IN THE MATTER OF THE SECURITIES ACT R.S.O. 1990, c. S.5, AS AMENDED AND IN THE MATTER OF AN APPLICATION FOR REGISTRATION BY JOHN DOE
Names and certain dates have been presented below in a manner designed to protect the privacy interests of persons having involvement in, or affected by, this matter.
1. This settlement agreement (the "Settlement Agreement") relates to an application (the "Application") for a reactivation of registration as an advising representative under the Securities Act (Ontario) (the "Act") by John Doe with the Firm.
2. In reviewing the Application, staff of the Ontario Securities Commission ("Staff") became aware of information which could impugn John Doe's suitability for registration under the Act, and which could form the basis of a recommendation by Staff to the Director that the Application be refused.
3. In the event that Staff recommended to the Director that the Application be refused, John Doe would be entitled to an opportunity to be heard (an "OTBH") pursuant to section 31 of the Act in respect of Staff's recommendation.
4. Staff and John Doe have agreed to make a joint recommendation to the Director regarding the Application, as more particularly described in this Settlement Agreement.
II. AGREED STATEMENT OF FACTS
5. The parties agree to the facts as stated below.
A. Registration History
6. John Doe has been registered as follows:
(a) A period of approximately two years and three months: advising representative, Previous Employer 1.
(b) A period of approximately five years and six months: advising representative, Previous Employer 2.
7. There has been no disciplinary action against John Doe by any securities commission, self-regulatory organization, or any firm registered under the Act, except as referred to in this Settlement Agreement.
B. Misstatements by John Doe to Persons Investigating his Conduct
i. The Personal Relationship with Jane Doe
8. In 2014, John Doe commenced an extra-marital affair with Jane Doe.
9. After a period of approximately three months, John Doe began the process of ending his relationship with Jane Doe. John Doe states that Jane Doe grew angry that he was ending the relationship, and that as a result she directed numerous harassing texts, emails, social media messages, and telephone calls to John Doe, members of his family, and others, some of which are more particularly described below.
10. John Doe states that on the evening of Day 1, Jane Doe directed several harassing text messages and telephone calls to him and his wife. Later that night, Jane Doe sent emails to various co-workers of John Doe that made allegations of a personal nature against him. Two of the recipients of these emails were Supervisor 1 and Supervisor 2, both of whom were individuals John Doe reported to at Previous Employer 2.
ii. First Misstatement: Supervisor 1 and Supervisor 2
11. On the morning of Day 2, Supervisor 1 and Supervisor 2 met with John Doe regarding the emails that had been received from Jane Doe the previous night. During this meeting, John Doe lied about the true nature of his relationship with Jane Doe.
12. Shortly after his meeting with John Doe, Supervisor 2 informed John Doe that Jane Doe had sent another email about him.
13. After being advised by Supervisor 2 of the further email from Jane Doe, John Doe informed Previous Employer 2's human resources department about his relationship with Jane Doe, and that he had not been truthful with Supervisor 1 or Supervisor 2. On the advice of a member of the human resources department, John Doe called Supervisor 2 and told him the truth about his relationship with Jane Doe.
iii. Second Misstatement: Toronto Police Services
14. John Doe states that on the afternoon of Day 2, Jane Doe sent a harassing email to his wife and others.
15. On the evening of Day 2, the police attended at John Doe's house at the request of his wife, who believed Jane Doe was harassing her.
16. During their attendance at John Doe's house to investigate his wife's complaint, the police asked John Doe about his relationship with Jane Doe, and he lied to the police about the true nature of his relationship with Jane Doe.
17. During the night of Day 2, the police called John Doe and informed him that since their questioning of him earlier that day, Jane Doe had shown them text messages between her and John Doe. The police also informed John Doe that Jane Doe had alleged that he made a death threat against her. At that time, John Doe admitted his relationship with Jane Doe to the police (contrary to his previous representations to them), but denied that he had made any death threats against her. The police informed John Doe that he would be arrested and charged with uttering a death threat.
iv. John Doe is Arrested
18. During the morning of Day 3, John Doe surrendered himself at the police station and was charged with uttering a death threat, a charge that was subsequently withdrawn at the request of the Crown upon John Doe entering into a peace bond.
v. Careless Response to Staff
19. As a part of Staff's review of the Application, John Doe attended a voluntary interview with Staff regarding the Application (the "Interview").
20. At the commencement of the Interview, John Doe swore an oath to tell the truth, and was also cautioned by Staff about the importance of being truthful in responding to Staff's questions.
21. During the Interview, John Doe was asked the following questions and gave the following answers:
Q. What is the statement that's alleged to be the death threat?
[. . .]
A. Yeah. I said, "Don't please don't call my home. Never call my home again . . ." Like, this is what I remember: "If you call my home again, I will phone the police." [. . .]
[. . .]
Q. So your best information is that the alleged death threat is your call to her on the Sunday night: "Please don't ever contact my house again or I'll report it to the police"?
A. That's right.
[. . .]
Q. Do you have any knowledge that [Jane Doe] told [the police] there was a threat other than the threat you've described to me?
A. No, I'm not aware of it, and I don't -- I don't have the letter here today, but if you could call the constable or the detective . . .
22. Later during the Interview, Staff informed John Doe that they were troubled by the fact that he had not been truthful with his employer or the police regarding his relationship with Jane Doe.
23. Following the Interview, Staff, with the consent of John Doe, contacted the police regarding their investigation into his alleged conduct. Staff was informed by the police that the alleged death threat was not as had been represented to Staff by John Doe. Rather, the police informed Staff that the alleged threat by John Doe to Jane Doe was a different statement, and that John Doe was specifically informed that this different statement was the alleged threat at the time of his arrest.
24. It is John Doe's position that he did not utter a death threat to Jane Doe or intentionally mislead Staff when he responded to their question about the alleged threat. However, John Doe acknowledges that:
(a) Staff asked him what Jane Doe alleged the threat was and not only whether he threatened her;
(b) he was specifically informed by Staff at the Interview that his history of being untruthful with Previous Employer 2 and the police were concerning to Staff; and
(c) he should have been more careful in his response about the alleged threat and should not have responded definitively where his memory did not allow for it.
C. Unauthorized Disclosure of Proprietary Information
25. During his employment at Previous Employer 2, John Doe and Colleague worked on the development of a new investment fund for the firm (the "Fund").
26. The Fund was never developed to the stage that it was ready to be marketed by Previous Employer 2 to the public, and as such, it remained the confidential and proprietary work product of Previous Employer 2.
27. While at Previous Employer 2, John Doe and Colleague discussed the possibility of leaving the firm to create their own investment fund.
28. In 2014, Colleague left Previous Employer 2, which John Doe states made his work towards developing the Fund more difficult.
29. After Colleague left Previous Employer 2, a representative of Previous Employer 2 sent John Doe an email setting out various detailed requests for information regarding the Fund (the "Request Email"). The purpose of these requests was to assist Previous Employer 2 in its assessment of the Fund.
30. Upon receiving the Request Email, John Doe forwarded it to a personal friend not employed by Previous Employer 2 or any of its affiliates, with a message that John Doe states was his expression of frustration over the amount of work he was being asked to do.
31. Throughout the fall of 2014, John Doe sent a series of emails to Colleague which included confidential performance data for the Fund. By the time these emails were sent to Colleague, Colleague had left Previous Employer 2. John Doe states that the purpose of providing this confidential performance data to Colleague was to have Colleague assist John Doe in responding to the requests set out in the Request Email.
32. Throughout the fall of 2014, while he was sending the Fund's confidential performance data to Colleague, John Doe also sent communications to Colleague in relation to their desire to establish their own investment fund. These communications included the following:
(a) John Doe forwarded to Colleague an email that contained certain research regarding the potential market for the Fund that had been obtained by John Doe at Previous Employer 2's request.
(b) John Doe exchanged text messages with Colleague during which he advised Colleague that he was meeting with a potential investor, and asked Colleague how much money he thought they would need to get started. John Doe did in fact meet with this potential investor, but no investment was ever made.
33. John Doe also sent at least three emails to a personal friend who worked as an investment banker at another firm, and in these emails John Doe forwarded confidential performance data regarding the Fund.
34. John Doe admits that he was not authorized by Previous Employer 2 to forward the Request Email to anyone outside the firm, nor was he authorized to send any of the confidential performance data or other research relating to the Fund to anyone outside the firm. John Doe admits that his disclosure of this information was contrary to Previous Employer 2's code of conduct and his duty of loyalty to the firm.
D. Dismissal for Cause and the Application
35. On Notification Date, Previous Employer 2 delivered a Form 33-109F1 Notice of Termination of Registered Individuals and Permitted Individuals (the "Form F1") informing Staff that the firm had terminated John Doe's employment for cause, effective on Termination Date.
36. On Application Date, John Doe submitted the Application.
37. Prior to submitting the Application, John Doe, through his counsel, requested a meeting with Staff to discuss the possibility of him applying to reactivate his registration. At this meeting, John Doe proactively provided Staff with a detailed written chronology of the events surrounding his relationship with Jane Doe, and discussed both the relationship with Jane Doe, the misstatements to Supervisor 1, Supervisor 2, and the police, and his unauthorized disclosure of Previous Employer 2's confidential information.
III. ADMISSIONS AND REPRESENTATIONS BY JOHN DOE
38. John Doe admits to the conduct described in this Settlement Agreement.
39. John Doe admits that the conduct described in this Settlement Agreement impugns his integrity for the purpose of registration under the Act.
40. John Doe represents as follows:
(a) he takes full responsibility for his conduct described in this Settlement Agreement, is remorseful for that conduct, understands how it has negatively impacted on his career in the capital markets, and will not engage in misconduct in the future;
(b) his conduct did not directly affect any client of Previous Employer 2;
(c) he has obtained counseling to assist him in dealing with the personal issues that he believes contributed to the conduct described in this Settlement Agreement; and
(d) he recognizes and acknowledges that the reactivation of his registration on the terms described in this Settlement Agreement represents a second chance for him to pursue a career in the capital markets, and that further misconduct by him could result in a permanent loss of his registration.
IV. JOINT RECOMMENDATION TO THE DIRECTOR
41. In order to resolve the matter of the Application, and on the basis of the Agreed Statement of Facts and the Admissions and Representations by John Doe set out in this Settlement Agreement, Staff and John Doe make the following joint recommendation to the Director:
(a) John Doe will withdraw the Application and will not reapply for a minimum period of 12 months from the Application Date.
(b) Before reapplying for registration, John Doe will successfully complete the Conduct and Practices Handbook Course.
(c) The Firm shall submit a supervisory plan for John Doe (the "Plan") to the Deputy Director, Registrant Conduct Team, Compliance and Registration Regulation Branch (the "Deputy Director"). John Doe shall not apply for registration until the Deputy Director has approved the Plan. For each investment fund to which John Doe intends to provide services, the Plan must describe the investment fund, John Doe's role with respect to the investment fund, and how the Firm's chief compliance officer and ultimate designated person will oversee John Doe's activities and the investment fund to provide reasonable assurance that the investment fund is functioning properly and in accordance with its constating documents.
(d) If paragraphs (a), (b), and (c) above are complied with, then upon John Doe reapplying for registration in the future with the Firm, 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 John Doe's suitability for registration, and provided he meets all other applicable criteria for registration at the time he applies for registration.
(e) For a period of not less than one year from the date John Doe becomes registered, the Firm shall submit quarterly reports regarding the administration of the Plan.
42. The Parties submit that their joint recommendation is reasonable, having regard to the following factors:
(a) John Doe has recognized and acknowledged his misconduct, has represented that he will not engage in misconduct in the future, and acknowledges the consequences of any future misconduct by him.
(b) Staff is not aware of any investor harm caused by John Doe's misconduct.
(c) John Doe has generally been cooperative with Staff both before the submission of his Application and during Staff's review of the Application.
(d) John Doe has taken remedial steps regarding his personal issues in an effort to minimize the possibility of further misconduct occurring in the future.
(e) By agreeing to this Settlement Agreement, John Doe has saved Staff and the Director the time and resources that would have been required for an OTBH.
43. Staff and John Doe acknowledge that if the Director does not accept this joint recommendation:
(a) this joint recommendation and all discussions and negotiations between Staff and John Doe in relation to this matter shall be without prejudice to the parties; and
(b) John Doe will be entitled to an OTBH in accordance with section 31 of the Act in respect of any recommendation that may be made by Staff regarding his registration status.
44. The parties agree that this Settlement Agreement, and any Director's decision approving of it, will be published on the OSC's website and in the OSC Bulletin in a format that will not divulge the identity of any of the parties referred to in this Settlement Agreement because of the sensitive personal information it contains.