INVESTMENT DEALERS ASSOCIATION OF CANADA THE BY-LAWS OF THE INVESTMENT DEALERS ASSOCIATION OF CANADA ROBERTSON ROGER DOW

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1 INVESTMENT DEALERS ASSOCIATION OF CANADA IN THE MATTER OF: THE BY-LAWS OF THE INVESTMENT DEALERS ASSOCIATION OF CANADA AND ROBERTSON ROGER DOW 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 a date to be fixed by the Hearing Panel, on Tuesday February 28, 2006, at the offices of Legal Transcript Services, 111 Richmond Street West, Suite 1500, Toronto, 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 Robertson Roger Dow ( the Respondent ) has committed the following contraventions that are alleged by the Association: 1. During 2002 to 2004, the Respondent, while a Registered Representative at Octagon Capital Corporation, a member of the Association, accepted orders to trade from an individual who he knew or ought to have known to have had a history of securities violations and/or an association with organized crime, thereby engaging in conduct unbecoming or detrimental to the public interest, contrary to By law 29.1.

2 During 2002 to 2004, the Respondent, while a Registered Representative at Octagon Capital Corporation, a member of the Association, concealed information from the Member firm, namely: (a) that Benil accounts #1 to #6 and the Blue Green T account, were being traded on the direction of persons not authorized in writing, and (b) that the actual beneficial owners of Benil accounts #2 to #6 and the Blue Green T account were different than indicated on the account documentation, thereby engaging in conduct unbecoming or detrimental to the public interest, contrary to Association By-Law During the period 2002 to 2004, the Respondent, while a Registered Representative of Octagon Capital Corporation, a member of the Association, accepted trading instructions for the following accounts from persons who were not the owners of the accounts and who were not duly authorized to give trading instructions, thereby engaging in conduct unbecoming or detrimental to the public interest, contrary to Association By-law 29.1: (a) Benil account #1 from February 2002 to February 2004; (b) Benil account #2 from February 2002 to February 2004; (c) Benil account #3 from June 2003 to February 2004; (d) Benil account #4 from February 2002 to February 2004; (e) Benil account #5 from May 2003 to February 2004; (f) Benil account #6 from May 2003 to January 2004; (g) Blue Green T account from May 2002 to February 2004.

3 - 3 - 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: Registration and Employment History: 1. The Respondent was at all material times employed by Octagon Capital Corporation ( Octagon ), a Member of the Association. The Respondent s registration history is as follows: Registration Issue Date Registration Termination Date Employer Registration Category 17/Apr/ /Dec/1998 Rampart Securities Registered Representative 09/Dec/ /Nov/1999 St. James Securities Inc. 17/Nov/ /Jan/2002 Northern Securities Inc. 25/Jan/ /Sep/2005 Octagon Capital Corporation The Association s Investigation: Registered Representative Registered Representative Registered Representative 2. The investigation by the Association was commenced as a result of discussions held by the Association s Enforcement Department ( Enforcement ) with the U.S. Securities and Exchange Commission ( SEC ) in July, The SEC had been investigating matters of apparent fraudulent activities by American residents with the apparent assistance of registered persons at Member firms in trading of shares of HiEnergy Technologies Inc. ( HiEnergy ), an Over the Counter Bulletin Board ( OTCBB ) stock. 3. The Respondent was advised in December, 2003 of the investigation into his conduct while he was employed at Octagon. Client backgrounds: Schnapik: 4. Jeanne Schnapik ( Schnapik ) is a French national. The Octagon account opening documentation suggests that Schnapik has dual residency both in Ottawa, Ontario and Pompano Beach, Florida. All account opening documentation at Octagon identifies Schnapik as the sole owner of various corporate accounts, as described below. The Respondent told the Association that Schnapik s investment experience and knowledge was average, although it is listed as sophisticated on the New Client Application Form for the corporate accounts.

4 - 4 - Cote: 5. Rheal Cote ( Cote ) is a Canadian citizen. According to the Respondent, Cote is Schnapik s common law spouse. The account opening documentation at Octagon suggests that Cote also has dual residency with identical addresses as Schnapik in both Ontario and Florida. Account opening documentation on various corporate accounts at Octagon gave authority to Cote to give trading instructions on behalf of Schnapik. The Respondent characterized Cote s investment knowledge as good. Gurian: 6. According to the Respondent, Phil Gurian ( Gurian ) is Schnapik s son. He is a Florida resident who pled guilty on February 24, 2000 to U.S. federal criminal charges including mail fraud, and conspiracy to commit securities fraud, mail fraud and wire fraud. A grand jury indictment of June, 1999 alleged that Gurian and others, including persons tied to organized crime, orchestrated a series of pump and dump schemes involving microcap issuers, and secretly controlled a branch office of Sovereign Equity Management Corp., then a registered Broker Dealer under NASD and SEC registration. 7. In addition to the June 1999 indictment, Gurian has been either the subject of or mentioned in a number of news articles and court cases linking him to activities that allegedly contravene U.S. securities laws and regulations and criminal statutes. 8. In the early 1990 s the National Association of Securities Dealers ( NASD ) permanently banned Gurian from the American securities industry. The Respondent s Background at Northern: 9. While at Northern Securities Inc. ( Northern ), the Respondent was contacted by Cote in late 2000 to open accounts to short OTCBB stocks. The Respondent told the Association that at first he was hesitant to engage in that type of trading. He advised that his initial due diligence in verifying Gurian s and Schnapik s identities consisted of speaking to brokers in Montreal who had dealt with them in the past. The Respondent indicated that following those conversations, he was comfortable and decided that he would like to do business with Gurian and Schnapik. The Respondent opened accounts at Northern for Schnapik, Cote and Gurian. 10. In December 2000 the Respondent opened accounts at Northern in the name of Benil Finance Ltd. ( Benil ). These corporate accounts listed Schnapik as the client contact and gave trading authority to Cote. Notwithstanding the written authorizations, the Respondent accepted trading instructions on the Benil accounts from Gurian.

5 - 5 - The Respondent s Relationship with his Clients: 11. The Respondent advised that two months after he started doing business with Gurian he learned about his criminal background. Gurian told the Respondent directly that he had been charged with money laundering and was awaiting sentence. The Respondent told the Association that he conducted an internet search by Googling Gurian s name in March This search led him to read a number of articles that discussed Gurian and his troubled background, including being banned by NASD. The Respondent also said that he read a Business Week article entitled The Mob on Wall Street that specifically mentioned Gurian and tied him to organized crime. The article also tied Gurian to Thomas Quinn, referred to in the article as a disbarred lawyer and convicted securities swindler with a two- decades-long history of running investment scams worldwide. 12. At that time, the Respondent was initially nervous when he learned of Gurian s past. He told the Association that after he came to know Gurian and talked to Gurian s friends he become comfortable and felt that Gurian was an honourable man in relation to the transactions that they did together. 13. The Respondent indicated that he met Schnapik on three occasions and talked to her on the telephone approximately once every six weeks. The Respondent further indicated that he had met Cote personally on four occasions and was in contact with him by fax daily. He advised that Cote was the paperwork guy to whom the Respondent would fax reports every morning. 14. In September 2002, the Respondent traveled to Colorado and spent the weekend with Gurian, Schnapik and Cote. While the Respondent advised the Association in April, 2004 that he had only met Gurian on one occasion, he told Octagon s compliance officer in March 2003 that he had met Gurian on a number of occasions. The Accounts at Octagon: 15. The Respondent transferred to Octagon in January Schnapik and Cote maintained some accounts at Northern, however, the trading volumes in the Northern Benil accounts were minimal. Schnapik and Cote subsequently opened their own new accounts and new Benil accounts with the Respondent at Octagon. 16. On November 13, 2001, the Association issued Member Regulation Notice MR-114 advising that effective March 1, 2002 all accounts were to be closed where Members and individual registered representatives were not either registered in the Canadian or United States jurisdiction in which the client resides or eligible for an exemption under all securities legislation applicable within that jurisdiction. As of January 2002, neither the Respondent nor Octagon was duly registered. 17. Shortly after he arrived at Octagon, the Respondent was advised that the firm did not permit American residents to open accounts or maintain trading authority. Adherence to

6 - 6 - this policy was contrary to the Respondent s manner of doing business with Gurian at Northern. The Respondent advised the Association that he had an understanding between himself, Gurian, Schnapik and Cote to conceal Gurian s behind the scene activity from Octagon. The Respondent admitted to the Association that he had an agreement with Phil [Gurian] to continue business as usual. 18. The Respondent admitted to the Association that he did not agree with Octagon s policy and felt that he was not violating any industry regulations by his normal practice relating to Americans. He further admitted that he continued with his manner of doing business with Gurian partly for financial selfish interests Failing to advise Octagon of his practices and in clear defiance of the firm s policy and the Association s registration requirements, the Respondent continued to take instructions from Gurian and others in relation to six Benil accounts and the Blue-Green T account. The Respondent s Trading: 19. The Respondent described himself as a trader as opposed to a broker. He admitted to the Association that his practice of doing business is on an unsolicited basis, taking orders and executing them for people. When asked whether he had ever fired a client, the Respondent advised the Association I can t imagine, short of murder, I mean, why I wouldn t open an account with them. If I felt comfortable that the trading was legitimate, I don t know why I would do that. 20. The Respondent admitted to the Association that for the most part, his trading with Gurian was short selling liquid bulletin board stocks through market makers in the United States. He indicated that he was comfortable that they were not trading in a bad way. He distinguished this activity from the trading in HiEnergy where he admitted that Gurian directed him in making a market for the stock. 21. The Respondent advised the Association that the fact that the trading went through a market maker gave him complete assurance that they were not manipulating stocks. He reasoned that a market maker added another layer to scrutinize the trade. He stated to the Association that if Gurian had the incentive to do a bad trade and the Respondent had mistakenly executed it, he felt that the market maker would eventually identify the problem. Hi-Energy: 22. The Respondent advised the Association that he also took instructions from Gurian with respect to making a market in the stock Hi-Energy. This was a very different activity from their usual naked short selling practice. The Respondent stated that Benil owned a lot of the Hi-Energy stock. Gurian never discussed his strategy in making a market in Hi- Energy with the Respondent. He stated that Gurian set the prices and amounts to be traded for the Hi-Energy shares. The Respondent followed Gurian s instructions.

7 - 7 - The Benil Accounts at Octagon: 23. Schnapik remained the named client contact for the Benil accounts at Octagon. The first Benil account # 02H 5021 ( Benil #1 ) was opened in January Within a few months of opening the initial account, an additional five (5) Benil accounts were opened at Octagon with account numbers as follows: -Benil 02H 5022 ( Benil #2 ) -Benil 02H 5148 ( Benil #3 ) -Benil 02H 5205 ( Benil #4 ) -Benil 02H 5206 ( Benil #5 ) -Benil 02H 5207 ( Benil #6 ) 24. Cote had trading authority on all six of the Benil accounts. Gurian did not open any accounts at Octagon nor was he listed as either a beneficial owner or as having trading authority over any of the Benil accounts. Schnapik provided Octagon with written confirmation in May 2002 that she was the sole and beneficial owner of the 6 Benil accounts. 25. The Respondent advised that Benil is an offshore corporation owned solely by Schnapik. He described it as a very small hedge fund that operated by shorting overpriced OTCBB stocks. Trading in the Benil accounts at Octagon was primarily short selling with much of it uncovered short selling. 26. Benil #1 was identified with an address in Nassau, Bahamas. Schnapik was listed as having sophisticated investment knowledge, with objectives of 10% moderate risk, growth and 90% higher risk, speculative. In March 2002, Schnapik provided the Respondent and Octagon with written confirmation that the investment objectives and risk tolerance for each of the Benil accounts was 100% higher risk, speculative securities and trading strategy. Schnapik was listed on the account opening documentation as the beneficial owner of the account. 27. The Benil #2 through Benil #6 accounts were opened on the original account opening documentation for the Benil #1 account. Notwithstanding the documented account information, the Respondent admitted to the Association that the Benil #2 to #6 accounts were operated for the benefit and on the instructions of individuals other than the account holder Schnapik. 28. The Respondent further admitted that he took instructions from Gurian to open the Benil #2 to #6 accounts for the benefit of American third parties not identified on the account opening documentation. Again, the accounts were opened and operated in this manner as a means of enabling the Respondent to disobey Octagon s policies and to conceal his activities.

8 - 8 - Benil #1: 29. The Respondent admitted to the Association that Benil #1 was opened for Schnapik s benefit. The Respondent presumed, however, that Schnapik knew it was Gurian who was actually directing the trading in the account. The Respondent had no discussions with Schnapik to confirm or deny these presumptions. Benil #1 was actively traded from February 2002 until at least February Benil #2: 30. The Respondent admitted to the Association that the Benil #2 was opened for the benefit of either Robert Coutou ( Coutou ), a friend of Gurian, or Coutou s company Ocean Fresh Seafood. According to the Respondent, the account was opened with Coutou s money. All trading in the account was executed on Coutou s or Ocean Fresh Seafood s behalf. The Respondent received trading instructions from both Coutou and Gurian. With the exception of three months in 2003, Benil #2 traded regularly from February 2002 to February Benil #3: 31. The Respondent admitted to the Association that Benil #3 was opened initially for the benefit of Jimmy Binns ( Binns ) and subsequently for the benefit of Brian Kane ( Kane ), both friends of Gurian. Binns is an American lawyer. All trading on behalf of Binns was directed by Gurian. All trading on behalf of Kane was directed by Kane. The Respondent never met Kane, but had spoken to him many times. The Respondent told the Association that Kane did not receive any distribution of proceeds from the account. After making an initial deposit of 100,000 USD into the account, Binns received some 150,000 USD. Benil #3 traded from June 2003 to at least February Benil #4: 32. The Respondent admitted to the Association that Benil #4 was operated for the benefit of Mark Cox, an American trader, at Gurian s request. According to the Respondent, while Cox did not fund the account, he gave the trading instructions and received proceeds of some 10,000 to 15,000 USD on three or four occasions. Benil #4 traded regularly from February 2002 to at least February Benil #5: 33. The Respondent admitted to the Association that Benil #5 was financed by Dr. Nathan Nachlas ( Nachlas ), an American who does not appear on the account opening documentation. The account was opened generally and later Gurian asked the Respondent to designate it as the account for the benefit of Nachlas. Trading instructions were provided by Gurian. The Respondent admitted that he had never sent Nachlas account documentation and that he had only spoken to him once or twice-briefly. He sent Nachlas an summarizing the account activity every 4-6 weeks. Benil #5 traded from May 2003 to at least February 2004.

9 - 9 - Benil #6: 34. The Respondent could not recall for whose benefit Benil #6 was traded. Gurian gave him the trading instructions for the account. Benil #6 traded from May 2003 to January Blue Green T account: 35. A corporate account numbered 02H 5187 in the name of Blue Green T LLC (the Blue Green T account) was opened at Octagon on or about February 28, The account documentation listed Jaime Villarroel ( Villarroel ) as the account owner. Blue Green T was a Nevis company. According to the Respondent, Villarroel was the father of Barbara Knight ( Knight ), a close friend of Gurian. Knight was an American. Dow said that Villarroel was a resident of Panama, although the New Client Application form indicates that he lived in Bolivia. 36. In November 2002, Villarroel advised Octagon in writing that he was the sole and beneficial owner of Blue Green T. The Respondent admitted to the Association that the account was actually operated for the benefit of Knight. Gurian gave the Respondent the trading instructions on the Blue Green T account. The Respondent told the Association that he had never met Knight or Villaroel. The Blue Green T NCAF indicates that the Respondent had known the client for two years and that they had met face to face. 37. The Blue Green T account traded at Octagon from May 2002 to at least February According to the Respondent, some of the proceeds went to other Blue Green T accounts. Concealment of Account Information and Trading Activity from Octagon: 38. The Respondent intentionally concealed from Octagon that he was taking trading instructions on the six Benil and the Blue-Green T accounts from individuals who were neither named as trading authorities nor permitted to give trading instructions due to their American Citizenship. Further, the Respondent did not advise Octagon that individuals were benefiting from trading in these accounts who had not been identified nor revealed as beneficiaries as part of the account documentation on file. The Respondent did nothing to reconcile with Octagon the disparity between the information on the account documentation and the reality of what he knew to be the activity in the accounts. 39. Two related articles written by Carol Remond regarding HiEnergy and Gurian were published on the Dow Jones newswire on February 25 and 26, The articles talked about HiEnergy s investors having a connection to Gurian, who by then had pled guilty to federal charges including mail fraud and conspiracy to commit securities fraud. The article also stated that published reports have identified Gurian as a front man for Phil Abramo ( Abramo ) a captain in the Decavalcante organized crime family. At that time,

10 Abramo was awaiting trial on a series of charges including murder and conspiracy to commit securities fraud. 40. The Remond article also stated that the Gurian connection with HiEnergy began with Cote. When Remond tried to reach Cote, she found him connected to an address for a condominium owned by Jeannine Gurian Phil s mother. 41. The article also raised a possible link between Benil Finance Ltd. and organized crime; as the corporate address for Benil was the same as that of a number of offshore firms connected to Gurian and Abramo and named in another article entitled The Mob on Wall Street. 42. The Respondent told the Association that he had read the Remond articles at the time they were released. He had discussed the articles with Gurian who denied the allegations. 43. Rita Lo, a compliance officer at Octagon, sent the Respondent an in early March 2003, enquiring about Schnapik, Cote and trading in the Benil accounts relating to HiEnergy shares in the spring of Ms. Lo also asked the Respondent about a reverse merger involving SLW Enterprises Inc. and HiEnergy Microdevices Inc. 44. Dow was asked if he checked to determine the possibility of his client s involvement with Gurian and why Benil s address was shared with some offshore accounts named in the Mob on Wall Street case. 45. In a reply , the Respondent indicated that he knew Schnapik and Cote quite well, and that he had met Gurian a number of times, including spending a weekend with the three of them in September He indicated that both Schnapik and her son were a walking encyclopedia when it comes to bulletin board stocks, promoters etc. In his e- mail, the Respondent advised Ms. Lo that he had had a number of conversations with Gurian about the charges against him and Gurian claimed he had no involvement with organized crime of any type. He also responded to Ms. Lo s questions regarding the reverse merger. 46. Although given the opportunity to disclose information to Octagon, the Respondent never advised Ms. Lo or Octagon that he was working with Gurian to create a market for HiEnergy or that others were instructing him on the 6 Benil and the Blue Green T accounts. Further, the Respondent never advised Ms. Lo or Octagon that Benil #2 through #6 and Blue Green T were trading for the benefit of others not named on the account documentation. The Respondent did not describe the true circumstances of the operation of these accounts to Octagon.

11 Summary of the Accounts at Northern Securities Inc. ( Northern ): Account # Beneficial Owner Date Opened Trading Authority 3R5683 Michelle Starman/ Jan. 07, 2001 Cote (Jan. 07, 2001) Schnapik Changed to: Schnapik Oct. 24, R6022 Gurian/Schnapik Changed to: Schnapik May 09, 2001 Oct. 24, 2001 None 3R6029 Gurian/Schnapik May 09, 2001 None 3R5666 Cote/Schnapik Dec. 08, 2000 None 3R6509 Benil Finance Karen Miller (acquaintance of Gurian) June 01, 200 3R5664 Benil Finance (Schnapik) Dec. 11, 2000 Cote 3R5667 Benil Finance #2 (Schnapik) Dec. 14, 2000 Cote 3R6125 Benil Finance #3 (Schnapik) Aug. 2, 2001 Cote Summary of the Accounts at Octagon Capital Corporation ( Octagon ): Account # Benil #1 02H-5021 Benil #2 02H-5022 Benil #3 02H-5148 Benil #4 02H-5205 Benil #5 02H-5206 Benil #6 02H-5207 Account Holder Documented Trading Authority Actual Beneficiary Schnapik Cote Schnapik Gurian Actual Trading Instructions Schnapik Cote Robert Coutou Coutou and Gurian Schnapik Cote Jimmy Binns Gurian Brian Kane Kane Schnapik Cote Mark Cox Cox Schnapik Cote Dr. Nathan Nachlas Gurian Schnapik Cote Gurian Blue Green T 02H-5187 Jaime Villarroel None Barbara Knight Gurian

12 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 (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:

13 (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) 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;

14 (d) (e) (f) (g) 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 day of February Aleksander Popovic Vice-President Enforcement Division INVESTMENT DEALERS ASSOCIATION OF CANADA 121 King Street West, Suite 1600 Toronto, ON M5H 3T9