Securities Law & Instruments

INTHE MATTER OF

THECOMMODITY FUTURES ACT, R.S.O. 1990, c. C.20, AS AMENDED

ANDTHE SECURITIES ACT, R.S.0. 1990, c. S.5, AS AMENDED

AND

INTHE MATTER OF

WAYNES. UMETSU

ORDER

(Subsection60(1) and section 60.1 of the Commodity Futures Act and

subsection127(1) of the Securities Act)

WHEREASon August 23, 2001, the Ontario Securities Commission (the "Commission")issued an Amended Notice of Hearing pursuant to subsection 60(1)of the Commodity Futures Act, R.S.O. 1990, c. C.20(the "Act") and subsection 127(1) of the Securities Act, R.S.O.1990, c. S.5 respecting Wayne S. Umetsu (the "Respondent");

ANDWHEREAS the Respondent entered into a settlement agreementwith Staff of the Commission in which he agreed to a proposedsettlement of the proceeding, subject to the approval of theCommission;

ANDUPON reviewing the settlement agreement and upon hearingsubmissions from the Respondent and from Staff of the Commission;

ANDWHEREAS the Commission is of the opinion that it isin the public interest to make this Order;

ITIS ORDERED THAT:

1.the settlement agreement, attached to this Order, is approved;

2.pursuant to paragraph 3, subsection 60(1) of the Act, the exemptionscontained in Ontario commodity futures law permanently do notapply to the Respondent;

3.pursuant to subsection 127(1), paragraph 2 of the SecuritiesAct, the Respondent is prohibited from trading in securitiespermanently, except that after one year from the date of thisOrder, the Respondent is permitted to trade in securities forthe account of his registered retirement savings plan (as definedin the Income Tax Act (Canada));

4.pursuant to subsection 60(1), paragraph 8 of the Act and subsection127(1), paragraph 8 of the Securities Act, the Respondentis prohibited permanently from acting as an officer or directorof any issuer;

5.pursuant to subsection 60(1), paragraph 6 of the Act and subsection127(1), paragraph 6 of the Securities Act, the Respondentis reprimanded; and

6.pursuant to section 60.1 of the Act, investigation costs inthe amount of $10,000.00 are payable by the Respondent.

March6, 2002.

"HowardWetston" "Lorne Morphy" "Theresa McLeod"

 


INTHE MATTER OF

THECOMMODITY FUTURES ACT, R.S.O. 1990, c. C.20, AS AMENDED

ANDTHE SECURITIES ACT, R.S.O. 1990, c. S.5, AS AMENDED

AND

INTHE MATTER OF

WAYNES. UMETSU

SETTLEMENTAGREEMENT BETWEEN STAFF OF

THEONTARIO SECURITIES COMMISSION AND WAYNE S. UMETSU



I.INTRODUCTION

1.By an Amended Notice of Hearing dated August 23, 2001 (the "AmendedNotice of Hearing"), the Ontario Securities Commission (the"Commission") announced that it proposed to hold a hearing toconsider the following issues:

(a)whether, pursuant to subsection 60(1) and section 60.1 of theCommodity Futures Act, R.S.O. 1990, c. C.20 (the "Act"), itis in the public interest for the Commission to make an order:

(i)that the exemptions contained in Ontario commodity futures lawdo not apply to Wayne S. Umetsu (the "Respondent") permanentlyor for such period as the Commission may direct;

(ii)prohibiting the Respondent from becoming or acting as a directoror officer of any issuer permanently or for such period as theCommission may direct;

(iii)reprimanding the Respondent; and

(iv)requiring the Respondent to pay the costs of the Commission'sinvestigation and the proceeding; and

(b)whether, pursuant to subsection 127(1) of the Securities Act,R.S.O. 1990, c. S.5 (the "Securities Act"), it is in the publicinterest for the Commission to make an order:

(i)that the Respondent cease trading in any securities permanently,or for such time as the Commission may direct;

(ii)prohibiting the Respondent from becoming or acting as a directoror officer of any issuer permanently or for such period as theCommission may direct; and

(iii)reprimanding the Respondent.

II.JOINT SETTLEMENT RECOMMENDATION

2.Staff of the Commission ("Staff") agree to recommend settlementof the proceeding initiated by the Amended Notice of Hearing inaccordance with the terms and conditions described below. TheRespondent consents to the making of an order against him in theform attached as Schedule "1" (the "Order") based on the factsset out in Part III of this Settlement Agreement.

III.STATEMENT OF FACTS

Acknowledgment

3.The Respondent acknowledges that the facts set out in paragraphs4 through 21 below are correct.

Facts

4.The Respondent was registered with the Commission as a salespersonpursuant to the Act for various periods since approximately August,1981. From April 8, 1997 to May 2, 1997 and from December 16,1997 to February 28, 1998, the Respondent was registered withthe Commission as a salesperson with F.C. Canada Investments Inc.("F.C. Canada"). During the material time, F.C. Canada was registeredas an Introducing Broker pursuant to the Act.

5.The Respondent was not registered with the Commission in any capacitybetween May 2, 1997 and December 16, 1997.

6.The Respondent has not been registered with the Commission inany capacity since his employment with F.C. Canada was terminatedon February 28, 1998.

7.W. E. is an individual who was a client of the Respondent.

8.In or around April, 1997, W.E. attended an information seminarhosted by F.C. Canada (the "Seminar"). The Seminar was advertisedas an opportunity to learn about commodities, futures and optionstrading. W.E. met the Respondent (then a salesperson employedby F.C. Canada) at the Seminar. The Respondent informed W.E. thathe had 15 years' experience trading in futures contracts.

9.At the Seminar, W.E. asked the Respondent about investing andopening an account with F.C. Canada. The Respondent informed W.E.that he would be leaving F.C. Canada in the near future and joininga better investment company. The Respondent requested that W.E.wait to make his investment until the Respondent had joined thenew company.

10.The Respondent left the employ of F.C. Canada on May 2, 1997,at which time the Respondent's registration as a salesperson wassuspended pursuant to the Act.

11.In early May, 1997, the Respondent joined Prime Canadian FuturesCompany, an Investment Dealers Association of Canada member ("Prime").Prime was registered as a Futures Commission Merchant under theAct. Prime did not, however, provide the Commission with noticein writing of the Respondent's employment. Thus, the Respondent'sregistration as a salesperson was not reinstated when he becameemployed by Prime.

12.On or about May 7, 1997, W.E. met with the Respondent at Prime'soffices to open an account. The Respondent did not inform W.E.that he was no longer registered under the Act to trade in futurecontracts.

13.Between May 27, 1997 and September 16, 1997, W.E. deposited $23,000into his account at Prime. During this period, from time to time,W.E. instructed the Respondent to effect certain transactionsin commodity futures contracts on his behalf. As a result, threecommodity futures contracts were purchased and sold in W.E.'saccount by the Respondent. The Respondent was not registered underthe Act to make such trades.

14.Late in the summer of 1997, the Respondent informed W.E. thathe was moving to a new company. Although the Respondent was notregistered to trade future contracts, he held himself out to W.E.as being able to so trade. W.E. agreed to keep his business withthe Respondent rather than transfer it to another Prime representative.Accordingly, W.E. withdrew all his funds from his Prime account.W.E. received from Prime two cheques dated September 22, 1997(one in the amount of Cdn$11,000 and one in the amount of US$5,342).Although there were no open contracts in his Prime account, W.E.believed that the Respondent had between 10 and 20 commodity futurescontracts for him in an account under the Respondent's name.

15.On September 23, 1997, the Respondent instructed W.E. to makea cheque in the amount of $19,000 payable to "LFG, care of WayneUmetsu" so that the Respondent could transfer W.E.'s account tothe Respondent's new firm. Later the same day, the Respondentcontacted W.E. and requested that he reissue the cheque to theRespondent personally. The Respondent picked up the $19,000 cheque(made payable to him) at W.E.'s home. He deposited it into hispersonal account at Canada Trust. The Respondent made no investmenton behalf of W.E. with the $19,000. Rather, the Respondent usedthe monies solely for his own benefit.

16.At the Respondent's request, on October 31, 1997, W.E. made anemergency wire transfer to the Respondent's personal account atCanada Trust in the amount of $15,000. W.E. was informed by theRespondent that these funds were required to protect his investments.The Respondent made no investment on behalf of W.E. with the $15,000.Rather, the Respondent used the monies solely for his own benefit.

17.In the fall of 1997, the Respondent returned to the employ ofF.C. Canada. He was registered with the Commission as a salespersonpursuant to the Act between December 16, 1997 and February 28,1998 (when he was terminated by F.C. Canada). After February 28,1998, the Respondent continued to hold himself out to W.E. asbeing registered under the Act to trade futures contracts.

18.On or about December 23, 1997, W.E. provided the Respondent witha cheque payable to the Respondent in the amount of $1,000 tobe invested on W.E.'s behalf. This cheque was deposited into theRespondent's personal account at Canada Trust. The Respondentmade no investment on behalf of W.E. with the $1,000. Rather,the Respondent used the monies solely for his own benefit.

19.Between March 17, 1998 and July 23, 1998, W.E. provided $44,500to the Respondent ($3,500 cash and six cheques totaling $41,000made payable to the Respondent) for the purpose of being investedon his behalf. The Respondent deposited the cash and cheques intohis personal account at Canada Trust. The Respondent made no investmenton behalf of W.E. with the $44,500. Rather, the Respondent usedthe monies solely for his own benefit.

20.By a handwritten agreement dated December 7, 1999, the Respondentagreed to pay back to W.E. the sum of $150,000. Further to thisagreement, the Respondent provided W.E. with 6 postdated chequestotaling $100,000 (the repayment terms of the remaining $50,000was to be negotiated by the Respondent and W.E. later). W.E. attemptedto cash the first cheque, but it was returned NSF. Shortly thereafter,the Respondent informed W.E. that he did not intend to honourtheir agreement. No restitution has been paid to date by the Respondentto W.E.

21.By trading futures contracts without being registered to do socontrary to section 22 of the Act, holding himself out as beingregistered to trade futures contracts contrary to section 52 ofthe Act and by diverting monies provided to him by W.E. for investmentpurposes for his own personal use, the Respondent contravenedthe Act and engaged in conduct contrary to the public interest.

IV.TERMS OF SETTLEMENT

22.The Respondent agrees to the following terms of settlement:

(a)pursuant to subsection 60(1), paragraph 3 of the Act, the exemptionscontained in Ontario commodity futures law permanently will notapply to the Respondent;

(b)pursuant to subsection 127(1), paragraph 2 of the Securities Act,the Respondent will be prohibited permanently from trading inany securities with the exception that after one year from thedate of the approval of this settlement the Respondent is permittedto trade securities for the account of his registered retirementsavings plan (as defined in the Income Tax Act (Canada));

(c)pursuant to paragraph 8 of subsection 60(1) of the Act and paragraph8 of subsection 127(1) of the Securities Act, the Respondent willbe prohibited permanently from acting as an officer or directorof any issuer;

(d)pursuant to subsection 60(1), paragraph 6 of the Act and subsection127(1), paragraph 6 of the Securities Act, the Respondent willbe reprimanded by the Commission; and

(e)pursuant to section 60.1 of the Act, the Respondent will pay theCommission's investigation and hearing costs of $10,000.

V.STAFF COMMITMENT

23.If the settlement is approved by the Commission, Staff will notinitiate any other proceeding against the Respondent in relationto the facts set out in Part III of this Settlement Agreement.

VI.APPROVAL OF SETTLEMENT

24.Approval of the settlement set out in this Settlement Agreementshall be sought at the public hearing of the Commission scheduledfor March 6, 2002, or such other date as may be agreed to by Staffand the Respondent (the "Settlement Hearing").

25.Counsel for Staff or the Respondent may refer to any part, orall, of this Settlement Agreement at the Settlement Hearing. Staffand the Respondent agree that this Settlement Agreement will constitutethe entirety of the evidence to be submitted at the SettlementHearing.

26.If this settlement is approved by the Commission, the Respondentagrees to waive his rights to a full hearing, judicial reviewor appeal of the matter under the Act and the Securities Act.

27.Staff and the Respondent agree that if this settlement is approvedby the Commission, they will not make any public statement inconsistentwith this Settlement Agreement.

28.If, at the conclusion of the settlement hearing, and for any reasonwhatsoever, this settlement is not approved by the Commissionor an order in the form attached as Schedule "1" is not made bythe Commission:

(a)this Settlement Agreement and its terms, including all discussionsand negotiations between Staff and the Respondent leading up toits presentation at the Settlement Hearing shall be without prejudiceto Staff and the Respondent;

(b) Staff and theRespondent shall be entitled to all available proceedings, remediesand challenges, including proceeding to a hearing of the allegationsin the Amended Notice of Hearing and Amended Statement of Allegations,unaffected by this Settlement Agreement or the settlement discussions/negotiations;

(c)the terms of this Settlement Agreement will not be referredto in any subsequent proceeding, or disclosed to any person,except with the written consent of Staff and the Respondentor as may be required by law; and

(d)the Respondent agrees that he will not, in any proceeding, referto or rely upon this Settlement Agreement or the discussions/negotiationsor the process of approval of this Settlement Agreement as thebasis for any attack on the Commission's jurisdiction, allegedbias or appearance of bias, alleged unfairness or any other remediesor challenges that may otherwise be available.

VII.DISCLOSURE OF SETTLEMENT AGREEMENT

29.Subject to paragraph 25 above, this Settlement Agreement and itsterms will be treated as confidential by Staff and the Respondentuntil approved by the Commission, and forever if, for any reasonwhatsoever, this settlement is not approved by the Commission,except with the written consent of Staff and the Respondent, oras may be required by law.

30.Any obligations of confidentiality shall terminate upon approvalof this settlement by the Commission.

VIII.EXECUTION OF SETTLEMENT AGREEMENT

31.This Settlement Agreement may be signed in one or more counterpartswhich together shall constitute a binding agreement.

32.A facsimile copy of any signature shall be as effective as anoriginal signature.

March4, 2002.

"WayneS. Umetsu"

March5, 2002.

"MichaelWatson"

 


Schedule"1"


INTHE MATTER OF

THECOMMODITY FUTURES ACT, R.S.O. 1990, c. C.20, AS AMENDED

ANDTHE SECURITIES ACT, R.S.0. 1990, c. S.5, AS AMENDED

AND

INTHE MATTER OF

WAYNES. UMETSU

ORDER

(Subsection60(1) and section 60.1 of the Commodity Futures Act and

subsection127(1) of the Securities Act)

WHEREASon August 23, 2001, the Ontario Securities Commission (the "Commission")issued an Amended Notice of Hearing pursuant to subsection 60(1)of the Commodity Futures Act, R.S.O. 1990, c. C.20 (the"Act") and subsection 127(1) of the Securities Act, R.S.O. 1990,c. S.5 respecting Wayne S. Umetsu (the "Respondent");

ANDWHEREAS the Respondent entered into a settlement agreementwith Staff of the Commission dated , 2002 (the "Settlement Agreement")in which he agreed to a proposed settlement of the proceeding,subject to the approval of the Commission;

ANDUPON reviewing the settlement agreement and upon hearingsubmissions from the Respondent and from Staff of the Commission;

ANDWHEREAS the Commission is of the opinion that it is inthe public interest to make this Order;

ITIS ORDERED THAT:

1.the settlement agreement, attached to this Order, is approved;

2.pursuant to paragraph 3, subsection 60(1) of the Act, the exemptionscontained in Ontario commodity futures law permanently do notapply to the Respondent;

3.pursuant to subsection 127(1), paragraph 2 of the Securities Act,the Respondent is prohibited from trading in securities permanently,except that after one year from the date of this Order, the Respondentis permitted to trade in securities for the account of his registeredretirement savings plan (as defined in the Income Tax Act(Canada));

4.pursuant to subsection 60(1), paragraph 8 of the Act and subsection127(1), paragraph 8 of the Securities Act, the Respondentis prohibited permanently from acting as an officer or directorof any issuer;

5.pursuant to subsection 60(1), paragraph 6 of the Act and subsection127(1), paragraph 6 of the Securities Act, the Respondent is reprimanded;and

6.pursuant to section 60.1 of the Act, investigation costs in theamount of $10,000.00 are payable by the Respondent.

DATEDat Toronto this day of March, 2002