Proceedings

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IN THE MATTER OF

THE SECURITIES ACT (ONTARIO)

R.S.O. 1990 C. S.5, AS AMENDED (Act)

AND

IN THE MATTER OF

ZDENKO MILOS

WRITTEN SUBMISSIONS TO THE DIRECTOR PURSUANT

TO SUBSECTION 26(3) OF THE ACT

DATE:
November 26, 2003
 
DIRECTOR:
Marrianne Bridge
Manager, Compliance
Capital Markets
 
SUBMISSIONS:
Dianna Daley, Registration Officer
Zdenko Milos (Applicant)

DIRECTOR'S DECISION

Decision

The decision of the Director is to impose terms and conditions on the registration of Zdenko Milos as a salesperson. These are the reasons for the decision.

Background

On September 19, 2003, PFSL Investments Canada Ltd. filed a Financial Disclosure Change Submission on behalf of Zdenko Milos (Applicant). The submission indicated that the Applicant had filed an assignment in bankruptcy on May 6, 2003. The submission also indicated that the Applicant would be given an automatic discharge on February 7, 2004 unless certain defined events occurred.

On October 8, 2003, staff of the Ontario Securities Commission (Commission) sent a letter to the Applicant advising that it had recommended to the Director that the Applicant's registration be subject to terms and conditions. The terms and conditions required written quarterly supervision reports (in a defined format) to be filed. The first quarterly report is to cover the period from October 8, 2003 to January 8, 2004 and is due January 23, 2004.

The October 8, 2003 letter also indicated that, pursuant to subsection 26(3) of the Act, before a decision is made by the Director, the Applicant has an opportunity to be heard. The Applicant may take the opportunity to be heard either by making written submissions to the Director or by appearing in person before the Director. In either case, written notice was required to be delivered by October 22, 2003.

Applicant's submissions

By letter dated October 14, 2003, the Applicant advised that he wanted to exercise his opportunity to be heard before the Director. Further, more substantive, submissions were made by letter dated November 5, 2003. In his letters, the Applicant advises that he doesn't think his registration should be subject to terms and conditions for the following reasons:

- "my bankruptcy was not caused by my money mismanagement or careless spending, but because of lack of enough income"

- he "entered the financial business without any previous knowledge of how such business works, what it takes to be self-employed, and the most important, how to find a market with the need for financial products".

He also indicates in his letters that all of his "clients were served in the best possible manner", that his "clients were always properly and professionally served and taken care of", and that he attended every major seminar organized by his company or other financial companies. He also indicates that no client has ever filed a complaint against him. He further argues that keeping him out of business for the period of time contemplated by the terms and conditions would not benefit anyone and would cause confusion to his clients.

Staff's submissions

Staff of the OSC recommended that the standard terms and conditions for quarterly reporting to the OSC be imposed on the Applicant's registration. Suitability for registration has 3 components -- proficiency (education and experience), integrity and financial soundness. Filing for personal bankruptcy gave staff concerns regarding the Applicant's continued suitability for registration under the third component.

It is staff's standard practice that terms and conditions for quarterly reporting be imposed on an individual's registration if they file for personal bankruptcy, have a garnishment or receive a Requirement to Pay notice. In isolation, the imposition of these terms and conditions, should not, in staff's view, keep an individual from continuing to conduct registerable activities.

Director's findings

My decision is that the Applicant's registration should be subject to the terms and conditions proposed by staff in their letter dated October 8, 2003 and as attached to these reasons.

Staff have consistently imposed terms and conditions on the registration of an individual that has filed for bankruptcy as it affects the financial soundness and suitability of a registrant. Staff's position is, in my view, consistent with the Commission's mandate of investor protection. As a result, I see no reason why staff's standard practice should not prevail in these circumstances and I find that terms and conditions (as set out in Schedule A to these reasons) should be imposed on the registration of Mr. Milos.

"Marrianne Bridge"

Exhibit "A"

Proposed Conditions For Registration

Of Zdenko Milos (Registrant)

Written Quarterly Supervision Reports (copy attached) are to be submitted to the Ontario Securities Commission (Attention: Manager, Registrant Regulation) reporting on the details of the Registrant's sales activities and his dealings with clients. The first quarterly report covering the period from October 8, 2003 to January 8, 2004 is due by January 23, 2004. Subsequent reports are due 15 calendar days after the end of each relevant quarterly reporting. These conditions are to continue until the Registrant has satisfied his obligation and presents to the Manager, Registrant Regulation, acceptable evidence that such obligation has been complied with.

_______________________
__________
Approved Officer for
Registrant
(Registrant Firm)
 
_______________________
Print Name of Signatory Above
 
_______________________
__________
Date
Date

QUARTERLY SUPERVISION REPORT

I hereby certify that strict supervision has been conducted for the quarter ending _________ _________, 200________ of the trading activities of ______________________ by the undersigned. I further certify the following:

1. All orders, both buy and sell, and sales contracts have been initialled and reviewed by a senior officer before entry;

2. All client accounts have been reviewed for:

a. suitability of investments;

b. excess trading or switching and

c. client addresses and any amendments thereto;

3. A review of trading activity on a daily basis has been conducted of the salesperson's client accounts.

4. No transactions have been made in any new account until the full and correct documentation is in place.

5. No client complaints have been received during the period covered. (If there have been, please attach a copy of the complaint documentation and the follow-up action initiated by the company).

6. There has been no handling of clients' funds or securities or issuance of cheques to clients without management approval.

7. Any transfer of funds or securities between clients' accounts has been authorized in writing, reviewed and approved by the supervising officer.

8. Spot audits of the salesperson's client accounts have been conducted during the preceding quarter to ensure compliance with these procedures and that no violation of these procedures were discovered.

__________
____________________
Date
Approved Officer
(Registrant Firm)