Settlement Agreement: In the Matter of David Deonarine Singh
R.S.O. 1990, c. S.5, AS AMENDED (the "Act")
AND
IN THE MATTER OF
DAVID DEONARINE SINGH
SETTLEMENT AGREEMENT
I. INTRODUCTION
1. In a Notice of Hearing (the "Notice") issued by the Ontario Securities Commission(the "Commission") on October 14, 1999, the Commission announced that itproposed to hold a hearing to consider whether, pursuant to section 127(1) of theSecurities Act (the "Act"), it is in the public interest for the Commission:
a. to make an order that the registration of the Respondent, Clifford Paul Tindall("Tindall") be terminated, suspended or restricted for such period as theCommission may order or that terms and conditions be imposed on hisregistration;
b. To make an order that the Respondents cease trading in securities,permanently or for such time as the Commission may direct;
c. To make an order that one or both of the Respondents be reprimanded;and/or
d. To make such order as the Commission may deem appropriate.
II. JOINT SETTLEMENT RECOMMENDATION
2. Staff of the Commission ("Staff") agree to recommend settlement of the proceedinginitiated in respect of the respondent David Deonarine Singh ("Singh") by the Noticein accordance with the terms and conditions set out below. Singh consents to themaking of an order against him in the form attached as Schedule 'A' on the basis ofthe facts set out below.
III. STATEMENT OF FACTS
Acknowledgment
3. For the purposes of this proceeding, and of any other proceeding commenced by asecurities regulatory agency, Singh agrees with the facts set out in this Part III.
Facts
Singh's Conduct in Relation to Tindall
4. Singh was, at all material times, registered under the Act as the President andSecretary of Fortune Financial Corporation ("Fortune"), which was at the material timea registered securities dealer, and of Fortune Investment Corp. ("FIC"), which was atthe material time, a registered mutual fund dealer. Singh was the branch managerin the office at which Tindall worked. Singh was also the ultimately designatedperson with the Montreal Exchange, and Supervisory Procedures Officer with theCommission for these registrants.
5. Tindall was, at all material times, registered under the Act as a salespersonemployed by Fortune. Tindall was also, at all material times, registered under theAct as a Vice President, a Director, or as an Executive Vice President and Directorof Fortune.
6. From November 1994, to November 1995, Tindall solicited his Fortune clients toinvest monies in promissory notes issued by Jack Rashid ("Rashid"), a relative ofTindall, and later Advanced Radar Technologies Inc. (Canada) ("ART Canada"), acompany that Tindall had incorporated. The monies raised were to be used tofinance a radar braking technology (hereinafter referred to as "ART") developed byRashid's family.
7. The promissory notes were "securities". These securities had not been previouslyissued. The sale of the securities therefore constituted a distribution. No prospectuswas filed with or received by the Commission and no prospectus exemption wasavailable. Tindall's activity was therefore in contravention of subsection 53(1) of theAct.
8. In early July, 1995, after Tindall had a number of his clients invest in ART, Tindalladvised Singh of his activities of actively soliciting his Fortune clients to invest in ART.Singh knew or ought to have known that Tindall's activities were improper. Ratherthan taking steps to ensure that no clients had been prejudiced or harmed by theseactivities, and taking measures to ensure that Tindall did not engage in any furthermisconduct, Singh suggested that Tindall make sure there were "properdocumentation between him [Tindall] and his clients as to what was going on" andthat Tindall "have the proper documents drawn up." Singh further suggested thatTindall call Fortune's securities lawyer.
9. Tindall subsequently incorporated a company called ART (Canada) for which heissued promissory notes which bore altered dates and other false information. Thesenew promissory notes gave appearance that the ART investment could benefit fromthe commercial paper exemption contained in clause 35(2)4 and paragraph 73(1)(a)of the Act.
10. The securities sold by Tindall were not approved by his sponsoring dealer, Fortune.Tindall brought it to Singh's attention that the ART investment might also be unlawful.Upon learning this, Singh failed to take adequate steps to prevent Tindall from sellinginvestments that were neither approved by Fortune nor in compliance with Ontariosecurities law.
11. In July 1995, First Marathon Securities Ltd. (now National Bank Financial Corp.)("FMSL"), Fortune's carrying broker, became aware of Tindall's involvement withART and expressed serious concerns. A meeting was held on July 12th, 1995, inwhich Tindall made a number of representations to FMSL, each of which was untrue.At a subsequent meeting held on October 31st, 1995, Tindall admitted to having liedto FMSL previously. Specifically, Tindall admitted to lying with regard to the numberof clients he had involved in ART; the nature of the investment; and his remunerationin respect to the ART investment. Singh, having been made aware that Tindall hadlied to FMSL, then took no steps to discipline, control or monitor Tindall.
12. It was subsequently discovered that ART was a fraud. By that time, Tindall hadraised in excess of US $2.3 million from 41 clients. None of Tindall's clientsrecovered any funds, with the exception of Tindall's brother and one other.
13. Singh failed to adequately address all client complaints made to Fortune in respectof Tindall's activities. In some cases Singh did not respond to the complaints at all.
Other Conduct
14. Singh permitted representatives of Fortune who were registered to sell only mutualfunds to trade securities for which they were not registered, by allowing them to usehis representative number. Singh then paid part or all of the commission to therepresentative by way of personal cheque.
15. Singh's assistant instructed a sales representative who was transferring to Fortunefrom another dealer to place trades using the code of the Vice-President ofCompliance, without that individual's knowledge.
16. In December 1996, Singh purchased 150,000 shares of O'Donnell InvestmentManagement Corporation. The shares were issued pursuant to a private placementand were subject to a hold period that expired on May 13, 1998. Singh sold all ofthe shares between May 28 and June 4, 1997. In doing so during the hold period, hissale of shares was therefore a distribution, pursuant to subsection 72(4) of the Act.
17. Singh's conduct as set out above contravened Ontario securities law and wascontrary to the public interest.
IV POSITION OF SINGH
18. Singh's position as provided to Staff is described below.
19. In or around July 1995, Singh was informed by Tindall that Tindall had introducedsome of his clients to a relative in Detroit for a private investment. Tindall told Singhthat ART had nothing to do with Fortune, or FMSL.
20. At the time, Singh believed Tindall's representations about his involvement with ART.Singh suggested to Tindall that he should obtain a legal opinion to ensure that theinvestors in ART were provided proper documentation to reflect their investment.Singh further suggested that Tindall should inform the OSC about his activities withrespect to ART.
21. After being informed about ART, Singh relayed the information to Jennifer Dewling,VP of Operations at Fortune and suggested that FMSL should also be informed.Each of Dewling and Singh contacted FMSL.
22. On July 17, 1995, Tindall provided FMSL with a written statement concerning hisactivities in ART. Tindall's statement indicated in part that there were only fourindividuals who had invested in ART, that he had not raised or assisted in raising anyother funds for ART and that he had not received nor had he been promised anyremuneration from Rashid or ART. Tindall certified that the information contained inthe statement was accurate and complete. Tindall undertook to keep both FMSL andFortune informed of any changes.
23. The Vice-President of Compliance approached Singh to discuss the use of Singh'scode by other representatives. Upon being advised by the Vice-President ofCompliance that this was improper, Singh took steps to stop this practice.
24. On or about June 25, 1997, Fortune's Vice-President of Compliance brought toSingh's attention the sale of O'Donnell Investment Management Corporation sharesthat were in violation of the hold period. Singh offered to reverse the trade andagreed to cooperate with the Commission in correcting the error promptly. The Vice-President of Compliance then wrote a letter to the Commission, dated August 11,1997, stating that Singh was anxious to have the issue cleared up and was willing todo whatever the Commission felt was necessary to correct the situation.
V. TERMS OF SETTLEMENT
25. Singh agrees to the following terms of settlement:
(i) pursuant to clause 6 of subsection 127(1) of the Act, Singh will bereprimanded by the Commission;
(ii) pursuant to clause 2 of subsection 127(1) of the Act, Singh will cease tradingin securities for a period of five years from the date of approval of thissettlement agreement with the exception of trading in personal accounts heldin his name only;
(iii) pursuant to clause 8 of subsection 127(1) of the Act, Singh is prohibited frombecoming or acting as a director or officer of any issuer for a period of fouryears effective the date of the Order of the Commission approving theproposed settlement agreement herein, resigning from any such positionwithin sixty days of the making of this order; and
(iv) Singh will make a payment, within sixty days, of $25,000 to the Commissionin respect of a portion of the Commission's costs with respect to this matterforthwith.
VI. CONSENT
26. Singh hereby consents to an order of the Commission incorporating the provisions ofPart IV above in the form of an order annexed hereto as Schedule "A".
VII. STAFF COMMITMENT
27. If this settlement is approved by the Commission, Staff will not initiate any complaintto the Commission or request the Commission to hold a hearing or issue any otherorder in respect of any conduct or alleged conduct of Singh in relation to the facts setout in Part III of this agreement.
28. If this settlement is approved by the Commission, Staff will not initiate any otherproceeding against Singh in relation to the facts set out in Part III of this agreement.
VIII. PROCEDURE FOR APPROVAL OF SETTLEMENT
29. Approval of the settlement set out in this agreement shall be sought at the publichearing of the Commission scheduled for July 31, 2000, or such other date as maybe agreed to by Staff and Singh, in accordance with the procedures described in thisagreement.
30. Staff and Singh agree that if this agreement is approved by the Commission, it willconstitute the entirety of the evidence to be submitted respecting Singh in this matter,and Singh agrees to waive his rights to a full hearing and appeal of the matter underthe Act.
31. Staff and Singh agree that if this settlement is approved by the Commission, no partyto this agreement will make any public statement inconsistent with this agreement.
32. If, at the conclusion of the settlement hearing, and for any reason whatsoever, thissettlement is not approved by the Commission or an order in the form attached asSchedule 'A' is not made by the Commission:
(a) each of Staff and Singh will be entitled to all available proceedings, remediesand challenges, including proceeding to a hearing of the allegations in theNotice and Statement of Allegations, unaffected by this agreement or thesettlement negotiations;
(b) the terms of this agreement will not be referred to in any subsequentproceeding, or disclosed to any person, except with the written consent ofStaff and Singh or as may be required by law; and
(c) Singh agrees that he will not, in any proceeding, refer to or rely upon thisagreement or the negotiation or process of approval of this agreement as thebasis for any attack on the Commission's jurisdiction, alleged bias,appearance of bias, alleged unfairness or any other remedies or challengesthat may otherwise be available.
VII. DISCLOSURE OF AGREEMENT
33. Counsel for Staff or for Singh may refer to any part or all of this agreement in thecourse of the hearing convened to consider this agreement. Otherwise, thisagreement and its terms will be treated as confidential by all parties to theagreement until approved by the Commission, and forever if, for any reasonwhatsoever, this settlement is not approved by the Commission, except with thewritten consent of all parties or as may be required by law.
34. Any obligations of confidentiality shall terminate upon approval of this settlement bythe Commission.
VIII. EXECUTION OF AGREEMENT
35. This agreement may be signed in one or more counterparts which together shallconstitute a binding agreement.
July 25th, 2000.
"DAVID DEONARINE SINGH"
STAFF OF THE ONTARIO SECURITIES COMMISSION