In the Matter of Staff’s Recommendations
to Suspend the Registrations
of Anchor Securities Limited and Martin Heppner
Opportunity to be Heard by the Director
under Section 31 of the Securities Act
1. My decision is that the registration of each of Anchor Securities Limited (Anchor) and Martin Heppner (collectively, the Applicants) is suspended effective August 26, 2011. My decision is based on the:
- verbal arguments of Michael Denyszyn, Senior Legal Counsel, Compliance and Registrant Regulation Branch, for Staff of the Ontario Securities Commission, and Martin Heppner, on behalf of himself and Anchor, and
- evidence provided at the opportunity to be heard (OTBH).
Brief chronology of events
Registration history of Anchor and Heppner
2. Anchor was initially registered as a securities dealer in 1989. It surrendered this registration in 2007. In 2006, it became registered as a limited market dealer. By operation of law, Anchor became registered as an exempt market dealer (EMD) in September 2009.
3. Martin Heppner was initially registered in 1979. Heppner is now the Chief Compliance Officer (CCO), Ultimate Designated Person (UDP), and a dealing representative of Anchor.
Suspension letter to Anchor
4. Staff performed a compliance field review of Anchor starting in late 2010. The numerous significant deficiencies (Alleged Significant Deficiencies) identified during this review were set out in a letter to Heppner dated June 10, 2011. Some of the significant deficiencies related to:
- know your client (KYC), suitability and accredited investor information, including no collection or documentation of KYC information, improper trades with clients who are not accredited investors and inaccurate and misleading representations to clients,
- know your product, including insufficient product due diligence,
- disclosure, including inadequate risk disclosure in offering documents, inadequate disclosure of conflicts of interest, and unsubstantiated claims in offering documents,
- financial condition, including incorrect calculations of excess working capital, and no preparation of monthly financial statements,
- books and records, including books and records not provided to Staff, incomplete books and records, and conflicting information provided to Commission staff,
- misleading information in marketing materials,
- failure to disclose the nature and extent of existing or potential materials conflicts of interest to clients,
- trade confirmations not provided to clients,
- inadequate policies and procedures on personal trading and conflicts of interest, and
- inaccurate and misleading information provided to Staff in Anchor’s risk assessment questionnaire.
5. By letter dated June 10, 2011, Staff advised Anchor of its recommendations that:
- Anchor’s registration as an EMD, and
- Heppner’s registrations as a dealing representative, CCO and UDP of Anchor, be suspended. Pursuant to section 31 of the Act, Anchor is entitled to an OTBH before a decision is made by me, as Director.
Outline of the Staff’s arguments
6. Staff argued that in light of the numerous Alleged Significant Deficiencies identified by Staff, Heppner and Anchor should be suspended. Staff argued that Heppner did not adequately perform his responsibilities as CCO, UDP and the dealing representative of Anchor, and Anchor does not have an adequate compliance system in place. As a result, Staff has fundamental concerns with regard to the integrity and proficiency of Heppner and Anchor, as well as solvency concerns with respect to Anchor. As well, the Alleged Significant Deficiencies call into question whether Anchor’s operations are being conducted with the requisite integrity, proficiency and solvency of securities professionals.
7. Staff also argued that section 28 of the Act permits me, as Director, to suspend the registration of each of the Applicants on the basis that the each of the Applicants is not suitable for registration, has failed to comply with Ontario securities law or that their registrations are otherwise objectionable.
Anchor does not have sufficient regulatory capital and proposes to surrender its registration in September
8. Heppner, on behalf of Anchor, advised me that Anchor did not currently have the required minimum capital required under subsection 12.1(3) of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Heppner also advised me that Anchor intended to surrender its registration in September 2011.
Decision on the suspensions of the Applicants
9. My decision is to suspend the registration of Anchor and Heppner as of August 26, 2011. My decision was communicated verbally to Heppner at the OTBH on August 26, 2011.
10. My decision was made for two primary reasons. First, Anchor does not currently have the required minimum capital and I was advised by Heppner that Anchor’s minimum capital deficiency would not be rectified. Second, Heppner was not able to assure me that Anchor would not be carrying out registerable activities in Ontario between August 26, 2011 and the date of surrender of its registration. As a result, I decided to immediately suspend the registration of both Anchor and Heppner.
11. In light of Heppner’s statements described in paragraphs 8 and 10 above, it was not necessary for me to make a decision as to the merits of the Alleged Significant Deficiencies and whether they were, on their own, sufficient to warrant suspension of Anchor and Heppner.
“Marrianne Bridge”, FCA
Deputy Director, Compliance and Registrant Regulation Branch
Ontario Securities Commission
August 30, 2011