Securities Law & Instruments


[Update: The terms and conditions imposed by the Director in this decision were removed as at September 18 2008.]


IN THE MATTER OF

THE REGISTRATION OF

W.R. SHAWN MCLACHLAN

OPPORTUNITY TO BE HEARD BY THE DIRECTOR

SECTION 26(3) OF THE SECURITIES ACT

Date:
February 28, 2007
 
Director:
David M. Gilkes
Manager, Registrant Regulation
Capital Markets Branch
 
Submissions:
Maria Aluning
For the staff of the Commission
 
W.R. Shawn McLachlan
For the Registrant

Background

 

1. Mr. McLachlan (the Registrant) has been registered with the Ontario Securities Commission (OSC) as a mutual fund salesperson for PFSL Investments Canada Ltd. (PFSL) since March 6, 2006. On December 14, 2006 PFSL submitted a financial disclosure change notice to the OSC that indicated that a Notice of Garnishment had been issued by the Ontario Superior Court against the Registrant on November 27, 2006. The garnishment is in relation to a line of credit at TD Canada Trust.

2. On December 20, 2006, OSC staff sent a letter to the Registrant and PFSL proposing terms and conditions for monthly close supervision reporting, be imposed on the registration of Shawn McLachlan.

3. 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 did not accept the proposal and requested an opportunity to be heard.

4. The Registrant requested to be heard through a written submission, which was received on January 11, 2007.

Submissions

 

5. The Registrant asked that his registration be allowed to continue without terms and conditions. Mr. McLachlan noted that the debt had been incurred as a result of a serious automobile accident which impaired his ability to earn an income. He stated that he had "endured some bad luck over the past few years trying to keep on top of debts and maintain a steady income".

6. Mr. McLachlan also noted that he expected to receive some pending settlements in 2007 that would more than cover his debts.

7. The fit and proper standard for registration 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.

    8. The fit and proper standard for registration is both an initial and an ongoing requirement for registrants. The Notice of Garnishment gave staff concern regarding the financial soundness of the Registrant and his continued fitness for registration. To mitigate the 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 W.R. Shawn McLachlan.

    Decision

     

    9. 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 taxes, or file for a consumer proposal. The terms and conditions are removed when the financial obligations resulting from the event are satisfied. The fact that the Registrant had been paying down the debt owed or will receive money in the future to pay the debt is not a factor in staff's recommendation to impose terms and conditions. This practice is consistent with the investor protection mandate of the OSC.

    10. I find that Notice of Garnishment does have a negative bearing on the registrant's financial soundness. Therefore, the terms and conditions as set out in Exhibit A will be imposed on the registration of W.R. Shawn McLachlan.

    February 28, 2007

    "David M. Gilkes"

     

    EXHIBIT A

    Terms and Conditions of Registration

    for

    W.R. Shawn McLachlan

    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. These terms and conditions will be removed unless the Director has reason to believe that the registrant is not suitable for unconditional renewal of registration at that time.

    _________________________
    _________________________
    Approved Officer for
    W.R. Shawn McLachlan
    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 (name), 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.