IN THE MATTER OF THE COMMODITY FUTURES ACT
R.S.O. 1990, c.C.20, AS AMENDED
IN THE MATTER OF
WAYNE S. UMETSU
STATEMENT OF ALLEGATIONS OF STAFF OF THE ONTARIO SECURITIES COMMISSION
Staff of the Ontario Securities Commission ("Staff") make the following allegations:
1. Wayne S. Umetsu ("Umetsu") was registered with the Ontario Securities Commission (the"Commission") as a salesperson pursuant to the Commodity Futures Act (the "Act") forvarious periods of time since approximately August, 1981. During the material time, Umetsuwas registered with the Commission as a salesperson, pursuant to the Act, with F.C. CanadaInvestments Inc. ("F.C. Canada") from April 8, 1997 to May 2, 1997 and again with F.C.Canada from December 16, 1997 to February 28, 1998. F.C. Canada was, at the materialtime, registered as an Introducing Broker pursuant to the Act.
2. Umetsu was not registered with the Commission in any capacity during the period betweenMay 2, 1997 and December 16, 1997.
3. Umetsu has not been registered with the Commission in any capacity since his employmentwith F.C. Canada was terminated on February 28, 1998.
4. W. E. is an individual who was a client of Umetsu.
5. In or around April, 1997, W.E. attended an information seminar hosted by F.C. Canada thatwas advertised as an opportunity to learn about commodities, futures and options trading (the"Seminar"). W.E. met Umetsu (then a salesperson employed by F.C. Canada) at the Seminarwho advised W.E. that he had 15 years experience trading in futures contracts.
6. At the Seminar W.E. asked Umetsu about investing and opening an account with F.C.Canada. Umetsu advised W.E. that he would be leaving F.C. Canada in the near future andjoining a better investment company. Umetsu requested that W.E. wait to make hisinvestment until Umetsu had joined the new company.
7. Umetsu's employment with F.C. Canada was terminated on May 2, 1997, at which time hisregistration as a salesperson was suspended pursuant to the Act.
8. In early May, 1997, Umetsu joined Prime Canadian Futures Company ("Prime") (anInvestment Dealers Association of Canada member) was registered as a Futures CommissionMerchant under the Act. Prime did not however, at any time, provide the Commission withnotice in writing of Umetsu's employment by Prime. As such, Umetsu's registration as asalesperson under the act was not reinstated when he became employed by Prime.
9. On or about May 7, 1997, W.E. met with Umetsu at Prime's office to open an account.Umetsu did not advise W.E. that he was no longer registered under the Act to trade incontracts.
10. Between May 27 and September 16, 1997, W.E. deposited $23,000 into his account at Prime.W.E. instructed Umetsu to effect certain transactions in a commodity futures contract andthree commodity futures contracts were in fact purchased and sold in W.E.'s account atPrime.
11. Late in the summer of 1997, Umetsu advised W.E. that he was moving to a new company andW.E. agreed to keep his business with Umetsu rather than transfer it to another representativeat Prime. W.E. withdrew all funds from his account at Prime and received two cheques datedSeptember 22, 1997 for Cdn$11,000 and US$5,342. At this time there were no opencontracts in his account at Prime, but W.E. believed that Umetsu had between 10 and 20commodity futures contracts for him in an account under Umetsu's name.
12. On September 23, 1997, Umetsu instructed W.E. to make a cheque payable to "LFG, careof Wayne Umetsu", so that Umetsu could transfer W.E.'s account to Umetsu's new firm.Later the same day, Umetsu contacted W.E. and requested him to reissue the cheque toUmetsu personally. Umetsu picked up the $19,000 cheque at W.E.'s home and deposited itinto his personal account at Canada Trust. Umetsu made no investment on behalf of W.E.with respect to the $19,000.
13. At Umetsu's request, on October 31, 1997, W.E. made an emergency wire transfer toUmetsu's account at Canada Trust in the amount of $15,000. W.E. was advised by Umetsuthat funds were required to protect his investments. Umetsu made no investment on behalfof W.E. with respect to the $15,000.
14. On or about December 23, 1997, W.E. provided Umetsu with a cheque in the amount of$1,000 to be invested and the cheque was deposited into Umetsu's account at Canada Trust.Umetsu made no investment on behalf of W.E. with respect to the $1,000.
15. Between March 17 and July 23, 1998, W.E. paid another $44,500 to Umetsu for the purposesof investment as follows: cash of $3,500 and six cheques totalling $41,000 which weredeposited into Umetsu's account at Canada Trust. Again, Umetsu made no investment onbehalf of W.E. with respect to the $45,000.
16. By a handwritten agreement dated December 7, 1999 (the "Agreement"), Umetsu agreed topay back to W.E. the sum of $150,000 in connection with the monies given to him by W.E.for investment purposes. In connection with the Agreement, Umetsu provided W.E. with 6postdated cheques totalling $100,000. W.E. attempted to cash the first cheque, but it wasreturned NSF. Shortly thereafter, Umetsu advised W.E. that he did not intend to honour theAgreement.
17. Umetsu breached the Act by trading in futures contracts without being registered to do so,contrary to section 22 of the Act and/or by holding himself as being registered to trade infutures contracts, contrary to section 52 of the Act.
Conduct Contrary To the Public Interest
18. The conduct of Umetsu as described above contravened Ontario commodity futures law andwas contrary to the public interest.
19. Such further and other allegations as Staff may make and the Commission may permit.
Dated at Toronto this 6th day of September, 2000.