feb Jan-00 Sell 10 Put 100 Lycos Feb Jan-00 Sell 10 Put 100 Gateway 2000 Mar Jan-00 Buy 10 Put 100 Aware Feb Commission US $ Feb-00 Buy 10 Put 100 Micron Tech Feb Feb-00 Sell 10 Put 100 Micron Tech Jul Feb-00 Buy 10 Put 100 CNET Feb Feb-00 Sell 10 Put 100 CNET Jul Feb-00 Buy 20 Put 100 Newbridge Mar Feb-00 Sell 10 Put 100 Newbridge Mar Feb-00 Buy 10 Put 100 Newbridge Mar Feb-00 Buy 10 Put 100 Gateway 2000 Mar Feb-00 Sell 10 Put 100 Intuit Mar Feb-00 Buy 10 Put 100 Oracle Mar Feb-00 Sell 10 Put 100 Oracle Mar Feb-00 Sell 10 Put 100 Autodesk Mar Feb-00 Buy 10 Put 100 Intuit Mar Feb-00 Sell 10 Put 100 Oracle Mar Feb-00 Buy 10 Put 100 Autodesk Mar Feb-00 Sell 10 Put 100 Amer Online Mar Feb-00 Sell 10 Put 100 Novell Mar Feb-00 Sell 10 Put 100 Newbridge Apr Feb-00 Buy 10 Put 100 Oracle Mar Feb-00 Buy 10 Put 100 Veritas May Mar-00 Sell 10 Put 100 Intuit Apr Mar-00 Buy 10 Put 100 Micron Tech Jul Mar-00 Buy 10 Put 100 Laser Vision Mar Mar-00 Sell 10 Put 100 Laser Vision Jun Mar-00 Sell 10 Put 100 Lycos Apr Mar-00 Buy 10 Put 100 Newbridge Apr

9 - 9 - Settlement Date of Trade Schedule A 65 Transactions in the US Margin Account (page ii of ii) Activity Quantity Description Price Type Commission $ 37 3-Mar-00 Sell 10 Put 100 CMGI Inc Apr Mar-00 Buy 10 Put 100 CMGI Inc Apr Mar-00 Buy 10 Put 100 CNET Jul Mar-00 Sell 10 Put 100 Gateway 2000 Apr Mar-00 Sell 10 Put 100 Peoplesoft Apr Mar-00 Sell 10 Put 100 Tellabs Apr Mar-00 Sell 10 Put 100 CMGI Apr Mar-00 Buy 10 Put 100 Lycos Apr Mar-00 Buy 10 Put 100 Amer Online Mar Mar-00 Buy 10 Put 100 CMGI Apr Mar-00 Buy 10 Put 100 Peoplesoft Apr Mar-00 Buy 10 Put 100 Intuit Apr Mar-00 Buy 10 Put 100 Tellabs Apr Mar-00 Sell 10 Put 100 Aware Apr Mar-00 Sell 10 Put 100 Nortel Apr Mar-00 Sell 10 Put 100 Oracle Apr Mar-00 Sell 10 Put 100 CMGI Apr Mar-00 Buy 10 Put 100 Novell Mar Mar-00 Sell 10 Put 100 Novell May Mar-00 Buy 10 Put 100 Oracle Apr Mar-00 Buy 10 Put 100 Nortel Apr Apr-00 Buy 10 Put 100 Gateway 2000 Apr Apr-00 Sell 10 Put 100 Gateway 2000 Sep Apr-00 Buy 10 Put 100 Gateway 2000 Sep Apr-00 Buy 10 Put 100 Aware Apr Apr-00 Buy 10 Put 100 CMGI Apr Apr-00 Sell 10 Put 100 Razorfish Jun May-00 Buy 1,000 Laser Vision Ctrs Inc May-00 Buy 10 Put 100 Novell May $

10 # (# on Schedule A ) Schedule B Discretionary Transactions in the US Margin Account (page i of ii) Settlement Date Activity Type Quantity Description Price Commission US $ US $ 1 (4) 21-Jan-00 Buy 10 Put 100 Dell Comp Feb (5) 21-Jan-00 Buy 10 Put 100 Gateway 2000 Mar (7) 24-Jan-00 Buy 10 Put 100 Lycos Feb (8) 24-Jan-00 Sell 10 Put 100 Lycos Feb (11) 01-Feb-00 Buy 10 Put 100 Micron Tech Feb (12) 01-Feb-00 Sell 10 Put 100 Micron Tech Jul (13) 01-Feb-00 Buy 10 Put 100 CNET Feb (14) 01-Feb-00 Sell 10 Put 100 CNET Jul (15) 18-Feb-00 Buy 20 Put 100 Newbridge Mar (16) 22-Feb-00 Sell 10 Put 100 Newbridge Mar (17) 23-Feb-00 Buy 10 Put 100 Newbridge Mar (18) 24-Feb-00 Buy 10 Put 100 Gateway 2000 Mar (19) 24-Feb-00 Sell 10 Put 100 Intuit Mar (20) 24-Feb-00 Buy 10 Put 100 Oracle Mar (21) 24-Feb-00 Sell 10 Put 100 Oracle Mar (22) 25-Feb-00 Sell 10 Put 100 Autodesk Mar (23) 25-Feb-00 Buy 10 Put 100 Intuit Mar (31) 1-Mar-00 Sell 10 Put 100 Intuit Apr (32) 1-Mar-00 Buy 10 Put 100 Micron Tech Jul (33) 1-Mar-00 Buy 10 Put 100 Laser Vision Mar (34) 1-Mar-00 Sell 10 Put 100 Laser Vision Jun (35) 1-Mar-00 Sell 10 Put 100 Lycos Apr (36) 2-Mar-00 Buy 10 Put 100 Newbridge Apr (37) 3-Mar-00 Sell 10 Put 100 CMGI Inc Apr / (40) 7-Mar-00 Sell 10 Put 100 Gateway 2000 Apr (41) 7-Mar-00 Sell 10 Put 100 Peoplesoft Apr (42) 7-Mar-00 Sell 10 Put 100 Tellabs Apr (43) 8-Mar-00 Sell 10 Put 100 CMGI Apr (44) 9-Mar-00 Buy 10 Put 100 Lycos Apr (45) 10-Mar-00 Buy 10 Put 100 Amer Online Mar (46) 10-Mar-00 Buy 10 Put 100 CMGI Apr (47) 10-Mar-00 Buy 10 Put 100 Peoplesoft Apr (53) 15-Mar-00 Sell 10 Put 100 CMGI Apr (54) 15-Mar-00 Buy 10 Put 100 Novell Mar (55) 15-Mar-00 Sell 10 Put 100 Novell May (56) 22-Mar-00 Buy 10 Put 100 Oracle Apr

11 # (# on Schedule A ) Schedule B Discretionary Transactions in the US Margin Account (page ii of ii) Settlement Date Activity Type Quantity Description Price Commission $ 37 (58) 3-Apr-00 Buy 10 Put 100 Gateway 2000 Apr (59) 3-Apr-00 Sell 10 Put 100 Gateway 2000 Sep (60) 17-Apr-00 Buy 10 Put 100 Gateway 2000 Sep (61) 20-Apr-00 Buy 10 Put 100 Aware Apr (62) 24-Apr-00 Buy 10 Put 100 CMGI Apr (63) 27-Apr-00 Sell 10 Put 100 Razorfish Jun (64) 5-May-00 Buy 1,000 Laser Vision Ctrs Inc (65) 5-May-00 Buy 10 Put 100 Novell May $