An application for a hearing and review of this decision was made to the Commission pursuant to section 8 of the Securities Act (Ontario), and all notices, orders, and decisions relating to that application can be found in ‘OSC Proceedings’: The Commission’s final decision dismissing the application can be accessed by clicking here.
In the Matter of Staff’s Recommendation
for the Refusal of Registration
of Anna Pyasetsky
Opportunity to be Heard by the Director
Section 31 of the Securities Act, R.S.O. 1990,
c. S.5, As Amended (the Act)
1. For the reasons set out below, my decision is to refuse the registration of Anna Pyasetsky (the Applicant).
2. On December 19, 2011 OSC staff (Staff) indicated that it would be recommending that the Director refuse the application made by the Applicant for registration as a dealing representative of a mutual fund dealer (the Application). By letter dated January 30, 2012, Staff articulated additional grounds for its recommendation. Pursuant to section 31 of the Act, the Applicant is entitled to an opportunity to be heard (OTBH) before I make a decision in my capacity as Director.
3. The OTBH proceeding was held on February 10, 2012. My decision is based on the verbal submissions and exhibits (including a transcript of a voluntary interview with the Applicant pursuant to section 33.1 of the Act) tendered at the OTBH by Mark Skuce, Legal Counsel, Compliance and Registrant Regulation Branch of the Ontario Securities Commission (OSC) for Staff, and Erin Hallock for the Applicant.
4. Staff’s recommendation to refuse the Applicant’s registration is based on five grounds. The first two grounds were set out in Staff’s letter of December 19, 2011; the remaining three grounds were set out in Staff’s letter dated January 30, 2012:
- The Applicant knowingly failed to disclose in the Application that the Applicant was previously employed by Global Energy Group, Ltd. (Global);
- On November 16, 2011, the Applicant was informed by Staff that the employment section of her Application (“Item 11 - Previous Employment and Other Activities”) was incomplete and needed to be updated; however, it was not updated;
- Staff alleges that by trading in securities of New Gold Limited Partnership (New Gold), the Applicant conducted registerable activity without registration, contrary to s. 25(1) of the Act;
- Staff alleges that on November 16, 2011, during an examination under affirmation the Applicant falsely represented to Staff that she had never heard the terms Global Energy Limited or New Gold and falsely denied that she had worked for a company bearing the name Global, contrary to subsection 122(1) of the Act; and
- Staff alleges that the Applicant’s registration would be objectionable in light of her employment with Global, her failure to disclose that employment in the Application, and her misrepresentations to Staff regarding that employment.
At the OTBH, Staff withdrew the second ground.
5. The crux of Staff’s case is that the Applicant knowingly concealed her employment as a telemarketer with a firm called Global. Global operated an unregistered sales office (also at times referred to as a “boiler room”) trading units of limited partnerships called New Gold LLP to members of the public. OSC Staff alleged that between June 2007 and June 2008 approximately $14.75 million (U.S.) worth of New Gold securities were sold to members of the public. One of Global’s principals, Vadim Tsatskin, pled guilty on April 5, 2011 to one count of fraud contrary to section 126.1 of the Act and was subsequently sentenced in the Ontario Court Justice to three years in jail.
6. Staff also alleges that during the course of an interview with Staff that took place on November 16, 2011 in connection with the registration process (the Interview), the Applicant lied to Staff by denying that she had ever heard of Global or New Gold.
Suitability for registration generally
7. Subsection 25(1) of the Act requires any person that trades 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. Therefore, determining whether an applicant should be registered is an important component of the work undertaken by the OSC.
8. Subsection 27(1) of the Act provides that the Director shall register a person unless it appears to the Director that the person is not suitable for registration or that the registration is otherwise objectionable. In many cases, including the recent case Re Ittihad Securities Inc., (2010) 33 OSCB 10458, the Director has discussed the well-established criteria that have been identified by the OSC when considering whether an applicant is suitable for registration:
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, which provides that in determining whether a person is suitable for registration, the Director shall consider whether the person has satisfied the requirements prescribed in the regulations relating to proficiency, solvency and integrity, and such other factors as the Director considers relevant.
9. The determination of whether an applicant’s registration may be otherwise objectionable goes beyond the three suitability criteria above. Prior OSC decisions have held that registration is “otherwise objectionable” if it is determined, with reference to the purposes of the Act, that it is not in the public interest for the person or company to be registered. For example, see Re Mithras Management Ltd., (1990) 13 OSCB 1600.
The primary issue in this proceeding relates to the integrity of the Applicant.
10. After considering the submissions of Staff and the Applicant and after closely considering the Applicant’s testimony, including her candour and demeanour in answering questions posed by Staff and myself at the OTBH proceeding, I have concluded that the registration of the Applicant should be refused. I find that the Applicant knowingly omitted her employment history with Global and that in the course of the registration application process she made numerous misrepresentations to OSC Staff. Accordingly, I find that the Applicant lacks the requisite integrity to be a securities professional.
11. In particular, I was troubled by the veracity of the responses provided by the Applicant to Staff at the Interview. The following are extracts from the Interview (Interview Transcript):
Interview Transcript, paragraph 146:
Q. Anna, I have got some information that in 2008 you were employed by a company called Global Energy.
Q. You were never employed by a company called Global Energy?
A. No. Who are they and what do they do?
Q. Well, I’m asking the question. Did you work for this company?
A. To the best of my knowledge, no.
Q. Let me ask you this question: have you ever sold securities before?
A. No, never, ever, ever.
Q. Okay. Bear with me for a second. All right. I have information that you were employed by Global Energy. You worked as a telemarketer for this company. Your employment ceased with that company on June 25, 2008, when the OSC executed a search warrant of that business.
A. There was a small -- yeah, there was a time period where I was working as a telemarketer for maybe a couple of months at some company that required us to just call on clients and ask them if they would be interested in investing in -- speaking to an investment representative. That’s all I got told. I was just making money after school. And that’s -- I have never sold anything to -- yes, that was definitely something that I cannot forget because I have never encountered anything like that. But I was just working with my friend, and we were just a normal workplace. And then one day, all of a sudden, there came in CRA and asked everybody to stop what they were doing and sort of took out -- take out -- give our information and everything. But the officer reassured us that -- he reassured us that we were okay because we weren’t selling anything. They had to investigate what was going on in the company. So I don’t know. There was something -- maybe somebody was doing something wrong in the company. I don’t know what went on from there, but I have stopped working there after such a thing.
Interview Transcript, paragraph 159:
A. I did not even remember that I worked there. Because, as you know -- I remember that happening because I was there when they’ve -- but I honestly didn’t even recall -- you told me now Global Energy, and I’m like, who is -- I didn’t even remember who that was or what they were.
Q. No, I know. But when I asked you about it you said, there’s no way I can forget that; it was a big event. Somebody came in and raided the place, right, and asked questions?
A. Well, I remember that. But when I was doing the application, like I said, it was just in a rush, and I was trying to remember all the small jobs that I have had, and I just missed out --
Q. So when you filled this out, you remembered at the time that you had had that job; is that right, but you couldn’t remember the name of the company?
A. No, I didn’t remember that I was even working there. I didn’t even remember.
Interview Transcript, paragraph 298:
Q. -- I want to be very clear and very specific about this. At the time you filled this out [the application for registration], you remembered that -- you knew that you had worked for this company?
A. No, no. Actually, at the time where I filled this out, I actually didn’t even remember that. Like, you know what I mean? I have the same thing happening in regards to many things... So when I filled out this application, like, I haven’t even thought about that job. I didn’t even -- I didn’t even remember having it, okay. If I knew this would be be such a big issue, I would have listed it... .
12. At the OTBH proceeding the Applicant acknowledged that as a telemarketer she would read from a script that included references to Global. Over the course of her employment as a telemarketer with Global she acknowledged that she would have had occasion to make several hundred telephone calls and when she got through to the recipient she would have read from a script along the following lines (OTBH transcript, paragraph 95):
Hi there. My name is Anna and I’m calling you on behalf of my company, Global Energy Group. How are you today? Good to hear. I’ll keep this brief. Global Energy is a venture oil/gas company. We do develop [sic] drilling in Lexington, Kentucky and we are introducing ourselves to some of the business/owners of (province) with an information package regarding our company, where we drill, how we drill and how you get involved if interested.
13. In light of being employed to read this script and the traumatic event (as she recalled it) of her office being raided, I find it difficult to accept that when she filled out her initial registration application she simply forgot that she ever worked at Global. When interviewed by Staff, I do not believe that she was truthful in her responses to Staff when she claimed she had never heard of Global.
14. Moreover, at the OTBH proceeding, the Applicant further impugned her integrity by claiming she technically never worked at Global, but instead for GVC Marketing, which was the firm that was paying her telemarketing salary. However, even her amended registration application - which she acknowledged filling out herself after the Interview with Staff - stated under ‘previous employment’ that she worked for “GVC Marketing Inc./Global Energy Group”.
15. Another particularly troubling aspect of the Applicant’s testimony, which in my view also impugned her integrity, was her claim - made for the first time at the OTBH proceeding - that she intentionally left off her initial registration application jobs with less than four months in duration, pursuant to her interpretation of an instruction in the application form. When asked why she did not explain this reason at the Interview, she claimed that at the Interview she forgot that she relied on this section of the application form as the basis for not disclosing her employment with Global.
16. Counsel for Staff referred me to several decisions. Re Thomas, (1972) OSCB 118 is instructive with respect to the Commission’s historic perspective regarding the importance of the application process. This case involved a young man that applied for and received registration as a securities salesman, but in his application he failed to disclose the existence of a criminal charge which he had incurred some years earlier. As a result, the Commission reviewed his continued fitness for registration, cancelled his registration, and in so doing, the panel wrote the following at page 120:
The keystone to the registration system is the application form. A desire and an ability to answer the questions in it with candour in many respects can be said to be the first test to which the applicant is put.
17. In my view, not only did the Applicant fail the first test contemplated by the Commission in Re Thomas, she failed a second test by virtue of the responses she provided to Staff at the Interview. And she failed a third test by not being forthcoming at the OTBH proceeding.
18. In my view, for the reasons set out above, the Applicant has not demonstrated the requisite integrity to be licensed to deal with the investing public.
19. Although Staff also alleged as an independent ground for refusal of registration the fact that the Applicant engaged in registerable activity in breach of subsection 25 of the Act (see paragraph 4(iii) above), I do not find it necessary to make a finding regarding whether her telemarketing activities constituted registrable activity.
20. As an alternative argument, counsel for the Applicant invited me to impose terms and conditions rather than an outright refusal of registration. In following Re Jaynes, (2000), 23 OSCB 1543, I do not believe that terms and conditions would be appropriate in a case such as this one, where there is a fundamental issue with the integrity of the Applicant.
21. Counsel for the Applicant also referred me to Re Trafalgar Associates Limited, (2010) 33 OSCB 1197 and Re Solovyev, (2008) 31 OSCB 8759. Re Trafalgar is distinguishable from the case at hand, as I am not basing my decision on the carelessness of the Applicant. Re Solovyev involved forgery by a registrant, where terms and conditions were imposed on the registrant. I note that Re Solovyev pre-dates the Director’s power to suspend found in section 28 of the Act, which came into effect in September 2009 as part of the reformulation of the registration regime in Ontario and across Canada. In my view, terms and conditions are not appropriate for cases involving forgery (see Re Obasi, (2011) 34 OSCB 3012 and Re Dipronio, (2011) 34 OSCB 6345).
22. For the reasons set out above, my decision is to refuse the registration of the Applicant as a dealing representative of a mutual fund dealer.
“Erez Blumberger “
Compliance and Registrant Regulation Branch
Ontario Securities Commission
February 28, 2012