INVESTMENT DEALERS ASSOCIATION OF CANADA

Transcription

1 INVESTMENT DEALERS ASSOCIATION OF CANA IN THE TTER OF: THE BY-LAWS OF THE INVESTMENT DEALERS ASSOCIATION OF CANA AND KONSTANTINOS GEORGAKOPOULOS 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 May 8, 2008, in the Association Boardroom at 1055 West Georgia Street, Suite 2800, Vancouver, BC, at 10:00 am, 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 Konstantinos Georgakopoulos ( the Respondent ) has committed the following contraventions that are alleged by the Association: COUNT 1 Between January and December 2004, the Respondent, at all material times a Registered Representative ( RR ) at Golden Capital Securities Ltd. ( Golden ), a Member Firm, failed to properly perform his role as gatekeeper to the capital markets and acted contrary to Association Regulation (a) by facilitating certain transactional activity in certain client accounts without making diligent inquiries to ensure the legitimacy of the transactions in circumstances which should have called the transactional activity into question because it was peculiar,

2 - 2 - suspicious or appeared to be consistent with market manipulation, deception or other improper market related activity. COUNT 2 Between January and December 2004, the Respondent, at all material times an RR at Golden, a Member Firm, failed to properly perform his role as gatekeeper to the capital markets and acted contrary to Association By-Law 29.1 by failing to observe the high standards of ethics and conduct in the transaction of his business by facilitating certain transactional activity in certain client accounts without making diligent inquiries to ensure the legitimacy of the transactions in circumstances which should have called the transactional activity into question because it was peculiar, suspicious or appeared to be consistent with market manipulation, deception or other improper market related activity. 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: THE RESPONDENT 1. The Respondent became employed in the securities industry in January 1996 as an RR with Georgia Pacific Securities Corp. In December 1997 he became an RR with Wolverton Securities Ltd. ( Wolverton ). He transferred to Golden on or about July 9, The Respondent remained at Golden until February 2007, when Golden ceased business operations. The Respondent is currently employed by Gateway Securities Inc. 2. The Respondent has no previous disciplinary history. AND 3. The Respondent was introduced to and his brother at a social gathering in Las Vegas at some point between 1998 and 2000 by an existing client of the Respondent. 4. Several weeks after the Las Vegas meeting, while the Respondent was still employed as an RR with Wolverton, contacted the Respondent and asked to open an account for the purpose of trading Over-The-Counter-Bulletin-Board ( OTCBB ) stock. Accordingly, opened a corporate account with the Respondent at Wolverton. 5. Around the time that opened his corporate account with the Respondent at Wolverton, Wolverton compliance staff met with the Respondent to discuss s account as Wolverton discovered that had past regulatory issues relating to parking stock. As a result, the Respondent was instructed by Wolverton to treat s account with care.

3 On or about April 10, 1996 the United States Securities and Exchange Commission ( SEC ) issued Release No in respect of s brother,. That release provides that the SEC, upon a review of disciplinary action taken against by the National Association of Securities Dealers ( NASD ), upheld the findings of violations and sanctions imposed by the NASD. The NASD found that had committed violations in connection with a scheme pursuant to which parked stock from his firm s trading account in fictitious and inactive customer accounts. In respect of those accounts, the SEC stated that Engaged in a scheme to park stock from his trading account in inactive and fictitious customer accounts and, in connection with that scheme, created false records, effected unauthorized transactions, and obtained improper extensions of credit; and where trader engaged in trading that improperly diverted profits from his firm and disadvantaged customers, and, in connection therewith, failed to comply with recordkeeping requirements. 7. SEC Release No indicated s address as 1941 New York Avenue, Brooklyn, NY ( s Address ). 8. As a result of the foregoing violations, the NASD censured, barred him from association with any NASD member in any capacity and fined him $100, On or about June 19, 1998, the SEC issued Release No in respect of and others. That release stated that: In order to stabilize or increase the price of Vertex stock in the face of substantial selling pressure, [] (1) made unauthorized purchases in customers accounts, (2) refused to execute customers sell orders with respect to Vertex stock, (3) arranged for customers to transfer margined Vertex shares to newly opened accounts at other broker-dealers, (4) directed nominees to purchase stock at other broker-dealers, and (5) interpositioned wholesale broker-dealers between Cortland and the nominees in order to disguise Cortlandt as the source of the shares sold to the nominees. [] therefore used manipulative and deceptive devices in a scheme to defraud the market for Vertex stock. 10. SEC Release No also stated that was ordered by the SEC to cease and desist from committing or causing any violation and any future violation of Sections 10(b) and 15(c) of the Exchange Act and Rules 10b-5 and 15c1-2. The SEC further ordered that be barred from association with any broker dealer, municipal securities dealer, investment advisor or investment company. 11. On or about July 9, 2002, the Respondent became registered as an RR with Golden. At that time, also had an existing account at Golden with another RR ( s Account ). 12. On or about August 8, 2002, a New Account Application Form ( NAAF ) was completed to update s Account. On that update, the RR of record was changed to the Respondent. The NAAF update for s Account also recorded the following: Date of Birth/Age: Est. Net Liquid Assets: $250,000

4 - 4 - Est. Net Fixed Assets: $250,000 Estimated Total Net Worth: $500,000 Approximate Annual Income from all Sources: $175,000 Investment Objectives: Income: 0%, Long Term Growth: 0%, Short Term Trading: 0%, Speculative: 100%, Other 0% Account Risk Factors: Low 0%, Medium 0%, High 100% Investment Knowledge: Sophisticated Position/Occupation: Financial Consultant Employer: Self 13. The Respondent sent the NAAF update to, who completed the information thereon. When it was returned to the Respondent, he contacted to discuss and verify the information. 14. At the time that the NAAF for s Account was updated, the Respondent was aware that was a consultant to an OTCBB company and that the purpose of the account ws to trade in speculative OTCBB stock. He was also aware that s brother, had a regulatory history. 15. There was no comment or notation on the NAAF for s Account regarding s regulatory history. 16. On or about July 24, 2003, opened an account with the Respondent at Golden ( s Account ). The NAAF for s Account recorded the following: Date of Birth/Age: May 6, 56 Est. Net Liquid Assets: $200,000 Est. Net Fixed Assets: $200,000 Est. Total Net Worth: $400,000 Approximate Annual Income from All Sources: $50,000 Investment Objectives: Income: 0%, Long Term Growth: 0%, Short Term Trading: 0%, Speculative: 100%, Other 0% Account Risk Factors: Low 0%, Medium 0%, High 100% Investment Knowledge: Sophisticated Type of Business: Consultant Employer: Self-employed. 17. The Respondent either mailed or faxed the NAAF to to complete following which he reviewed the information thereon with. 18. The Respondent was aware that was previously a broker or trader and that he was no longer so employed because of the NASD judgment against him. 19. There was no comment or notation on the NAAF for s Account regarding s regulatory history.

5 At the time that s Account was opened, the Respondent was aware that the purpose of the account was to trade in highly speculative OTCBB securities. The Respondent was also aware that consulted with OTCBB companies to assist with acquisitions and financing for those companies. 21. Golden only became aware of s prior regulatory matters on or about June 27, 2005 when the British Columbia Securities Commission issued a production order to Golden on behalf of the SEC in respect of trading of certain shares. 22. The home telephone number recorded on each of the NAAFs for s Account and for s Account was the same. Further, the home addresses recorded on the NAAFs for each of s Account and s Account recorded the identical street address, city, province and postal code. Only s address indicated a unit number before the street address. 23. The Respondent was aware that and were brothers and that the address recorded on the NAAFs for their respective accounts was the identical street address. 24. The activity in both s Account and in s Account was 100% unsolicited. AVIC/EDLT 25. Avic Technologies Ltd. ( AVIC ), a public company whose shares were quoted on the OTCBB, was a Montreal, Quebec based development-stage enterprise incorporated in Delaware. Its initial intention was to participate in the building industry in China and other parts of Asia. In 2002, AVIC changed directions and intended to participate in the field of waste recycling. In 2003 the company changed directions again and intended to participate in the textile industry. In 2004, AVIC changed directions again, this time intending to participate in mineral exploration and mining. 26. East Delta Resources Corp. ( EDR ) was a private company owned by six shareholders, one of whom was. EDR, through its wholly-owned Canadian subsidiary, Amingo Resources Inc., ( Amingo ), was in the business of exploration and mining of gold and other precious metals, with a geographic focus on Southeast Asia and other developing countries from the former Soviet Union. EDR changed its name to Omega Resources Inc. ( OR ) on April 28, 2004., who had been the president of EDR, became the president of OR. also became a shareholder of OR. 27. An EDLT Quarterly Report for the period ended March 31, 2004, and filed on May 13, 2004, disclosed that, in February 2004, Amingo signed a Joint Venture Contract with a Province and a County in China to explore and mine gold within their territories. Amingo acquired the rights to develop a 72 square kilometer property and was eligible to earn up to 84% of the net revenues extracted from this property. The success of this venture was contingent on AVIC obtaining the necessary funding which was disclosed in a June 30, 2004 Current Report (filed on July 15, 2004) to be at least $10 million over the next 5 years.

6 On March 1, 2004, AVIC announced in a Current Report, its intention to change its corporate name to East Delta Resources Corp. ( EDLT ). This became a public filing on or about March 10, The actual name change took place on or about May 3, In the same March 1, 2004 Current Report, AVIC indicated that on February 3, 2004, it executed a share exchange agreement (the Acquisition Agreement ) with the EDR shareholders whereby AVIC would acquire all issued and outstanding shares of EDR in consideration for the issuance of an aggregate of 25,650,000 shares of the common stock of AVIC to the EDR shareholders. This transaction was to close in April A Preliminary Information Statement filed on March 23, 2004 and posted on the SEC website confirmed that the Acquisition Agreement would permit the company to undertake a new direction oriented toward mineral exploration and mining. That filing directed anyone with questions about the transaction to contact. 31. The Acquisition Agreement document that was announced in March 2004 was filed on Edgar on July 15, In that Agreement, the contact address for EDR was indicated as 1941 New York Avenue, Brooklyn, NY, This address is s Address as noted in SEC Release No dated April 10, A final version of the Acquisition Agreement, reflecting the name changes of AVIC and EDR was entered into on or about June 30, This final version was filed on July 15, The parties to the Final Acquisition Agreement were OM (formerly EDR) and EDLT (formerly AVIC). The address indicated in the Final Acquisition Agreement for OR was s Address. 33. A registration statement filed on August 30, 2004 by EDLT announced that on August 26, 2004, EDLT had entered into a two year consulting agreement with. The consulting agreement described as a businessman and indicated that maintained an office at s Address. Pursuant to the agreement, s responsibilities were inter alia to commence an analysis of the financial, engineering and mining experiences of all Canadian and American mining entities operating in China and issue recommendations as to those that have most potential to have an interest to either partner, affiliate, provide engineering services and/or invest in EDLT s projects. AVIC/EDLT IN CONJUNCTION WITH AVIC/EDLT ACTIVITY IN THE AND ACCOUNTS 34. AVIC/EDLT was not a stock that was followed or recommended by Golden. 35. On or about February 25, 2004, 614,000 shares of AVIC (unrestricted and registered in s name) were received into s Account. In accordance with the Golden Compliance Manual, a questionnaire dated February 25, 2004 was completed by in respect of these shares. The questionnaire indicated inter alia that had held the shares for two months, he had received the shares as payment of fees and that during the past

7 - 7 - three months, he sold 150,000 of the same class of security, and that the shares were issues through a Regulation S offering. 36. At the time that the AVIC shares were delivered into s Account, AVIC was a development stage enterprise which had abandoned its previous business plan and was in the process of entering the textiles industry in China. AVIC was in need of financing to continue as a going concern. There were no other EDGAR filings in respect of AVIC until March 10, 2004, after the textile industry venture was abandoned and when the Acquisition Agreement was announced allowing the company to change their business focus to mineral exploration and mining. 37. AVIC changed its name to EDLT on May 3, The Final Acquisition Agreement, which closed on June 30, 2004, was filed on July 15, On or about July 22, 2004, 100,000 shares of EDLT (unrestricted and registered in s name) were received into s Account. In accordance with the Golden Compliance Manual, a questionnaire was completed by in respect of these shares. The questionnaire indicated inter alia that had held the shares for two months, that he acquired the shares through a private purchase and that he had sold 50,000 shares of the same class within the past three months, and that the shares were issued through a Regulation S offering. 40. On the same date, July 22, 2004, 30,000 shares of EDLT were delivered out of s Account. 41. s consulting agreement with EDLT was announced in an August 30, 2004 Edgar filing. 42. On or about August 31, 2004, 200,000 shares of EDLT were received into s Account. In accordance with the Golden Compliance Manual, a questionnaire dated August 31, 2004 was completed by. It provided that had held the shares for one week, and that he had received the shares as fees for services. RKET VOLUME PERCENTAGES 43. Between January 2004 and December 2004 (the Review Period ), total market volume for AVIC/EDLT shares increased. In the twelve months prior to the Review Period, AVIC was a thinly traded stock with total market volume of 143,500 shares or an average of 11,958 shares per month. During the Review Period, total market volume for AVIC/EDLT shares was 16,489,720 or an average of 1,374,143 per month. 44. During the Review Period, s Account and s Account were the only two accounts at Golden to trade AVIC/EDLT shares.

8 Beginning in February and March 2004, and began trading AVIC/EDLT shares. and traded a total of 6,899,000 shares of AVIC/EDLT during the Review Period, an average of 574,916 shares per month. This accounted for 41.84% of the total trading volume of AVIC/EDLT during the Review Period. 46. AVIC/EDLT shares traded for a total of 203 days during the Review Period with either or or both trading on 138 or 67.98% of those days. During the Review Period, there were 38 days where trading by or or both accounted for 70% or more of the total market volume for AVIC/EDLT shares. On 14 of those days, trading by, or both accounted for 100% of the total market volume for AVIC/EDLT shares. 47. During the Review Period, the closing price for AVIC/EDLT shares increased from $0.14 to $0.60 per share, an increase of approximately 329%. AND TAKING OPPOSITE SIDES OF THE RKET ON THE SAME Y 48. On 14 occasions during the Review Period, trading in AVIC/EDLT shares in the and Accounts involved and placing orders where one account would be on the buy side and the other on the sell side on the same trade date using the same market maker for both sides of the transaction. 49. These orders were prearranged and facilitated by the Respondent with trader JVH at market maker PBLC. The effect of these orders was to create a false appearance of trading volume and market interest in AVIC/EDLT shares and artificially affected the market price for the security. 50. The Respondent did not question these orders or trades. The following is a list of trades conducted in this manner: Account Name Trade Date 26-Feb Feb Feb- 04 Time Stamp R Time / Q Time Market Maker Bought Sold Price missing ticket 13:21:01 PBLC 125,000 $0.142 missing ticket 12:49:44 PBLC 30,000 $0.145 missing ticket 12:49:44 PBLC 40,000 $ , Mar- 04 8:02AM 11:08:43 PBLC 30,000 $ Mar- 04 8:06AM 11:12:00 PBLC 20,000 $ Mar- 04 8:23AM 11:25:01 PBLC 30,000 $ Mar- 04 8:33AM 11:35:43 PBLC 25,000 $0.170

9 Mar- 04 unknown 11:37:22 PBLC 5,000 $ , Mar- 04 9:34 AM 12:19:31 PBLC 50,000 $ Mar- 04 9:34 AM 12:43:55 PBLC 55,000 $ , Mar- 04 6:47AM 9:50:19 PBLC 50,000 $ Mar :37AM 14:42:56 PBLC 37,000 $ Mar :53PM 15:55:28 PBLC 50,000 $ Mar :24AM 13:28:41 PBLC 20,000 $ Apr- 04 9:18AM 12:23:54PM PBLC 15,000 $ Apr :38PM 15:45:52 PBLC 5,000 $ , Apr :01AM 14:03:31 PBLC 30,000 $ May- 04 9:56AM 12:57:15 PBLC 25,000 $ May :23PM 15:23:49 PBLC 25,000 $ , May :38AM 14:38:55 PBLC 25,000 $ May :14PM 15:14:46 PBLC 15,000 $ , Jul-04 9:13AM 12:13:13 PBLC 30,000 $ Jul-04 9:43AM 12:43:53 PBLC 15,000 $ Jul-04 9:43AM 12:43:53 PBLC 10,000 $ , Jul-04 9:26AM 12:26:53 PBLC 40,000 $ Jul-04 12:26PM 15:27:42 PBLC 20,000 $ ,000

10 Jul-04 11:09AM 14:14:55 PBLC 30,000 $ Jul-04 11:34AM 15:17:57 PBLC 20,000 $ , Jul-04 11:09AM 14:11:00 PBLC 20,000 $ Jul-04 11:28AM 14:29:03 PBLC 35,000 $ ,000 6-Aug-04 10:37AM 13:02:42 PBLC 20,000 $ Aug-04 10:02AM 13:34:57 PBLC 20,000 $ Aug-04 10:02AM 13:34:57 PBLC 5,000 $ Aug-04 10:02AM 13:34:57 PBLC 5,000 $ ,000 6-Aug-04 10:02AM 13:06:20 PBLC 25,000 $ Aug-04 10:59AM 14:00:11 PBLC 15,000 $ Aug-04 11:15AM 14:15:43 PBLC 5,000 $ Aug-04 11:15AM 14:15:43 PBLC 10,000 $ , Aug :36AM 13:37:00 PBLC 20,000 $ Aug :52AM 13:53:55 PBLC 30,000 $ , Aug :57AM 13:57:48 PBLC 10,000 $ Aug :21AM 14:49:23 PBLC 15,000 $ Aug :47AM 15:27:26 PBLC 10,000 $ Aug :26PM 15:39:48 PBLC 15,000 $ ,000 $ Aug- 04 8:40AM 11:41:40 PBLC 20,000 $ Aug- 04 8:40AM 11:41:40 PBLC 10,000 $ Aug- 04 8:53AM 12:21:52 PBLC 30,000 $ , Aug- 04 9:38AM 12:39:21 PBLC 17,000 $ Aug :05AM 13:05:29 PBLC 28,000 $ ,000

11 Sep :08PM 15:08:11 PBLC 30,000 $ Sep :22PM 15:24:15 PBLC 15,000 $ Sep :22PM 15:33:10 PBLC 15,000 $ , Sep- 04 8:36AM 11:42:16 PBLC 20,000 $ Sep- 04 8:44AM 11:44:40 PBLC 30,000 $ , Sep- 04 8:36AM 11:38:27 PBLC 35,000 $ Sep- 04 8:36AM 15:18:45 PBLC 25,000 $ , Oct :53AM 14:48:08 PBLC 40,000 $ Oct :57AM 14:57:00* PBLC 40,000 $ , Oct :45PM 14:53:53 PBLC 35,000 $ Oct :24PM 15:29:09 PBLC 35,000 $ ,000 * EX Time used rather than R Time/Q Time, since according to the Audit Trail report, this trade was reported out of sequence. 51. On or about July 21, 2006, the National Adjudicatory Council Review Subcommittee of the NASD accepted a Letter of Acceptance, Waiver and Consent ( AWC ) signed by the PBLC trader JVH in which JVH was barred from association with any NASD member in any capacity. 52. In the AWC, without admitting or denying the findings, JVH consented to the sanctions and to the entry of findings that, inter alia, he engaged in a series of pre-arranged and other manipulative trades, including trades with Canadian firms, primarily for the benefit of the Canadian accounts of and at Golden. The findings stated that JVH made a market in EDLT/AVIC, a thinly traded pink sheet stock, and moved his quotes and traded over 7.5 million shares of the stock during the Review Period, at the direction of, an individual barred by the NASD. 53. JVH confirmed that it was the Respondent who contacted him about these pre-arranged in-house cross transactions. In these instances, JH described that if he executed an order from the Respondent, the Respondent would, on the same day, give him a second order to offset the first order at a profit to JVH.

12 JVH also confirmed that while was not a client of PBLC, would nevertheless contact him frequently to ask about the bid, offer and volume of AVIC/EDLT shares. also recommended that JVH buy stock from Golden and sell stock to Golden. also asked JVH to either match or improve bid and offer prices on AVIC/EDLT which JVC did if it was profitable for him to do so. 55. JVH confirmed that sometime in 2004, the Respondent contacted him to inquire if he had heard from since the time that had had a heart attack. This surprised JVH as he had never used s name in discussions with the Respondent prior to such time. 56. Total gross commissions earned by the Respondent from the trading of AVIC/EDLT shares during the Review Period were $49, ( s Account $27, and s Account $21,886.40). GATEKEEPER 57. Golden s Compliance Manual, section 6.14 outlines The Gatekeeper Rule as follows: Security Regulators look to IAs to be the Gatekeepers within the securities industry. That is to say to be the first line of defense through their knowledge of the client and securities regulations to detect that the intention or effect of the trading done by a client would be in breach of the securities act or impugn the integrity of the market place. IAs are in the best position to be aware of potential signs of market manipulation and any market scheme at its outset, because of their knowledge of their clients and their trading patterns. The Exchange, in assessing whether an IA is participating in any market scheme will ask the question; [sic] Did you know or ought you to have known that there was a scheme afloat? Wilful [sic] blindness on the part of the IA may be constructed [sic] as a failure to meet Know Your Client obligations. 58. The Respondent was aware of his gatekeeper obligations and in particular, to make sure that trades are done ethically and within the context of the market. 59. The Conduct and Practices Handbook Course ( CPH ), under the heading Concerns about Client Trading states: Registrants should be concerned not only about their own trading practices, but also about any unusual or suspicious trades by clients. The following are examples of situations in which trading activity may be a cause for concern. Should an IA have reason to believe that any such activity is in process, or has already taken place, the situation should be brought immediately to the attention of the branch manager or a compliance officer of the firm. Example A: A group of clients is trading in a particular security and the security is not one normally followed by the IA and/or the member firm s research department. The IA must particularly note if one of the group has trading authority for some or all of the others. In addition, the IA must remain alert to detect other indications that the clients are connected and are acting in concert. This might

13 include use of the same mailing address, same employer, or same last name or phone numbers. Similarities in the timing and pricing of orders would be another clue. Clients engaging in this conduct may be manipulating the price of the stock by trading among themselves or may be attempting to give the appearance of an active market. RESPONDENT S KNOWLEDGE 60. The Respondent knew or ought to have known the following facts: (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) (m) (n) (o) (p) The NASD barred from associating with any member firm as a result of s fraudulent misconduct at a former employer. As part of this fraudulent misconduct, opened fictitious accounts using s address. was similarly barred by the SEC as a result of s use of manipulative and deceptive practices in a scheme to defraud the market for a particular OTCBB stock; As a result of s regulatory history, Wolverton required the Respondent to treat s account at Wolverton with care; and are brothers; and recorded the same phone numbers on their respective NAAFs at Golden; and recorded virtually identical residential addresses on their respective NAAFs; was closely involved with EDR/OM and with AVIC/EDLT; was a consultant for AVIC/EDLT; The contact address for EDR/OM was the same address noted for in the disciplinary releases; AVIC/EDLT was not a stock followed or recommended by Golden; AVIC/EDLT was a development stage enterprise with no assets save for small amounts of cash revenues during the Review Period; s Account and s Account were the only accounts at Golden that traded in AVIC/EDLT; s Account and s Account were placing pre-arranged orders on opposite sides of the market for AVIC/EDLT on the same day, thereby creating a false appearance of trading volume and market interest in AVIC/EDLT; Trading of AVIC/EDLT shares in s Account and in s Account accounted for a large portion of the market volume in AVIC/EDLT shares; All trades of AVIC/EDLT were unsolicited; Physical certificates for large quantities of AVIC/EDLT were deposited into each of s Account and s Account; RRs have gatekeeper obligations. 61. The Respondent facilitated transactional activity in s Account and s Account without making diligent inquiries to ensure the legitimacy of the transactions, in circumstances which should have called the transactional activity into question because it appeared to be consistent with market manipulation, deception or other improper market related activity.

14 GENERAL PROCEDURAL TTERS 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:

15 (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) (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.

16 TED at Vancouver, this day of February, Warren Funt Vice President, Western Canada INVESTMENT DEALERS ASSOCIATION OF CANA Suite 2800, 1055 West Georgia Street Vancouver, BC V6E 3R5