In the Matter of Staff’s Recommendation
for the Refusal of Registration
of Alexander Adams
Opportunity to be Heard by the Director
Section 31 of the Securities Act
1. For the reasons outlined below, my decision is to grant the registration of Alexander Adams.
2. On July 14, 2011, Staff recommended Adams’ application for registration as a representative in the category of dealing representative for a sponsoring exempt market dealer (EMD) be refused. Pursuant to section 31 of the Securities Act (Ontario) (Act), Adams is entitled to an opportunity to be heard (OTBH) before a decision is made by me, as Director. My decision is based on the verbal submissions of Mark Skuce, Legal Counsel, Compliance and Registrant Regulation Branch for Staff, the verbal submissions of Adams (on his own behalf), and the testimony of three individuals from Shorcan Brokers Limited (the sponsoring EMD).
3. Staff claims that Adams knowingly made a misrepresentation to Staff, and that he did not complete his registration application with due care, by stating in his application that he completed the Canadian Securities Course (CSC) when in fact he had only completed Part 1 of the CSC. He also used the incorrect CSC completion date in his application. Adams claims that he made an honest mistake, that he did not do so knowingly or intentionally, and that he had no malicious intent. And when contacted by Staff, Adams immediately wrote (and passed) Part 2 of the CSC.
Suitability for registration generally
4. Subsection 25(1) of the Act requires any person that engages in, or holds himself out as engaging in, the business of trading in securities to be registered in the relevant category. As set out in numerous prior decisions, a registrant is in a position to perform valuable services to the public, both in the form of direct services to individual investors and as part of the larger system that provides the public benefits of fair and efficient capital markets. A registrant also has a corresponding capacity to do material harm to individual investors and to the public at large. Determining whether an applicant should be registered is thus an important component of the work undertaken by the OSC.
5. Subsection 27(1) of the Act provides that the Director shall register the person unless it appears to the Director that the person is not suitable for registration or that the registration is otherwise objectionable. In the recent case of Ittihad Securities Inc., Re (2010) 33 OSCB 10458, I, as Director, stated that:
The OSC has, over time, articulated three fundamental criteria for determining suitability for registration – integrity (which includes honesty and good faith, particularly in dealings with clients, and compliance with Ontario securities law), proficiency, and solvency. These three fundamental criteria have been codified in subsection 27(2) of the Act…”
6. The issue at hand is Adams’ integrity.
7. My decision is to grant Adams’ registration as a representative in the category of dealing representative for a sponsoring EMD. I was convinced that the Adams made an honest, somewhat careless, and unfortunate mistake in completing his registration application by stating that he had completed the CSC when in fact he had not. In my view, Adams deserves a “second chance” to become a compliant registrant under the Act. It is my sincere hope that Adams has learned his lesson by having to appear before me in this OTBH to explain his actions and the reasons for the mistake in his registration application.
8. Staff pointed me to two decisions which they argued stood for the proposition that misrepresentations in a registration application should result in refusal of registration. In both cases, the misrepresentation related to missing disclosure related to a criminal record. Although disclosing incorrect information about completion of the CSC is indeed serious, I believe these cases can be distinguished from the case at hand. In the case of John Doe, Re (2010) 33 OSCB 1371, John Doe failed on three separate occasions to disclose his criminal records of indecent assault. In that case, the Director stated the following:
“In my view, one false statement is enough to discredit the Applicant’s credibility and raise an issue as to his integrity. In other words, one false statement is sufficient to result in the Applicant’s application for registration being denied on the basis that the Applicant lacks the requisite integrity required of a securities professional and is, therefore, not suitable for registration.
The matter before me, however, involves not only one false statement, but a chain of inaccurate and misleading disclosures provided by the Applicant.”
9. In the case of Michael Avram Thomas, Re (1972) OSCB 118, Thomas failed to disclose that he had been convicted of possession of drugs in a foreign country. In that case, the Commission stated:
“it is impossible to believe that Mr. Thomas did not know that he had been arrested, detained, fined and released for some offence…The answer to the question was deliberately made which resulted in a false statement… This lack of candour… is such that it goes to the heart of his fitness for continued registration”
10. In both the John Doe and Michael Avram Thomas cases, the lack of disclosure related to conviction of a criminal offence which presumably could not be easily forgotten by either applicant. In this case, I was convinced by Adams (and his character witnesses) that the misrepresentation in his registration application was inadvertent and not knowingly made as argued by Staff. However, I do think that Adams should have taken greater care in completing his application.
11. I also do not think that Staff made the case, as required under subsection 27(1) of the Act, that Adams’ was not suitable for registration or that his registration was otherwise objectionable.“Marrianne Bridge, FCA”
Deputy Director, Compliance and Registrant Regulation
Ontario Securities Commission
September 27, 2011