Re: ROBERT SCOTT RITCHIE SETTLEMENT AGREEMENT DECISION

Transcription

1 IN THE MATTER OF A SETTLEMENT HEARING PURSUANT TO BY-LAW 20 OF THE INVESTMENT DEALERS ASSOCIATION OF CANADA PACIFIC DISTRICT COUNCIL Re: ROBERT SCOTT RITCHIE SETTLEMENT AGREEMENT Panel: Appearances: Leon Getz, Chair, Chris Lay and Ron Merritt Lorne Herlin, for the Investment Dealers Association Hearing held: July 27, 2005 David Burgess, for Mr. Ritchie Introduction DECISION [1] We were constituted as a panel of the Pacific District Council of the Investment Dealers Association of Canada (the Association ) to consider, pursuant to Association By-law 20.36, whether to accept a settlement agreement that had been negotiated between the Association s Enforcement Division and Mr. Ritchie. At the conclusion of the hearing held for this purpose in Kelowna, B.C. on July 27, 2005, and after considering the submissions of counsel for the Association and for Mr. Ritchie and the terms of the settlement agreement (the Settlement Agreement ), we accepted the Settlement Agreement. These are our reasons for doing so. The Settlement Agreement [2] The Settlement Agreement is annexed to this Decision. It contains: (a) (b) (c) a summary of the facts that gave rise to the proceedings that resulted in the settlement; an acknowledgement by Mr. Ritchie that he had engaged in personal financial dealings with a client, without the knowledge, consent, or authorization of his Member employer and that in so doing he had committed a violation of Association Bylaw 29.1; and Mr. Ritchie s agreement to:

2 i. pay a fine of $10,000; 2 ii. iii. iv. be under close supervision for a period of 12 months; rewrite and pass the Conduct and Practices Handbook examination, administered by the Canadian Securities Institute within 6 months of the effective date of the Agreement; and pay $1,000 to the Association on account of its costs. The principles [3] The principles that govern us, and that we applied in deciding that we should accept the Settlement Agreement are set out in the following passage from the decision in Re Milewski: 1 Analysis A District Council considering a settlement agreement will tend not to alter a penalty that it considers to be within a reasonable range, taking into account the settlement process and the fact that the parties have agreed. It will not reject a settlement unless it views the penalty as clearly falling outside a reasonable range of appropriateness. [4] We have been influenced by a number of considerations: (a) (b) (c) (d) (e) As is clear from the Settlement Agreement itself, the facts are highly unusual. There is not even a hint of a suggestion that Mr. Ritchie was ill-motivated rather, it seems, he saw an opportunity to assist a long-standing and aged client and did so, as it turned out, at significant cost to himself. Mr. Ritchie s client does not seem to have suffered any loss and indeed may well have benefited from the transaction with Mr. Ritchie. There is no suggestion that Mr. Ritchie set out deliberately to conceal the facts from his employer. The fact that Mr. Ritchie has no prior disciplinary history. The agreed sanctions are generally consistent with those contemplated in the material parts 2 of the Disciplinary Sanctions Guidelines adopted by the Association in January [1999] I.D.A.C. No. 17, August 5, 1999 at page 11.

3 3 Conclusion [5] While we had some mild reservations about the appropriateness and utility in the circumstances of the close supervision requirement and the requirement that Mr. Ritchie complete the Conduct and Practices Handbook examination, we considered that taken as a whole the sanctions provided for in the Settlement Agreement fell within a reasonable range of appropriateness and that the Agreement should, therefore, be accepted. Leon Getz Chris Lay Ron Merritt Kelowna, British Columbia As of July 27, See section 2.5 of the Guidelines.

4 4 INVESTMENT DEALERS ASSOCIATION IN THE MATTER OF: THE BY-LAWS OF THE INVESTMENT DEALERS ASSOCIATION OF CANADA AND ROBERT SCOTT RITCHIE SETTLEMENT AGREEMENT I. INTRODUCTION 1. The Enforcement Department Staff (Staff) of the Investment Dealers Association of Canada (the Association) has conducted an investigation (the Investigation) into the conduct of Robert Scott Ritchie (the Respondent). 2. The Investigation discloses matters for which the Respondent may be disciplined by a hearing panel appointed pursuant to Association By-law 20 Part 10 (the Hearing Panel). II. Joint Settlement Recommendation 3. Staff and the Respondent consent and agree to the settlement of these matters by way of this settlement agreement (the Settlement Agreement) in accordance with By-laws to 20.40, inclusive and Rule 15 of the Association Rules of Practice and Procedure. 4. The Settlement Agreement is subject to acceptance by the Hearing Panel. 5. The Settlement Agreement shall become effective and binding upon the Respondent and Staff as of the date of its acceptance by the Hearing Panel. 6. The Settlement Agreement will be presented to the Hearing Panel at a hearing (the Settlement Hearing) for approval. Following the conclusion of the Settlement Hearing, the Hearing Panel may either accept or reject the Settlement Agreement. 7. If the Hearing Panel accepts the Settlement Agreement, the Respondent waives his right under the Association By-laws and any applicable legislation to a disciplinary hearing, review or appeal. 8. If the Hearing Panel rejects the Settlement Agreement, Staff and the Respondent may enter into another settlement agreement; or Staff may proceed to a disciplinary hearing in relation to the matters disclosed in the Investigation. 9. The Settlement Agreement will become available to the public upon its acceptance by the Hearing Panel.

5 5 10. Staff and the Respondent agree that if the Hearing Panel accepts the Settlement Agreement, they, or anyone on their behalf, will not make any public statements inconsistent with the Settlement Agreement. 11. Staff and the Respondent jointly recommend that the Hearing Panel accept the Settlement Agreement. III. Statement of Facts (i) Acknowledgment 12. Staff and the Respondent agree with the facts set out in this Section III and acknowledge that the terms of the settlement contained in this Settlement Agreement are based upon those specific facts. (ii) Factual Background 13. The Respondent s registration history is set out in the following table: Registration Commencement Date Registration Termination Date Employer Registration Category April 1991 July 1998 Investors Group Inc. Financial Planner August 1998 November 2004 RBC Dominion Securities Inc. Registered Representative November 2004 Present Canaccord Capital Inc. Registered Representative 14. The Respondent has no prior disciplinary history. 15. At all material times, the Respondent was the Registered Representative of record for the account of M at the Kelowna branch office of RBC Dominion Securities Inc. (RBC DS). 16. M was a 92 year old widower who lived by himself in a townhouse in Kelowna, British Columbia (the Townhouse). He had been a client of the Respondent for approximately 12 years, first at Investors Group Inc. and then at RBC DS. 17. The Respondent represents, and Staff accepts, that: the Respondent and M developed a friendship; M indicated to the Respondent that he wished to move into a seniors residence; the Respondent suggested to M that he place the Townhouse for sale on the open market, but M did not wish to do so; the Respondent s son was in the process of moving back to Kelowna and required a place to live; in order to facilitate M s move into the seniors residence and to provide a place for his son to live, the Respondent offered to purchase the Townhouse from M; and

6 6 the Respondent did not believe that he could obtain a mortgage to finance the purchase of the Townhouse, because he already had an outstanding mortgage. 18. On March 5, 2004, M sold his Townhouse to the Respondent (the Transaction). The Contract of Purchase and Sale for the Transaction recorded that M agreed to sell the Townhouse to the Respondent and to take a mortgage back for the full purchase price of $118,000 repayable in: monthly installments of $1,500 per month, interest free, from April 1, 2004 to March 1, 2005; and the balance of $100,000 to be payable on April 1, 2005 (collectively, the Terms of Purchase). 19. The Respondent did not obtain an independent real estate assessment to ascertain the purchase price of the Townhouse. Rather, he based the purchase price on the average value of the 2001, 2002, and 2003 city of Kelowna property assessments for the Townhouse and on the fact that one of M s neighbors had verbally informed the Respondent that that they had sold their residence for $180,000, after spending $60,000 in repairs. 20. According to an independent appraisal that was obtained by Staff, based on the condition of the Townhouse on October 13, 2004, the market value of the Townhouse as of March 1, 2004 was $148,000 (the Appraisal). 21. The Respondent purchased the Townhouse from M without the knowledge, consent or authorization of RBC DS. 22. On March 6, 2004, the Respondent took possession of the Townhouse. 23. The Respondent represents, and Staff accepts, that between the day he took possession of the Townhouse and the day the Appraisal was conducted, the Respondent made a number of improvements to the Townhouse. 24. The Terms of Purchase were also contained in a mortgage agreement that was executed by the Respondent on March 22, 2004 and then registered with the Land Title Office. 25. As required by the Contract of Purchase and Sale for the Transaction, from April 2004 to October 2004, the Respondent made the $1,500 monthly payments to M. 26. On or about October 14, 2004, counsel for M sent the Respondent a letter in which he, among other things, demanded that the Respondent reverse the sale of the Townhouse. 27. On or about October 18, 2004, the Respondent agreed to transfer the property back to M. 28. On or about October 28, 2004, the Respondent transferred the Townhouse back to M for one dollar and the Respondent paid all of the related legal expenses. 29. M kept the $10,500 in payments that he received from the Respondent between April 2004 and October RBC DS first learned of the Transaction in October 2004 when it received a copy of the letter from counsel for M that is referred to in paragraph In November 2004, RBC DS terminated the Respondent s employment because of his personal financial dealings with M.

7 32. Standard C of the Canadian Securities Institute s Conduct and Practices Handbook, states that: Any personal financial or business dealings with any clients must be conducted in such a way as to avoid any real or apparent conflict of interest and be disclosed to the firm, in order that the firm may monitor the situation. 33. Further, RBC DS s Code of Ethics and Standard of Conduct (the RBC DS Code) states: "All Investment Advisors are obliged to know and follow the standards set out in the Conduct and Practices Handbook and other RBC DS Manuals. 34. The RBC DS Code also states: It is expected that all Investment Advisors of RBC DS will not at any time: Enter into personal financial dealings with clients including the lending of money or the borrowing of money." By purchasing the Townhouse and by not informing RBC DS of the purchase, the Respondent failed to comply with Standard C of the Conduct and Practices Handbook and the above-noted provisions of the RBC DS Code. 36. The Respondent cooperated with Staff in the investigation of this matter. IV. Contravention 37. The Respondent admits to the following contravention of Association By-laws, Regulations, Rulings or Policies: Between March 2004 and October 2004, the Respondent, a Registered Representative employed by a Member of the Association, engaged in personal financial dealings with a client, without the knowledge, consent, or authorization of his Member employer, contrary to Association By-law V. Terms of Settlement 38. The Respondent agrees to the following terms of settlement: Penalties (i) payment of a fine in the amount of $10,000; (ii) (iii) a requirement that he be under close supervision for a period of 12 months; and a requirement that he re-write and pass the Conduct and Practices Handbook examination, that is administered by the Canadian Securities Institute, within 6 months of the effective date of this Settlement Agreement. Costs The Respondent shall pay a portion of the Association s costs of this proceeding in the amount of $1,000.

8 8 39. Unless otherwise stated, any monetary penalties and costs imposed upon the Respondent are payable immediately to the Association upon the effective date of the Settlement Agreement. 40. Unless otherwise stated, any suspensions, bars, expulsions, restrictions or other terms of the Settlement Agreement shall commence on the effective date of the Settlement Agreement. AGREED TO by the Respondent at the city of Kelowna in the Province of British Columbia, this day of May, Witness Robert Scott Ritchie AGREED TO by Staff at the City day of May of Vancouver in the Province of British Columbia, this Witness Lorne Herlin Enforcement Counsel on behalf of Staff of the Investment Dealers Association of Canada ACCEPTED this day of, 2005, by the following Hearing Panel: Per: Panel Chair Per: Panel Member Per: Panel Member