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 ANDY HYON CHUL KIM 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 ) beginning on, October 30, 2007 at 111 Richmond St. West, Toronto, Ontario, at 1:00pm 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 what sanction and costs should be imposed on Andy Hyon Chul Kim ( the Respondent ) for the following contraventions: (i) (ii) (iii) In March 2004, the Respondent invested in a private placement involving Soho Resources Corp. without the knowledge or approval of his employer Member firm, and thereby engaged in business conduct or practice unbecoming, or detrimental to the public interest, contrary to Association By-law 29.1; On February 25, 2004, the Respondent misrepresented his resident status when investing in the private placement involving Soho Resources Corp., thereby engaging in business conduct or practice unbecoming, or detrimental to the public interest, contrary to Association By-law 29.1; In March 2004, the Respondent opened an account with Bolder Investment Partners and misrepresented information on his New Account Application Form

2 - 2 - relating to his employment with a Member firm, thereby engaging in business conduct or practice unbecoming, contrary to Association By-law 29.1; (iv) (v) (vi) Between March 2004 and June 2004, the Respondent maintained an account at an outside firm, namely Bolder Investment Partners, jointly with his spouse, without the knowledge or consent of his employer Member firm, thereby engaging in business conduct or practice unbecoming, contrary to Association By-law 29.1; Between October 1999 and May 2001, the Respondent maintained offshore accounts at an outside firm, namely Lines Overseas Management, without the formal knowledge or consent of his employer Member firm, thereby engaging in business conduct or practice unbecoming, contrary to Association By-law 29.1; Between February 2004 and November 2005, the Respondent failed to act in accordance with the standards for conduct prescribed in the Conduct and Practices Handbook ( CPH ), in that he failed to advise and obtain prior approval from his Member firm in respect of his outside business activities with Altus Exploration Inc., and therefore acted contrary to Association By-law PARTICULARS NOTICE IS FURTHER GIVEN that the following facts have been agreed upon by Association Staff and the Respondent for the purposes of this proceeding: The Respondent 1. At all material times, the Respondent was employed as a Registered Representative, Trading Officer by CIBC World Markets Inc. ( CIBC-WM ) in Mississauga, Ontario. The Respondent was subsequently terminated by CIBC-WM on December 7, CIBC-WM indicated on the Uniform Termination Notice filed with the National Registration Database (NRD) that the reason for the termination was the Respondent s failure to disclose an outside business activity. 2. The Respondent s registration history is as follows: From To Firm December Present TD Waterhouse Canada Inc December December CIBC World Markets Inc August 1998 December 2001 Merrill Lynch Canada Inc. July 1994 August Midland Walwyn Capital 1998 Inc. July 1988 July 1994 Investors Group Financial

3 - 3 - Services Inc. 3. The Respondent does not have any prior disciplinary history with the Association. He cooperated with Association Staff in its investigation of this matter. Soho Resources Corp. 4. Soho Resources Corp. ( Soho ) trades on the TSX Venture Exchange. 5. On February 25, 2004, the Respondent completed a Private Placement Subscription agreement for 272,727 Units, with each unit consisting of one common share of Soho and one-half of one non-transferable share purchase warrant. 6. The Terms of the Subscription agreement provided that within Canada, the units may be sold only in British Columbia and Alberta. 7. At all material times, the Respondent resided in Oakville, Ontario. However, in the Subscription agreement, the Respondent directed Soho to register the shares in his name at an address in Vernon, British Columbia. 8. On March 14, 2004, the Respondent signed a Subscription Form directing his Soho common shares to be issued and delivered to an address in Oakville, Ontario, which was his home address. The following day, the Respondent provided Soho with a cheque in the amount of $19, for payment of the shares. 9. On April 1, 2004, the Respondent received a stock certificate and share purchase warrant certificate, each dated March 20, The address for the Respondent, as indicated on the each certificate, was the B.C. address he had provided on the Subscription agreement. These certificates were delivered to his home address in Oakville, Ontario. 10. On June 15, 2004, the Respondent wrote to Boulder Investment Partners, where he held an investment account, advising them to send the share certificates and his warrant certificate for Soho Resources to his home address. The home address provided by the Respondent is his address in Oakville, Ontario. 11. The Respondent did not advise CIBC-WM or seek approval at the time of his investment in the private placement as he felt he would be denied the approval. 12. Further, on June 28, 2004, the Respondent completed a CIBC Wood Gundy Investment Advisor, Associate Investment Advisor Questionnaire, and indicated that he was aware that he was not permitted to participate in a private placement of a security outside of CIBC Wood Gundy unless prior approval of his Branch Manager and the Compliance Department has been obtained in writing. Despite this knowledge, the Respondent did not advise CIBC-WM or CIBC Wood Gundy of his participation in the private placement.

4 Soho subsequently filed a Form F4, Report of Exempt Distribution under Multilateral Instrument , indicating that the Canadian purchasers of the securities resided only in British Columbia. This was untrue as the Respondent was in fact resident in Ontario. 14. The Respondent did not advise CIBC-WM of his participation in the private placement, nor did he deposit the Soho common shares into his account at CIBC- WM. Both the misrepresentation to Soho regarding his resident status and his failure to advise CIBC-WM are in contravention of Association By-law Bolder Investment Partners Account 15. In March 2004, the Respondent opened a joint account with his spouse at Bolder Investment Partners ( Bolder ) in Vancouver, British Columbia. The Soho shares and warrants outlined above were subsequently deposited into this account. 16. On the New Account Application Form (NAAF) the Respondent misrepresented his occupation as a self employed consultant in the oil and gas industry. 17. The NAAF contained the following questions, with the Respondent s accompanying responses: Are you or your spouse an Employee, Director, Partner or Officer of a securities dealer, or of a stock exchange or of the I.D.A. No. Do you trade or intend to trade with other investment firms? No. If you are a senior officer, director or insider of a company whose shares are traded on an exchange or over the counter, please specify the issuer by full stock name. No. 18. The account was not designated as a pro account by Bolder. 19. On June 28, 2004, the Respondent completed a CIBC Wood Gundy, Investment Advisor, Associate Investment Advisor Questionnaire, and indicated that neither he nor any of his immediate family had accounts at other firms. 20. The Respondent misrepresented his status as an IDA Member employee to Bolder, and failed to advise CIBC-WM of the existence of this account. Both the misrepresentation to Bolder and the Respondent s failure to advise CIBC-WM are in contravention of Association By-law LOM Accounts

5 On October 26, 1999, the Respondent caused an account to be opened with Lines Overseas Management Securities (Bermuda) Limited ( LOM ). The account was opened in the name of Price Investments Ltd., with the Respondent as the authorized signatory. 22. Price Investments Ltd. had been incorporated on September 1, 1999 in Grand Cayman Island. The Respondent was not directly involved in the incorporation of this company. 23. There was trading activity in the account as the Respondent deposited shares into the Price Investments account, and subsequently had those shares transferred to accounts belonging to individuals at other firms, between November 1999 and May There continued to be cash transactions in the account after May This account appears to have been dormant after November 2003 as there was no further account activity after that date. 25. The Respondent opened three additional accounts at LOM for which he was the beneficial owner, including accounts in the name of Jacob Financial and Manson Holdings Ltd. There does not appear to have been any trading activity in these accounts. 26. The Respondent s employer Member firm was not formally made aware of the existence of the LOM accounts. The Respondent failed to seek the prior written authorization of the CIBC-WM Compliance Department, as required by CIBC-WM s own internal policies. Altus Explorations Inc. 27. Altus Explorations Inc. ( Altus ) was a publicly-traded company, trading on the Over-the-Counter Bulletin Board (OTC BB) under the symbol ATUX. 28. In his capacity as a Director of Altus, the Respondent was provided with several corporate resolutions for his signature, which he read and approved. Included was a Corporate Governance Resolution dated February 27, 2004 appointing the Respondent to the Audit Committee, Corporate Governance Committee and Compensation Committee of Altus. 29. The Respondent failed to disclose his role with Altus to CIBC-WM prior to his appointment with Altus. 30. On June 28, 2004, the Respondent completed an Investment Advisor Questionnaire at CIBC-WM. In his responses to the Questionnaire, the Respondent indicated that he was not engaged in an outside business activity.

6 The Respondent only disclosed his role as a Director of Altus to CIBC-WM in a revised Investment Advisor Questionnaire dated October 18, The Questionnaire was completed at the request of CIBC-WM. 32. The Respondent resigned as a Director of Altus on November 15, 2005, at the request of CIBC-WM. 33. The Respondent further failed to disclose his directorship on the NAAF for his Bolder account. 34. The Respondent s failure to disclose his directorship to CIBC in a timely manner and his misrepresentation to Bolder on the NAAF are contrary to Association By-law 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) proceed with the hearing as set out in the Notice of Hearing, without further notice to the Respondent; (b) accept as proven the facts and contraventions alleged by the Association in the Notice of Hearing; and

7 - 7 - (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 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;

8 - 8 - (c) (d) (e) (f) (g) 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; 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 Toronto, this th day of June, ALEKSANDAR POPOVIC VICE-PRESIDENT, ENFORCEMENT INVESTMENT DEALERS ASSOCIATION OF CANADA Suite 1600, 121 King Street West Toronto, Ontario M5H 3T9