THE ONTARIO COURT OF JUSTICE (PROVINCIAL DIVISION)
IN THE MATTER OF
The Provincial Offences ActR.S.0. 1990, c.400
HER MAJESTY THE QUEEN
BRUCE ALAN WARRINGTON
and MONEYSEM FINANCIAL CONSULTANTS INCORPORATED
REASONS ON SENTENCING
Heard before Justice of the Peace, Her Worship W. Casey at the Ontario Court of Justice (Provincial Division), 32 James Street South, Hamilton, Ontario onFriday, March 14, 1997.
D. Ferris, Esq. Prosecutor on behalf of the Crown
W.M. Brown, Esq. Counsel on behalf of the defendants
REASONS ON SENTENCING
HER WORSHIP: The charges before the court are that between July the 1st, 1991 and December 15, 1995, Bruce Alan Warrington did trade in securities,namely promissory notes issued by Bruce Alan Warrington or Moneysem Financial Consultants Incorporated without being registered to trade in such securitiesas required by section 25(1) of the Securities Act, R.S.O. 1990, c. S.5, as amended, and did thereby commit an offence contrary to section 122(1)(c) of theSecurities Act, R.S.O. 1990, c. S.5, as amended.
Count #2. Between July the 1st, 1991 and December 15, 1995, Bruce Alan Warrington, being a director or officer of Moneysem Financial ConsultantsIncorporated, did authorize, permit or acquiesce in the offence committed by Moneysem Financial Consultants Incorporated described in count 1 and did therebycommit an offence contrary to section 122(3) of the Securities Act, R.S.O. 1990, c. S.5, as amended.
Count #3. Between July the 1st, 1991 and December 15, 1995, Bruce Alan Warrington did trade in securities, namely, promissory notes issued by BruceWarrington or Moneysem Financial Consultants Incorporated, where such trading was a distribution of such securities, without having filed a preliminaryprospectus and a prospectus and obtaining receipts therefore from the Director as required by section 53(1) of the Securities Act, R.S.O. 1990, c. S.5, asamended and did thereby commit an offence contrary to section 122(1)(c) of the Securities Act, R.S.O. 1990, c. S.5, as amended.
The last count, #4, between July the 1st, 1991 and December the 15th, 1995, Bruce Alan Warrington, being a director or officer of Moneysem FinancialConsultants Incorporated, did authorize, permit or acquiesce in the offence committed by Moneysem Financial Consultants Inc. described in count #3 and didthereby commit an offence contrary to section 122(3) of the Securities Act, R.S.O. 1990, c. S.5, as amended.
The facts in this case are as follows:
Bruce Warrington initially plead not guilty to all of the offences and evidence was heard from a total of 16 witnesses, 14 of whom were former clients of Mr.Warrington. After five days of trial time and after the Crown had rested its case, Mr. Warrington changed his plea to guilty. Submissions were heard, including astatement by Mr. Warrington, on the reasons for his actions.
I will not review all the evidence in detail. It was clear from the evidence put forward by the Crown that Mr. Warrington had breached the Securities Act. Theguilty plea was accepted. Submissions were made by both prosection and defence. The matter was put over until today for sentence.
In sentencing this defendant, the Court finds the following:
The Securities Act falls under the Public Welfare statutes, which are in force specifically for the protection of the public. Mr. Warrington misused his clientsfunds. Bruce Warrington clearly and knowingly circumvented some of the safeguards put into place by the Securities Act to prevent the misuse of clients' funds.Mr. Warrington, as a Mutual Fund dealer, improperly answered questions on redemption certificates. He persuaded some of his clients to redeem funds in orderthat they could loan him the money. Mr. Warrington misled some of his clients by inference or design into believing their investments were secured by insurance.When he issued the promissory notes, Bruce Warrington breached his fiduciary duty as well as his ethical responsibility to this clients. Bruce Warringtonbreached the trust of his clients, the majority of whom had little, if any, knowledge of the investment market and who were relying upon him for his good advice.
In determining the sentence for these offences, the Court has looked to the following sentencing principles:
Number 1 - Punishment of Mr. Warrington.
Number 2 - Deterrent factor both for himself and others of his fast growing profession who would advise the public on their financial matters.
Number 3 - The protection of the public.
Number 4 - The rehabilitation of the offender.
Dealing first with number 4, the rehabilitation of Mr. Warrington, in Mr. Warrington's statement to the court, he stated that he never meant to hurt anyone and hebelieved it was a lack of attention and poor judgment on his part that led to these charges. For two reasons, the Court rejects the statement entirely, first forreasons of law. Charges under the Provincial Offences Act are not mens rea offences. A guilty mind is not a required ingredient of provincial statutes. In otherwords, the fact that Mr. Warrington did not have the intent to commit the offences is not a mitigating factor. Secondly, despite Mr. Warrington's indication of hisremorse for his actions, the Court has great difficulty in accepting these assertions. It seems that his regret is more because he did not have the time oropportunity to continue his business in the hopes of someday making enough money to repay all the loans. In this Court's opinion, Mr. Warrington's remorse isgenerated more by the fact that he was caught than by his regret for his deeds. Unless there is a definite shift in Mr. Warrington's perception of hisresponsibilities, he clearly will not be a candidate for rehabilitation.
Next, dealing with number 3, protection of the public, it is the Court's belief that the regulatory agencies are well equipped to prevent Mr. Warrington fromrepeating this type of offence, and that they will do so in the future, thus, the public will be protected. Basically, had Mr. Warrington answered the redemptionquestions honestly, had he been honest with his clients in reviewing with them the status of his business before they invested, the Court believes that this misuseof funds could not have escaped the notice of the securities commission.
Next, dealing with number 2, the deterrent factor, the deterrent is not for Mr. Warrington alone, but for others in his field who may be tempted by the samecircumstances to engage in similar practices. This Court wishes to send out the message that his conduct was reprehensible, unacceptable and will not betolerated by the courts.
Lastly, number 1, punishment for Bruce Warrington, Mr. Warrington has no money and, despite his statement that he is capable of earning a lot of money ifallowed to work, he currently has no assets. He began his business on borrowed capital, kept it going on borrowed funds and has nothing left. It is difficult toaccept from his past history that he could generate enough revenue if he was freed on probation, to make even a dent in the nearly $500,000 he owes to hisclients. Mr. Warrington had the complete trust of the investors. The majority seemed to have considered him a friend and confidante, as much as an investmentcounsellor. He used that status to continue the deception that he was a successful businessman who needed further capital to increase his business. Mr.Warrington would have the court believe that he was more a victim of circumstances, getting deeper and deeper into debt in the cyclical business of moneymanagement. This Court rejects that submission and is of the opinion that Bruce Warrington is not a victim of his own misfortune, he is, in fact, the author if hisown misfortune. He used the trust and naivete of persons he knew had little knowledge of the complex world of money management and persuaded them to lendhim money, knowing full well that he had none of his own financial resources to cover the loans. He took that money and used it for his own personal as well asbusiness expenses.
The fact that Mr. Warrington plead guilty to these offences is not a mitigating circumstance with regard to penalty as he chose to plead guilty after he had put hisclients through the trauma of testifying before this court and before he had to give his own testimony.
The Court carefully considered the question of ordering restitution of the missing money, however, there is currently a civil action against the defendant. It is,therefore, in this Court's opinion more within the scope of the civil and criminal courts, should criminal charges be forthcoming from this conviction, to orderrestitution in the large amount involved in this case. A longer gaol sentence than that which this Court has been asked to impose would have been appropriatewere this a criminal court. I am, however, dealing with a matter under the Securities Act, and must govern myself appropriately.
Having carefully reviewed the case law presented on submission to sentence, the Court finds that this is definitely not a case for probation or any homeconfinement type of "punishment". In this Court's opinion, Mr. Warrington knew what he was doing. He deceived his clients in order to further his own gain andprestige. He caused great financial and emotional hardship to retirees who could not replenish the money he took from them.
I feel that a fine in this case would not be appropriate. Any monies which could be forthcoming in the future should go back to the victims. For his actions, Mr.Warrington will be sentenced to serve a total of nine months in gaol as requested by the prosecution; count #1, three months; count #2, two months; count #3,three months; count #4, one month; sentence to be served consecutively, not on an intermittent basis. To use the vernacular, sir, you will be serving "straighttime".
When he finishes serving his sentence, Mr. Warrington will be subject to a two-year period of probation with the following conditions:
The defendant is prohibited from trading in a security during the term of his probation order. He is further to abstain from working for any investment firmaccepting investments.
Finally, I would like to address the witnesses in this case. Some of the witnesses appeared to be blaming themselves for trusting in Mr. Warrington and, inhindsight, wondering why they were fooled. To them I would like to say that we live in a world where trust is an essential ingredient. It is necessary to consultand rely on people with expertise. We are all aware that hindsight is 20/20. Direct the blame where it belongs. That you were misled, misinformed andmisdirected by the smooth talk and personality of Bruce Warrington is his shame, not yours.
Anything you would like to address to the Court?
MR. BROWN: No, Your Worship.
HER WORSHIP: Anything the prosecution would like to say to the Court?
MR. FERRIS: No, Your Worship. HER WORSHIP: Thank you. Mr. Warrington, you are under arrest. You will begin serving your sentence now.