Securities Law & Instruments

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IN THE MATTER OF STAFF'S RECOMMENDATION TO REFUSE TO REGISTER JOHN DOE

OPPORTUNITY TO BE HEARD BY THE DIRECTOR UNDER SECTION 31 OF THE SECURITIES ACT (Ontario)

Decision

1. For the reasons outlined below, following the exercise by John Doe (the Applicant) of an opportunity to be heard before me (the OTBH) under section 31 of the Securities Act, R.S.O. 1990, c. S.5, as amended (the Act), it is my decision to register the Applicant as a mutual fund dealing representative of the registered mutual fund dealer (the Sponsoring Firm) that has sponsored his application (the Application) for such registration, which staff (Staff) of the Ontario Securities Commission (the Commission or OSC) had recommended I refuse on the basis that the Applicant lacks the integrity required for registration, and that his registration would be objectionable.

2. It is also my decision, pursuant to clause 10 (a) of the Procedures for Opportunities to be Heard Before Director's Decisions On Registration Matters,{1} that all written submissions (including Exhibits) and transcripts of appearances in the OTBH be sealed and not available for disclosure to the public, on the basis that, in my opinion, the desirability of avoiding the disclosure of intimate personal matters that are discussed in these documents outweighs the public benefit of openness in Commission proceedings. Accordingly, in this Decision I have replaced the proper name of the Applicant with the pseudonym "John Doe," and limited the presentation of certain other personal identifying information in order to protect the privacy interests of persons that are involved with, or may be affected by, this matter.

Overview

3. In 2015, the Applicant plead guilty to one count of possession of child pornography in the form of a computer video file, contrary to section 163.1(4) of the Criminal Code (Canada) (the Offence), for which he received a sentence of four months imprisonment followed by three years of probation and a monetary fine. The Applicant was also required to receive counseling after his release from prison as directed by his probation officer.

4. In 2011, at the time the Offence was committed, the Applicant was in university.

5. In 2019, the Applicant submitted his application for registration as a mutual fund dealing representative of the Sponsoring Firm. In his Application, he fully disclosed his prior criminal conviction, including the nature of the Offence, the length of the prison sentence imposed, the length of probation, and the monetary fine.

6. The OSC administers the registration process for firms and individuals applying for registration as a mutual fund dealer or as a dealing representative of a mutual fund dealer.

7. In 2019, the Applicant attended, without representation by counsel, a voluntary interview with Staff to discuss his Application (the Interview). In this Interview, Staff enquired about his Offence and the Applicant provided an explanation of the circumstances that gave rise to the criminal charge and his ultimate conviction. It is during this Interview that Staff asserts that the Applicant was not being honest with them by representing to Staff that his purpose in possessing the child pornography was to conduct academic research, which staff has asserted was unreasonable and unrealistic given the circumstances.

8. The OTBH included written submissions of Mark Skuce, Senior Legal Counsel, OSC and Ellen Bessner and Brendan Monahan of Babin Bessner Spry, counsel for the Applicant, with appearances that took place on June 26, 2020 via video conference. These proceeding were not made open to the public because intimate personal or other matters may have been disclosed that, in my opinion, would outweigh the public benefit of openness in Commission proceedings.

Law and Reasons

9. 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 under the Act, or that the registration is otherwise objectionable. Subsection 27(2) states that in considering whether a person is suitable for registration, the Director shall consider the requirements prescribed in the regulations relating to proficiency, solvency and integrity.

Staff's Submissions

10. Staff has submitted that the criminal conduct of the Applicant which was the subject matter of the Offence has been appropriately dealt with by the criminal justice system and does not form the basis of Staff's recommendation that his Application for registration be refused.

11. The basis for Staff's recommendation to refuse the registration of the Applicant is that during the Interview he was not honest with Staff about the underlying reasons for his commission of the Offence. Staff has asserted that, by not being honest to Staff about his true purpose in possessing the child pornography, which Staff has contended was his personal curiosity, this impugns the Applicant's integrity for the purpose of registration.

12. Staff obtained the court records and transcripts from the plea and sentencing hearing in respect of the Offence, which were submitted in the OTBH.

The Applicant's Submissions

13. Counsel for the Applicant has submitted that, at the time of the Offence, the Applicant was a young adult. He plead guilty to the Offence and has completed his sentence and probation. He has accepted responsibility for his actions, is remorseful, and understands that the Offence was not a "victimless" crime.

14. Counsel for the Applicant has also submitted that this was the Applicant's first and only offence and that he has had no other issues with the law. He has paid the price for his crime and, in this circumstance, the underlying criminal conviction should not be the basis for the recommendation to refuse his registration.

15. Counsel for the Applicant has submitted that the Applicant was honest with Staff during the Interview. He responded in detail to the questions asked. However, counsel asserts that Staff did not explicitly ask the question for which Staff is asserting he did not provide an honest response.

Findings

16. The primary question of fact in the OTBH is whether the Applicant was honest with Staff during the Interview. If I find that the Applicant was honest in the Interview, then Staff has stated that there is no other basis to refuse his Application at this time.

17. Staff submits that the Applicant's responses to certain questions asked during the Interview relating to his personal motives for committing the Offence were unreasonable and unrealistic. I don't believe that as Director, or Staff for that matter, can get into the mind of the Applicant at the time the Offence was committed to determine if his thoughts then were reasonable or realistic.

18. However, what I can assess is the record from the criminal trial. Having reviewed the transcripts from the court proceedings (plea and sentencing) against the transcript of the Interview, I have found there to be a consistent representation of the facts and circumstances of the criminal case. This leads me to conclude that the Applicant provided an honest response to Staff during the Interview.

19. The Applicant has complied with the regulatory requirement to disclose the criminal conviction in his registration application. He also provided a letter of support from the Chief Compliance Officer of his Sponsoring Firm, who has interacted with him, in a capacity that did not require registration, for a period of six years, prior to his application for registration.

20. I am satisfied that the Applicant has taken responsibility for his actions, is remorseful and understands that his actions were a crime.

Conclusions

21. Based on the foregoing, I reject Staff's recommendation to refuse the Applicant's registration and have directed our registration Staff to, as soon as practicable, register the Applicant as mutual fund dealing representative of the Sponsoring Firm.

22. Moreover, upon the request of counsel for the Applicant which was supported by Staff, I have also decided to seal the record of this OTBH, as provided for in the above paragraph 2 of this Decision.

"Debra Foubert, J.D."
Director, Compliance and Registrant Regulation Branch
Ontario Securities Commission

July 20, 2020

{1} online: OSC $lt;https://www.osc.gov.on.ca/en/34426.htm$gt;.