Order: In the Matter of Kuber Mortgage Investment Corporation and Sutharsan Kunaratnam

IN THE MATTER OF
KUBER MORTGAGE INVESTMENT CORPORATION
and SUTHARSAN KUNARATNAM

Timothy Moseley, Vice-Chair and Chair of the Panel  

File No. 2020-6

March 23, 2020

ORDER

(Sections 127 and 127.1 of the Securities Act, RSO 1990, c S.5)

WHEREAS the Ontario Securities Commission (the Commission) held a hearing in writing to consider the request made jointly by Kuber Mortgage Investment Corporation (Kuber) and Sutharsan Kunaratnam (Kunaratnam) (collectively, the Respondents) and Staff of the Commission (Staff) for approval of a settlement agreement dated March 6, 2020 (the Settlement Agreement);

AND WHEREAS Kuber has given an undertaking to the Commission, in the form attached as Appendix A to this Order (the Undertaking);

ON READING the Statement of Allegations dated March 13, 2020, the Settlement Agreement and the submissions of the representative of Staff, and on considering the Undertaking;

IT IS ORDERED THAT:

1. the Settlement Agreement is approved;

2. each of the Respondents is reprimanded, pursuant to paragraph 6 of subsection 127(1) of the Securities Act, RSO 1990, c S.5 (the Act);

3. the Respondents shall pay an administrative penalty in the amount of $400,000, on a joint and several basis, pursuant to paragraph 9 of subsection 127(1) of the Act, which amount is designated for allocation or use by the Commission in accordance with paragraph 3.4(2)(b) of the Act; and

4. Kuber shall pay costs in the amount of $30,000, pursuant to section 127.1 of the Act.

 

APPENDIX A

UNDERTAKING OF KUBER MORTGAGE INVESTMENT CORPORATION

IN THE MATTER OF KUBER MORTGAGE INVESTMENT CORPORATION and SUTHARSAN KUNARATNAM

UNDERTAKING TO THE ONTARIO SECURITIES COMMISSION

1. This Undertaking is given in connection with the settlement agreement dated March 6, 2020 (the Settlement Agreement) between Kuber Mortgage Investment Corporation (Kuber), Sutharsan Kunaratnam (Kunaratnam) and Staff (Staff) of the Ontario Securities Commission (the Commission). All terms shall have the same meanings in this Undertaking as in the Settlement Agreement.

2. Kuber undertakes to the Commission to:

(a) conduct any subsequent trades of securities of Kuber through or to a firm registered under Ontario securities law in a category that permits such trade, or by Kuber directly only if and when registered to conduct such trades;

(b) amend its most recent offering memorandum by:

(i) removing all references to the Blanket Order,

(ii) stating that Kuber is not registered as a dealer and trades its securities through a firm registered under Ontario securities law in a category that permits such trades,

(iii) stating that Kuber would be required to be registered in the appropriate dealer category under Ontario securities law if it does not trade through a dealer registered in a category that permits such a trade, and

(iv) detailing Square Capital's control over the general partner of Zephyr LP;

(c) retain an EMD to:

(i) conduct a review of the adequacy of the KYC and suitability documentation obtained by Kuber with respect to its current existing investors who did not purchase Kuber's preferred shares through a registered dealer, to be completed within four months from the date of the Settlement Hearing,

(ii) obtain such additional KYC and suitability information as required for a suitability assessment where the EMD deems that the existing documentation at Kuber is inadequate pursuant to paragraph 2(c)(i) above,

(iii) conduct suitability analysis in accordance with sections 13.2 and 13.3 of NI 31-103 for a random sample of 20 current existing investors, selected by the EMD, who did not purchase Kuber's preferred shares through a registered dealer, to be completed within four months from the date of the Settlement Hearing, and

(iv) if 5 or more of the 20 investors are identified by the EMD to have made unsuitable investments in Kuber pursuant to paragraph 2(c)(iii) above, conduct suitability analysis in accordance with sections 13.2 and 13.3 of Nl 31-103 for all current existing investors who did not purchase Kuber's preferred shares through a registered dealer, to be completed within a time period proposed by the EMD which is not unacceptable to Staff;

(d) once an EMD has been retained pursuant to paragraph 2(c) above, Kuber shall immediately provide Staff with a written authorization granting Staff free and unfettered access to communicate with the EMD; and

(e) redeem the preferred shares held by all investors identified by the EMD to have made an unsuitable investment in Kuber pursuant to paragraph 2(c) above at the issue price of $10 per preferred share, unless the investors instruct the EMD that they wish to retain their investments in accordance with subsection 13.3(2) of NI 31-103.

 

DATED at Toronto, Ontario this 6th day of March, 2020.

KUBER MORTGAGE INVESTMENT CORPORATION