IN THE MATTER OF THE SECURITIES ACT,
R.S.O. 1990, c. S.5, AS AMENDED
IN THE MATTER OF
STATEMENT OF ALLEGATIONS OF STAFF OF
THE ENFORCEMENT BRANCH OF THE ONTARIO SECURITIES COMMISSION
Staff of the Ontario Securities Commission ("Staff") make the following allegations:
1. Mikael Prydz ("Prydz") is an individual who resides in Waterloo, Ontario. From May7, 1992 to December 22, 1992 and from January 18, 1993 to July 1, 1996 Prydzwas registered with the Ontario Securities Commission (the "Commission") to sellmutual fund securities and limited market products. Prydz' registration wasterminated on July 1, 1996 and since that date he has not been registered in anycapacity with the Commission.
Previous Commission Proceeding
2. On January 31, 2000, a Notice of Hearing and Statement of Allegations were issuedby the Commission against Prydz (the "first proceeding"). The first proceedingmade allegations that Prydz sold securities of two corporations, 1149932 OntarioInc. ("114") and Investors Retirement Holdings Inc., in violation of the registrationand prospectus requirements of the Act.
3. The first proceeding also alleged that Prydz falsely represented to investors that hewas registered with the Commission and held the qualifications to engage inportfolio management.
4. It was also alleged in the first proceeding that Prydz made misrepresentations toinvestors and omitted to disclose to them pertinent information. In addition, Prydzsold speculative securities to investors and failed to assess the suitability of thoseinvestments to the needs of the investors.
The Settlement Agreement
5. On January 31, 2000, Prydz executed a settlement agreement with Staff.
6. In the settlement agreement, Prydz agreed with the allegations of Staff as set outin the Statement of Allegations. In particular, Prydz made the following admissions:
a. The sale of shares of 114 was a distribution for which no prospectus wasfiled or receipted and for which none of the exemptions from the prospectusrequirements was available;
b. No exemption from the registration requirements was available for the saleof shares of 114;
c. Prydz sold securities of 114 without registration;
d. The business venture pursued by 114 failed and all of the money was lost.Prydz falsely represented to investors that 114 was still viable when he knewthe money had been lost; and
e. Prydz ought to have known that information he received from the promotersof 114 that the investment was intact was false.
7. As part of the settlement, Prydz agreed to the following sanctions:
a. pursuant to clause 2 of subsection 127(1) of the Act, Prydz will be prohibitedfrom trading in securities for a period of five years from the date of theCommission's Order;
b. pursuant to clause 6 of subsection 127(1) of the Act, Prydz will bereprimanded;
c. Prydz undertakes that he will never reapply to the Commission forregistration in any capacity;
d. Prydz will send a letter within 10 days from the date of the Commission'sOrder in a form to be approved by Staff of the Commission to each of theinvestors to whom he sold securities as outlined in paragraphs 6 and 16above. The letter will identify his terms of settlement with the Commission,the status of the investor's investment and will contain a recommendationthat the investor seek professional advice with respect to that investment;and
e. Prydz undertakes to remove within 10 days of the Commission's Order alllanguage from the website of his current employer which refers to hisinvolvement in the investment industry.
8. The Commission approved the settlement agreement on February 8, 2000 andmade an order which incorporated the terms of settlement outlined in paragraph7(e) above.
9. The settlement agreement contained the following clause in paragraph 33:
If this Settlement Agreement is approved by the Commission, neither of theparties to this Settlement Agreement will make any statement that isinconsistent with this Settlement Agreement.
10. As outlined in paragraph 7(e) above, Prydz agreed to remove language from thewebsite of his employer which referred to his involvement in the investmentindustry. Despite a warning from Staff by letter dated March 10, 2000 that thelanguage had not been removed, the impugned language was not removed from thewebsite until after March 17, 2000 in violation of the settlement agreement and theCommission's order.
Letter to Investors
11. As outlined in paragraph 7(d) above, Prydz agreed to send a letter to investors tobe approved by Staff of the Commission. A letter dated February 25, 2000 wasapproved by Staff, was signed by Prydz and was sent out to investors by Staff.
12. The names of investors to whom the letter was sent were identified by Staff frominformation provided by Prydz. Despite requests from Staff on at least twooccasions to verify the completeness of the investor list, Prydz never provided Staffwith any additional names.
13. The names of at least two investors who purchased shares of 114 and InvestorsRetirement Holdings Inc. were not included in the list of investors to whom Staffsent letters. Prydz never advised Staff of the identity of these investors.
14. Unknown to Staff, Prydz sent another letter to investors dated February 28, 2000(the "second letter") which was designed to negate the impact of the letter approvedby Staff. In the second letter, Prydz made the following representations whichcontradicted the admissions he made in the settlement agreement:
a. It is the position of the OSC that shares were not issued in accordance withtheir guidelines. This statement contradicted Prydz' admission that he tooagreed that shares of 114 were issued in contravention of the prospectusrequirements of the Act.
b. Prydz had a limited market dealer licence when funds were being raised butgave that up as he had a "mandated contract" with Antaglobal (the promoterof 114). This suggests that Prydz was never in violation of the registrationrequirements of the Act which contradicts his admission to the contrary in thesettlement agreement.
c. The funds invested in 114 are in an escrow account and preparations will bemade to return the funds to all investors. This directly contradicts Prydz'admission in the settlement agreement that all funds in 114 were lost. Thisstatement also exacerbates the misconduct addressed in the first proceedingwherein Prydz admitted that he falsely represented to investors that 114 wasstill viable when he knew the money was lost.
d. Prydz agreed with the OSC that he contravened their guidelines as "that'sall he could do" in protecting the funds of the investors and he would do thesame thing again. This statement suggests that Prydz does not accept astrue the admissions he made in the settlement agreement but made them forsome ulterior purpose. This contravenes the purpose and intent of thesettlement agreement.
15. In addition to violating the settlement agreement, the conduct of Prydz in sendingthe letter to investors shows a complete disregard for the Commission's process.The second letter is clearly designed to confuse investors and to undermine theintended effect of the terms of settlement in the first proceeding.
Conduct Contrary to the Public Interest
16. Prydz acted contrary to the public interest by:
a. Violating the terms of the settlement agreement and order of the Commissionby failing to remove language from the website of his employer;
b. Failing to provide Staff with a complete list of investors to give effect to hisundertaking to send a letter to all investors;
c. Sending a letter to investors which contradicted his admissions in thesettlement agreement contrary to the provisions of the settlement agreement;and
d. Showing a complete disregard for the Commission's process.
17. Such other allegations as Staff may make and the Commission may permit.
DATED at Toronto this 22nd day of March, 2000.