Securities Law & Instruments


IN THE MATTER OF THE SECURITIES ACT
R.S.O. 1990, c. S.5, AS AMENDED

AND

IN THE MATTER OF THE REGISTRATION OF
ADEWALE GBALAJOBI

SETTLEMENT AGREEMENT



Introduction

1. This settlement agreement (the Settlement Agreement) relates to the registration status under the Securities Act (Ontario) (the Act) of Adewale Gbalajobi (Gbalajobi).  

Agreed Statement of Facts

2. Staff of the Ontario Securities Commission (Staff of the OSC) and Gbalajobi agree to the facts as stated herein. 

Gbalajobi’s Registration History with FCPF Corporation

3. FCPF Corporation (formerly Redev Corporation) (FCPF) is registered under the Act as an exempt market dealer. At all material times, FCPF offered for sale securities of related-party issuers that carry on the business of real estate development in Alberta and elsewhere.  

4. Gbalajobi has been registered with FCPF as follows: 

(a) Salesperson: July 22, 2007 to September 28, 2009;  

(b) Dealing representative: September 28, 2009 to February 3, 2011, and July 4, 2011 to the present; and 

(c) Chief compliance officer as of July 4, 2011. 

5. FCPF, through its ultimate designated person, consented to a suspension of its registration effective February 3, 2011 because the firm did not have a chief compliance officer who met the proficiency requirements of National Instrument 31-103 – Registration Requirements, Exemptions, and Ongoing Registrant Obligations (NI 31-103). The suspension of the firm’s registration resulted in a suspension of Gbalajobi’s individual registration as a dealing representative pursuant to subsection 29(2) of the Act. 

6. FCPF’s registration was reinstated effective July 4, 2011 when Gbalajobi was appointed its chief compliance officer. Gbalajobi’s registration as a dealing representative was also reinstated at that time.  

The Compliance Review

7. In the fall of 2012, Staff conducted a review of FCPF’s compliance with Ontario securities law pursuant to section 20 of the Act (the Compliance Review). 

8. Through the Compliance Review, Staff identified the following deficiencies in Gbalajobi’s compliance with Ontario securities law, both as a dealing representative and as a chief compliance officer, which Gbalajobi admits to: 

(a) During the period of time that FCPF’s registration was suspended in 2011, the firm traded in securities with at least two investors, including KH, contrary to section 25 of the Act and section 10.4 of NI 31-103. Acts in furtherance of the trade to KH were carried out by Gbalajobi during the suspension period, and the trade was completed after FCPF’s registration was reinstated.  

(b) Gbalajobi did not record know-your-client (KYC) information for trades made to clients YJ, RT, or KH, all of whom purchased securities through Gbalajobi. It is Gbalajobi’s position that while he did not record KYC information for these clients, he did make inquiries of them to obtain their KYC information.

(c) KH invested in two issuers sold to her by FCPF, both of which were of substantially the same nature. Each investment by KH represented approximately 12.5% to 25% of her “net investible assets” (a term used in FCPF’s KYC form), and on a combined basis they represented approximately 25% to 50% of her net investible assets. These trades were carried out by Gbalajobi, and he could not demonstrate to Staff that he properly assessed whether these trades resulted in KH being over-concentrated in FCPF offerings, and therefore whether they were suitable for her. 

9. The Compliance Review did not find any evidence that FCPF clients had suffered monetary loss as a result of Gbalajobi’s breaches of Ontario securities law.  

Staff Recommends Suspension of Registration

10. On January 2, 2013, Staff sent a report to FCPF setting out its findings from the Compliance Review, including the findings regarding Gbalajobi.

11. Also on January 2, 2013, Staff sent a letter to Gbalajobi informing him that Staff had recommended to the Director that his registration be suspended pursuant to section 28 of the Act, and informing him of his right to request an opportunity to be heard (OTBH) pursuant to section 31 of the Act.

12. On January 16, 2013, counsel for Gbalajobi notified Staff in writing that Gbalajobi wished to have an OTBH before the Director made a decision regarding Staff’s recommendation.

13. On February 15, 2013, FCPF consented to the imposition of terms and conditions on its registration which prohibited the firm and anyone acting on its behalf from trading in securities.

Admission of Non-Compliance with Ontario Securities Law

14. On the basis of the Agreed Statement of Facts, Gbalajobi admits that he failed to properly discharge all of his obligations as chief compliance officer and dealing representative under Ontario securities law. In particular, Gbalajobi admits as follows:

(a) As FCPF’s chief compliance officer, he did not properly ensure that the firm maintained adequate records to accurately record its business activities, financial affairs, and client transactions, and demonstrate the extent of the firm’s compliance with applicable requirements of securities legislation, contrary to section 11.5 of NI 3-103.

(b) As FCPF’s chief compliance officer, he did not adequately establish and maintain policies and procedures for assessing compliance by FCPF, and individuals acting on its behalf, with securities legislation, and monitor and assess compliance by FCPF and individuals acting on its behalf, with securities legislation, contrary to section 5.2 of NI 31-103.

(c) He traded in securities on behalf of FCPF during a period of time when the firm’s registration, and his individual registration, was suspended, contrary to section 25 of the Act and section 6.5 of NI 31-103.

(d) He did not take reasonable steps to ensure that before he accepted instructions from KH to buy securities, those purchases were suitable for her, contrary to subsection 13.3(1) of NI 31-103.

Joint Recommendation to Director

15. In order to resolve the OTBH that has been requested by Gbalajobi, and on the basis of the Agreed Statement of Facts, the admission of non-compliance with Ontario securities law, and undertakings, set out in this Settlement Agreement, Staff and Gbalajobi (the Parties) have agreed to the following terms, and make the following joint recommendation to the Director:

(a) The registration of Gbalajobi as a chief compliance officer shall be suspended, and he may apply for a reinstatement of registration after a period of three years from February 15, 2013 (i.e., the date terms and conditions were imposed on FCPF’s registration preventing the firm or anyone acting on its behalf from trading in securities). If Gbalajobi applies for a reinstatement of registration as chief compliance officer, Staff will not recommend to the Director that his application be refused, unless Staff becomes aware after the date of this Settlement Agreement of conduct impugning Gbalajobi’s suitability for registration, and provided he meets all other applicable criteria for registration at the time he applies for registration; 

(b) The registration of Gbalajobi as a dealing representative in the category of exempt market dealer will be suspended, and he may apply for a reinstatement of registration after a period of nine months from February 15, 2013. If Gbalajobi applies for a reinstatement of registration as a dealing representative Staff will not recommend to the Director that his application be refused, unless Staff becomes aware after the date of this Settlement Agreement of conduct impugning Gbalajobi’s suitability for registration, and provided he meets all other applicable criteria for registration at the time he applies for registration;  

(c) Gbalajobi undertakes that he will not apply for registration as the ultimate designated person of a registered firm for a period of three years from February 15, 2013, after which Staff will not recommend to the Director that his application be refused, unless Staff becomes aware after the date of this Settlement Agreement of conduct impugning Gbalajobi’s suitability for registration, and provided he meets all other applicable criteria for registration at the time he applies for registration;  

(d) Gbalajobi will resign his position as a permitted individual of FCPF and undertakes that he will not become a permitted individual of a registered firm for a period of three years from February 15, 2013; and 

(e) Gbalajobi undertakes that he will retake and successfully complete the Conduct and Practices Handbook Course before applying for individual registration in any category or to be a permitted individual. 

16. The Parties submit that their joint recommendation is reasonable, having regard to the following factors:  

(a) The misconduct by Gbalajobi was significant, but Staff is not aware of any investors having suffered any losses to date as a result of his activities;

(b) Gbalajobi has not previously been the subject of any regulatory action by the OSC relating to allegations of misconduct;

(c) Gbalajobi has accepted full responsibility for his misconduct and has expressed remorse for that misconduct; and

(d) By agreeing to this Settlement Agreement, Gbalajobi has saved the Director the time and resources that would have been required for an OTBH.

17. The Parties acknowledge that if the Director does not accept this joint recommendation:  

(a) This joint recommendation and all discussions and negotiations between the Parties in relation to this matter shall be without prejudice to the Parties; and

(b) Gbalajobi will be entitled to an OTBH in accordance with section 31 of the Act.

 

 

Mark Skuce
Mark Skuce, Legal Counsel,
Compliance and Registrant Regulation


July 26, 2013
Date 
  Robert Brush
Robert Brush
Counsel for Adewale Gbalajobi


July 24, 2013
Date



Decision of the Director



Having reviewed and considered the agreed facts, admissions, representations, submissions, and undertakings contained in the settlement agreement (the Settlement Agreement) signed by Adewale Gbalajobi (Gbalajobi) on July 24, 2013 and by staff of the Ontario Securities Commission (Staff) on July 26, 2013, and on the basis of those agreed facts, admissions, representations, submissions, and undertakings, I, Debra Foubert, in my capacity as Director under the Securities Act (Ontario) (the Act), accept the joint recommendation of the parties, and make the following decision: 

(i) Effective immediately, the registration of Gbalajobi as a chief compliance officer is suspended pursuant to section 28 of the Act, and he may apply for a reactivation of registration as a chief compliance office after a period of three years from February 15, 2013 (i.e., the date on which terms and conditions were imposed on the registration of his sponsoring firm at the time which prevented the firm or anyone acting on its behalf from trading in securities); and

(ii) Effective immediately, the registration of Gbalajobi as a dealing representative in the category of exempt market dealer is suspended pursuant to section 28 of the Act, and he may apply for a reactivation of registration as a dealing representative in the category of exempt market dealer after a period of nine months from February 15, 2013.

July 26, 2013
Date
Debra Foubert
Director