R.S.O. 1990, c. S.5, AS AMENDED




Staff of the Ontario Securities Commission ("Staff") make the following allegations:


1. Noram Capital Management, Inc. ("Noram") is and was at all material times, registered withthe Ontario Securities Commission (the "Commission") as an investment counsel portfoliomanager pursuant to Ontario securities law. Noram's registration is currently suspended byOrder of the Commission dated September 29, 1999 (the "Order"), details of which are morefully described below under Part C.

2. Andrew Willman ("Willman") is, and was, at all material times:

(a) registered with the Commission as an investment counsel portfolio manager pursuantto Ontario securities law;

(b) the only registrant employed by Noram;

(c) registered with the Commission as the President, Chief Executive Officer, tradingofficer and director and the supervisory procedures officer and branch manager atNoram; and

(d) the sole shareholder of Noram.

3. By decision dated March 8, 2000 (the "BCSC Decision"), the British Columbia SecuritiesCommission (the "BCSC") cancelled Noram's registration and ordered it to pay anadministrative penalty of $25,000, for failing to maintain the required level of working capital,filing misleading financial statements and filing financial statements late. The BCSC Decisionstated the following with respect to Noram:

It is clear from Noram's conduct that it is prepared to mislead theCommission as necessary for its own purposes, and that it has noregard for its obligations as a registrant under the Act and the Rules.This conduct is inconsistent with the requirements and expectationsthe Commission has of registrants. The registration requirements areintended to ensure that those who trade securities for the investingpublic are of high integrity and worthy of their clients' trust. This isespecially so of those registered in the portfolio manager category,who are entrusted with clients' funds to invest on their behalf.



B.1 Background

4. Until the suspension of Noram on October 2, 1999 in Ontario and on March 8, 2000 in BritishColumbia, Noram provided portfolio advice to clients in these provinces. Clients of Noram(the "Clients") entered into a wrap account services agreement (the "Wrap Agreement")pursuant to which Clients' funds were held by a registered dealer, First Marathon SecuritiesLimited (now National Bank Financial, the Correspondent Network ("NBF")) and Noramwas authorized to provide investment instructions to NBF on behalf of Noram's clients. TheWrap Agreement also provided Noram with discretionary authority over Clients' accounts,subject to the "Standard Investment Guidelines" section of the Wrap Agreement which is inthe form of a schedule to the Wrap Agreement ("Schedule A").

5. Schedule A to the Wrap Agreement is a standard form which sets out Clients' investmentobjectives for their accounts as follows:

1. Investment objectives for the Account:

  • Capital Safety
  • Income
  • Liquidity
  • Capital Appreciation

2. The investments in the Account are limited to:

  • Government bonds, both Canadian and foreign currencies denominations
  • Convertible securities, both Canadian and foreign
  • Treasury Bills, both Canadian and foreign

Schedule A also requires the Clients to "fill-in and initial" the following with respect toleveraging of the Clients' account:

The account is subject to the following leverage ratio ____________________(Please fill in and initial) with recognition of the attendant risk.

There is no explanation in the Wrap Agreement, with respect to the meaning of "attendantrisk".

6. Pursuant to section 20 of the Securities Act, R.S.O. 1990, c. S.5, as amended (the "Act"), acompliance review of Noram was conducted by Staff of the Commission ("Staff") inNovember, 1998. A compliance report dated May 17, 1999 (the "Compliance Report") wasdelivered by Staff to Noram which detailed a number of concerns that Staff had with respectto the operations of Noram. The Compliance Report required Noram to respond to Staff'sconcerns by June 28, 1999, which deadline was subsequently extended to July 27, 1999 at therequest of Willman.

7. Noram's response to the Compliance Report was received late at the Commission on July 29,1999. Noram's response failed to satisfactorily address the majority of concerns raised in theCompliance Report. Consequently, by letter dated November 2, 1999, Staff advised Noramthat its response did not adequately address the concerns raised in the Report and requesteda follow-up report by November 30, 1999. To date, Staff have not received a response totheir letter dated November 2, 1999. Many of the outstanding concerns relating to theoperation of Noram are detailed in the allegations set out below in paragraph 10.

B.2 Allegations Relating to Misleading Representations in Promotional Materials

8. In a variety of promotional materials, Noram made several representations to investors whichwere misleading and/or ambiguous and contrary to the public interest. Such representationsto investors included the following:

(i) that Noram's strategies aim to protect assets by investing only in guaranteed types ofinvestments;

(ii) that Noram's objective was to provide a steady flow of income as part of the totalreturn irrespective of market conditions;

(iii) that Noram's asset allocation was conservative;

(iv) that Noram pursued a disciplined asset allocation strategy rooted in the major classesof fixed-income securities: Government Bonds; U.S. and Canadian ConvertibleBonds; Foreign Currency Government Bonds;

(v) that by investing solely in bonds, Noram's strategy was financially conservative; andthat to minimize the risk, Noram invests solely in high grade bonds;

(vi) that Noram's tactical approach typically provides more upside than downsidepotential;

(vii) that Noram aims to select low-risk, high profit investment opportunities;

(viii) that Noram's operations are designed to serve sophisticated clients; and that Noramoffers private portfolio management to a select group of individuals; and

(ix) that Noram's strategy includes high capital safety.

9. Willman authorized, permitted or acquiesced in the conduct referred to in paragraph 8 above.

B.3 Allegations Relating to Improper Portfolio Management

10. Between February, 1993 and October 7, 1999, Noram and Willman failed to deal fairly,honestly and in good faith with Clients of Noram, did not act in the best interests of Clientsand otherwise acted contrary to the public interest. Among other things, Noram and Willman:

(a) failed to take adequate steps to ensure that securities bought and sold on behalf ofClients and that Noram's overall investment strategy were suitable or appropriate inview of the Clients' net worth, income, investment knowledge and experience andinvestment objectives and employment/retirement status;

(b) failed to disclose adequately to Clients the risks associated with the securities investedin by Noram on behalf of Clients and Noram's overall investment strategy;

(c) failed to disclose adequately, and in particular, that the securities invested in byNoram were highly risky, that leveraged investments were highly risky and thatinvestment in these securities could result in a loss of the original capital invested;

(d) utilized leveraged investments without Clients' authorization and exceeded Clients'authorized Schedule A leverage ratios; alternatively failed to monitor the leverageratios of Clients' accounts to ensure compliance with the maximum ratio specified byClients in Schedule A to the Wrap Agreement;

(e) made misleading statements to clients regarding leveraged investments designed toinduce them to refrain from selling their securities and to increase their leverage ratio;

(f) made incorrect and/or misleading statements that Noram only invested in guaranteedinvestments and that securities invested in were of the greatest quality;

(g) provided Clients with misleading and inaccurate advertising and promotional materialswhich, among other things, led Clients to believe that Noram invested only inguaranteed types of investments and in securities of the highest quality; and thatNoram's strategy protected assets and provided a steady flow of income irrespectiveof market conditions; and that Noram only invested in U.S. and Canadian convertiblebonds and debentures;

(h) failed to follow Clients' instructions and failed to respond to Client inquiries in atimely manner or at all;

(i) failed to have the proper controls and procedures in place to enable Noram to serviceits Clients adequately;

(j) failed to obtain and maintain required "know-your-client" information;

(k) failed to ensure that investment opportunities were allocated fairly amongst Clients;

(l) engaged in personal trading contrary to section 119 of the Act and section 115 of theRegulation to the Act; and

(m) engaged in principal trading and self-dealing contrary to section 118 of the Act.


C.1 Background

11. A Notice of Hearing and Statement of Allegations were issued by the Commission onSeptember 23, 1999 against Noram. The Statement of Allegations alleged that Noram hadbeen deficient in meeting its minimum capital requirements in amounts ranging up to$948,909 which was alleged to be contrary to the public interest and contravened the Act andRegulations thereunder. In addition, it was alleged that Noram failed to comply with termsand conditions imposed on its registration by the Commission which required Noram to filecertain financial information with the Commission on a monthly basis. The hearing of thismatter took place on September 27, 1999.

12. On September 29, 1999, the Commission issued an order pursuant to section 127 of the Act(the "Order") which ordered the following:

1. Pursuant to clause 1 of subsection 127(1) of the Act the registration of Noram ishereby suspended as of October 7, 1999 until the later of:

1. 6 months from the date of the commencement of the suspension; or

2. the date upon which the Commission has received audited financial statementsestablishing that the capital deficiency has been rectified.

2. Pursuant to subsection 127(2) of the Act Noram shall provide to the Commission,until further order of the Commission:

3. quarterly financial statements, with a review report and a working capitalcalculation, within 45 days of the end of the quarter; and

4. monthly financial statements for those months other than those ending on thequarter date, accompanied with a working capital calculation, within 30 daysof the month end; (Hereinafter referred to as the "Financial Reporting").

3. Pursuant to subsection 127(2) of the Act, Noram shall send a letter by registered mailin the form attached as Schedule "A" and Schedule "B" to each of its clients and FirstMarathon Correspondent Network respectively, within 24 hours after receipt byfacsimile of a copy of this Order; (Hereinafter referred to as the "Investor/DealerNotification Letters").

C.2 Allegations Relating to Breach of Order of the Commission

13. On September 30, 1999, Mr. Willman left a voice mail message for Yvonne Lo, a forensicaccountant with Staff of the Commission, in which he stated: "... I'm calling with referenceto the letter - this [Investor/Dealer Notification] letter - I'm not used to being told what towrite. If you people want to write on your own stationery things that simply are distortingand coercive and etc., you can do this. I am not gonna be told how to word my letters. Andlet's make that clear... if you people are so irresponsible I have to take the action at a differentlevel. So please leave me alone ...".

14. By letter dated September 30, 1999, Staff of the Commission advised Mr. Willman that anyfailure by Noram to comply with the terms of the Order would constitute a violation ofOntario securities law and that Staff would bring proceedings against Noram.

15. By letter dated October 1, 1999, Mr. Willman advised that Noram had completed the mail-outof the Investor/Dealer Notification letters at 11:00 a.m. on October 1, 1999. Consequently,Noram did not comply with the 24 hour notification requirement set out in paragraph 3 of theOrder. Staff was not, however, aware of any correspondence accompanying the Notification.

16. Under cover of letter dated October 21, 1999, the BCSC provided to Staff a copy of a letterthat Mr. Willman had sent to Noram's clients (the "Undisclosed Letter"). The UndisclosedLetter makes the following inaccurate statements:

In view of the proposed suspension of Noram Capital Management,Inc. by the Ontario Securities Commission for reasons of allegedunder-capitalization, we have been requested to send you a copy oftheir standard letter of advice. [Italics added]

In the meantime, we are planning a vigorous defensive action againstthe Order of the Commission as the matter of alleged under-capitalization is an entirely internal matter of Noram employees withno effect whatsoever on investment dealings, nor client services.[Italics added]

The Commission's unduly harsh and irresponsible action placeshardships on both the clients and the company itself and demandsproper action to counteract a case of an obvious discrimination.

17. The Undisclosed Letter enclosed a letter that had purportedly been sent to the OntarioSecurities Commission (the "Enclosed Letter"). The Enclosed Letter was not received byStaff of the Commission.

18. Both the Undisclosed Letter and the Enclosed Letter misrepresent the true state of affairswith respect to Noram's capital deficiency and the content and status of the Order, by makinga number of false and misleading statements to Noram clients including the following:

(a) that there was an "alleged under-capitalization";

(b) that the suspension by the Ontario Securities Commission was merely "proposed";

(c) that under capitalization was "an entirely internal matter of Noram employees with noeffect whatsoever on investment dealing, nor client services";

(d) that the Commission's actions were "unduly harsh and irresponsible" and a "case ofobvious discrimination";

(e) that the capital deficiency was caused by "some serious professional errors committedby Noram's agents and advisors, including negligent monitoring by Staff of theCommission";

(f) that the capital deficiency was caused by a "different interpretation of an accountingprinciple between the Commission and Noram's accounting firm"; and

(g) that "the Actuarial Report ... reflecting on new realities recommends cancellation ofthe pending transfer of $1.1 million and in fact, suggests a return of an over-fundedamount in excess of $100,000 to Noram. This rectifies, in our view, the operatingdeficiency".

19. As the Supervisory Procedures Officer of Noram, Mr. Willman is responsible for ensuring thatNoram fulfills its obligations as a registered advisor under Ontario securities law. AsPresident and a Director of Noram, Mr. Willman is responsible in respect of the corporateactions of Noram. At page 9 of the Commission's Reasons for Decision dated October 19,1999, it makes the following finding:

Willman testified that he is the sole registrant employed by Noram.Indeed, on the evidence, he seems to be Noram for all practicalpurposes.

20. To date, Noram has not provided the Financial Reporting to Staff as required by paragraph2 of the Order.

21. By letter dated December 27, 1999, Mr. Willman acknowledges that Noram has not providedthe Commission with the Financial Reporting, explaining that "due to severe financialconstraints imposed on Noram by the Commission's actions, we are unable to provide theCommission with the monthly and quarterly financial statements. Besides, since the activitiesof the company have effectively ceased - there is little to report particularly since no publicinterest has ever been the issue". [Emphasis added]

22. As at July 7, 2000, Noram is deficient in filing the Financial Reporting required pursuant tothe Order. In addition, as at July 7, 2000, Noram had not provided Staff with audited financialstatements establishing that the capital deficiency had been rectified and therefore is still undersuspension.


23. The Respondents' conduct as set out in paragraphs 7 - 10 and 13 - 23 above contravenedOntario securities law and was contrary to the public interest.


24. Such further and other allegations as Staff may make and the Commission may permit.

DATED at Toronto this 7th day of July, 2000.