Securities Law & Instruments

In the Matter of the Registration of
Francis Thomas Stone


Opportunity to be heard by the Director
Section 26(3) of the Securities Act


Date:
June 11, 2008
 
Director:
David M. Gilkes
Manager, Registrant Regulation
Ontario Securities Commission
 
Submissions:
Rebecca Stefanec
For the staff of the Commission
Francis Thomas Stone
For the Registrant
 
Background

1.    Mr. Stone (the Registrant) has been registered with the Ontario Securities Commission (OSC) as a mutual fund salesperson for PFSL Investments Canada Ltd. (PFSL) since February 23, 2005.

2.    On April 11, 2008, PFSL submitted a financial disclosure change notice to the OSC indicating Mr. Stone had made a consumer proposal under the Bankruptcy and Insolvency Act on February 13, 2008.

3.    On April 21, 2008, OSC staff sent a letter to the Registrant and to PFSL proposing terms and conditions for monthly close supervision reporting, be imposed on the registration of Francis Thomas Stone.

4.    The Director may restrict a registration by imposing terms and conditions under subsection 26 of the Securities Act but must provide the registrant with the opportunity to be heard by the Director. The Registrant requested an opportunity to be heard through a written submission. The submission was received onMay 7, 2008.

Submissions

5.    The Registrant asked that his registration be allowed to continue without terms and conditions. Mr. Stone noted that he had not declared bankruptcy but had made a consumer proposal.

6.    Mr. Stone noted the proposal included a payment schedule to his creditors that will be paid in three years. He also noted that he had full time employment at Honda of Canada and the income would be used to pay the proposal.

7.    Mr. Stone noted that PFSL will not accept restrictions placed on his registration and would terminate sponsorship of his registration.

Suitability for Registration

8.    The fit and proper standard for registration is both an initial and an ongoing requirement for registrants. The fit and proper standard is based on three well established criteria that have been identified by the OSC:
The [Registrant Regulation] section administers a registration system which is intended to ensure that all Applicants under the Securities Act and the Commodity Futures Act meet appropriate standards of integrity, competence and financial soundness …(Ontario Securities Commission, Annual Report 1991, Page 16)
When analyzing these criteria staff consider:
  • integrity – honesty and good faith, particularly in dealings with clients, and compliance with Ontario securities law;
  • competence – prescribed proficiency and knowledge of the requirements of Ontario securities law; and
  • financial soundness – an indicator of a firm’s capacity to fulfill its obligations and can be an indicator of the risk that an individual will engage in self-interested activities at the expense of clients.
9.    In this case neither the Registrant’s integrity nor his competence are in question. However, filing for bankruptcy raises concern regarding the financial soundness of the Registrant. To mitigate the potential increased risk concerning self-interested activities by the Registrant, staff recommended that terms and conditions for monthly close supervision reporting be imposed on the registration of Francis Thomas Stone.

Decision

10.   It is OSC staff practice to impose terms and conditions for monthly close supervision reporting on an individual’s registration should that person file for bankruptcy, receive a garnishment, receive a requirement to pay overdue taxes, or file for a consumer proposal. The terms and conditions are removed when the financial obligations resulting from the event have been satisfied. This practice is consistent with the investor protection mandate of the OSC.

11.   I find that the bankruptcy does have a negative impact on the registrant’s financial soundness. Therefore, I impose the terms and conditions as set out in Exhibit A on the registration of Francis Thomas Stone.

June 11, 2008

“David M. Gilkes”



Exhibit A
Terms and Conditions of Registration
for
Francis Thomas Stone


Monthly Close Supervision Reports are to be completed on the registrant’s sales activities and dealings with clients. The supervision reports are to be retained with the sponsoring firm and must be made available for review upon request. These terms and conditions are to continue until the obligation has been satisfied and acceptable evidence has been provided to the OSC.


__________________________                 ________________________
Approved Officer for                                          Francis Thomas Stone
PFSL Investments Canada Ltd.



____________________________               ________________________
Print Name of Approved Officer                                         Date



Monthly Close Supervision Report*



I hereby certify that supervision has been conducted for the month ending____________ of the trading activities of Francis Thomas Stone, by the undersigned. I further certify the following:
  1. All orders from the salesperson were reviewed and approved by a compliance officer or branch manager of PFSL Investments Canada Ltd.
  2. There were no client complaints received during the preceding month. If there were complaints, a description of the complaint and follow-up action initiated by the company is attached.
  3. All payments for the purchase of the investments were made payable to the dealer. There were no cash payments accepted.
  4. The transactions of the salesperson were reviewed during the preceding month to ensure compliance with the policies and procedures of the dealer, including the suitability of investments for clients. If there were any violations, a description of the violation and follow-up action is attached.


____________________________
Signature
Compliance Officer/Branch Manager
PFSL Investments Canada Ltd.


____________________________               ________________________
Print Name                                                                         Date




* In the case of violations or client complaints, the regulator must be notified within five business days.