An application for a hearing and review and stay of this decision was made to the Commission pursuant to section 8 of the Securities Act (Ontario), and all notices, orders, and decisions relating to that application can be found in "OSC Proceedings.
In the Matter of Staff’s Recommendation
for the Suspension of Registration of Investar
Investment Ltd., Liyuan Qi and Jian (Bob) Guo
Opportunity to be Heard by the Director under
Section 31 of the Securities Act
- For the reasons outlined below, my decision is to permanently suspend the registration of each of Investar Investment Ltd. (Investar), Liyuan Qi (Qi) and Jian (Bob) Guo (Guo) effective October 13, 2016.
- On July 14, 2016, staff of the Compliance and Registrant Regulation branch (CRR) of the Ontario Securities Commission (Commission) (Staff) recommended to the Director that the registration of Investar as an exempt market dealer, Qi as ultimate designated person (UDP) and a dealing representative, and Guo as the chief compliance officer (CCO) of Investar (Investar, Qi, and Guo collectively referred to in this decision as Registrants) be suspended under the Securities Act (Ontario) (Act). Under section 31 of the Act, Investar, Qi and Guo are entitled to an opportunity to be heard (OTBH) before a decision is made by me, as Director.
- The July 14, 2016 Staff recommendation for suspension of the Registrants set out the following reasons for their recommendation:
- Investar has an inadequate compliance system, and Qi and Guo are not meeting their responsibilities as UDP and CCO, respectively;
- Investar has been dealing outside of its registration category by entering into mutual fund distribution agreements with two fund companies and selling mutual funds to clients;
- Investar has been holding itself out as a mutual fund dealer to its clients;
- Investar failed to make timely and accurate filings with the Commission with respect to outside employment and business activities of registered individuals, including Qi and Guo;
- Misleading or inaccurate marketing materials; and
- Investar’s risk assessment questionnaire dated June 28, 2016 was not accurately completed and contained incorrect information.
Should the OTBH proceed in the absence of the Registrants?
- The OTBH with respect to this matter was scheduled for October 13, 2016 commencing at 9:30. The OTBH started approximately 15 minutes late in order to allow the Registrants more time to appear at the OTBH. At the start of the OTBH, Staff confirmed (at my request) that the Registrants were not in the OSC’s reception area.
- Victoria Paris (Legal Counsel, CRR) provided submissions to me regarding why the OTBH should proceed in the absence of the Registrants. I was advised that:
- an email dated August 24 from Qi to Staff states that “we are [sic] prefer to schedule [the OTBH] for Oct. 13”;
- Staff sent its initial materials for the OTBH to Qi on September 29 with a letter that set out the date of the OTBH (October 13);
- Staff sent further materials for the OTBH to Qi on October 4 with a letter that also set out the date of the OTBH (October 13); and
- An email dated October 7 from Qi to Staff (October 7 Qi Email) states that “We already received the hard copy and your letter… We do not think it’s necessary to attend the Director hearing”.
- Although it was unclear in the October 7 Qi Email whether Qi is referring to Staff’s letter of September 29 or October 4, both of which attached materials, I am satisfied that the Registrants were aware of the OTBH date of October 13.
- On October 7, Staff sent a further email to Qi (to the email address that Qi used in the October 7 Qi Email) which states that:
If you wish to consent to the decision to suspend, I will inform the Director and you do not have to attend the OTBH. The Director will make a decision based on the information in Staff’s materials.
If you wish to oppose the decision to suspend, or ask that the suspension be time limited or conditional, you must attend the OTBH and make the request to the Director…. Please let me know how you wish to proceed.
(October 7 Staff Email)
- In my view, the Registrants had ample notice of Staff’s recommendation dated July 14, 2016, they received Staff’s materials and requests for submissions, and they were notified in the October 7 Staff Email that I would make a decision based on the information in Staff’s materials. Therefore, I am satisfied that the OTBH could proceed in their absence.
Should the Registrants’ registrations be suspended?
- The October 7 Qi Email also states:
Looks like, we have no choice but accept the result to suspend our EMD license… The only hope of suspension is time limited or just a conditional suspension. So, we have a second chance to correct all the mistakes and restart our EMD business again.
- As noted above, the October 7 Staff Email requests further submissions. Staff also sent a further email to Qi on October 11 requesting a response to the October 7 Staff Email. No response was received prior to the OTBH.
- Staff referred me to the Re Cornerstone Asset Management L.P. (2015) 38 OSCB 9535 decision. In that decision, the registrant consented to the suspension of its registration, but provided no materials to the Director for review, and the Director proceeded to suspend the registration of Cornerstone. In the Re Royal Securities Corp. and Ningyuan Guo also known as Mark Guo (2011) 34 OSCB 8043 decision, the Registrant failed to appear at the in person OTBH (as requested by the Director given the seriousness of the misconduct) and instead provided written submissions that the Director described as “disjointed, confusing, and generally difficult to understand”. The Director stated that:
Based on the submissions before me and the fact that Mr. Guo [the UDP and CCO of Royal Securities Corp.] failed to attend the OTBH and refused to cooperate with Staff’s attempt to conduct a compliance review of the Registrants, my decision is that the registration of Mr. Guo and [Royal Securities Corp.] be suspended, effectively immediately.
- In my view, these decisions are directly relevant to the case at hand. The Registrants have, in my view, consented to the suspension of their registrations.
Should the suspensions of the Registrants be time limited or permanent?
- In the Registrants very brief submissions to me in the October 7 Qi Email (which were the only submissions made by the Registrants to me), I was asked to consider whether the suspensions of the Registrants should be permanent or time limited.
- My decision is that the suspensions of the Registrants should all be permanent. I agree with Staff’s recommendation and, in my view, the misconduct described in paragraph 3 above represents a pattern of serious non-compliance with Ontario securities law that is sufficient to demonstrate that the elements of the test for suspension under section 28 of the Act have been met.
Request for Staff to follow up on clients holding mutual fund securities illegally sold to them by Investar
- Lastly, Staff is urged to take appropriate follow up action with respect to the clients holding mutual fund securities illegally sold to them by Investar including contacting the two fund companies to determine how to best deal with these clients.
“Marrianne Bridge”, FCPA, FCA
Deputy Director, Compliance, Strategy and Risk
Compliance and Registrant Regulation
Ontario Securities Commission
October 17, 2016
ADDENDUM – JOINT AGREEMENT BY STAFF, INVESTAR INVESTMENT LTD., LIYUAN QI AND JIAN (BOB) GUO TO MARRIANNE BRIDGE IN HER CAPACITY AS DIRECTOR
Staff (“Staff”) of the Ontario Securities Commission (“OSC”), Investar Investment Ltd. (“Investar”), Liyuan Qi (“Qi”) and Jian (Bob) Guo (“Guo”) jointly agree that in reference to your decision in the capacity of Director dated October 17, 2016 (the “Director’s Decision”):
- The Director’s Decision suspended the EMD registration of Investar, which automatically suspended the registrations of all dealing representatives registered under it, including Qi’s and Guo’s. For clarity, although the Director’s Decision permanently suspended Qi as the ultimate designated person (UDP) of Investar and Guo as the chief compliance officer (CCO) of Investar, nothing in the Director’s Decision shall preclude Qi and/or Guo from applying for reinstatement of registration as a dealing representative with an appropriately registered firm in the future.
- If the Director accepts this joint agreement, Investar, Qi and Guo will immediately withdraw their application dated January 3, 2017 for a hearing and review of the Director’s Decision.
- If the Director accepts this joint agreement, Investar, Qi and Guo agree to waive all rights to a review of this matter.
- If the Director accepts this joint agreement, none of the parties will make any public statement that is inconsistent with this agreement.
- If the Director does not accept this joint agreement, all discussions and negotiations between Staff, Investar, Qi and Guo in relation to this matter, and the joint agreement itself, shall be without prejudice to the parties.
Jointly submitted by:
|" Elizabeth King "
Elizabeth King, Deputy Director,
Compliance and Registrant Regulation on behalf of
Staff of the Ontario Securities Commission
|February 17, 2017
|" Jeffrey Larry "
Paliare Roland Rosenberg Rothstein
Counsel for Investar Investment Inc., Liyuan Qi and Jian (Bob) Guo
|February 16, 2017
|In my capacity as Director, I hereby accept the joint recommendation.|
|" Marrianne Bridge "
Marrianne Bridge, Deputy Director,
Compliance and Registrant Regulation Branch
|February 17, 2017