Securities Law & Instruments



R.S.O. 1990, c. S.5, AS AMENDED







(Section 127)

WHEREAS on November 9, 2001, the OntarioSecurities Commission (the "Commission") issued aNotice of Hearing pursuant to section 127 of the SecuritiesAct, R.S.O. 1990, c. S.5, as amended (the "Act")respecting Donald McCrory ("McCrory") and others;

AND WHEREAS McCrory entered into a SettlementAgreement executed November 14, 2002 (the "Settlement Agreement")in which he agreed to a proposed settlement of the proceedings,subject to the approval of the Commission;

AND UPON reviewing the Settlement Agreementand the Statement of Allegations of Staff of the Commissionand upon hearing submissions from McCrory and from Staff ofthe Commission;

AND WHEREAS the Commission is of theopinion that it is in the public interest to make this Orderpursuant to subsection 127(1) of the Act;


1. the attached Settlement Agreement is approved;

2. pursuant to subsection 127(1), paragraph2, trading in any securities by McCrory cease for five yearscommencing on the date of this Order with the exceptions that:

(a) McCrory is permitted to trade securitiesthrough a registered dealer pursuant to his powers of attorneyfor property of Helen and (Stanley) Emmett McCrory and/oras the executor of either of their estates; and

(b) after three years from the date of thisOrder, McCrory is permitted to trade securities througha registered dealer for the account of his registered retirementsavings plan (as defined in the Income Tax Act (Canada));and

3. pursuant to subsection 127(1), paragraph6, McCrory is reprimanded.

November 15, 2002.

"Howard Wetston"                    "RobertDavis"



R.S.O. 1990, c. S.5, AS AMENDED









1. By Notice of Hearing dated November 9,2001 (the "Notice of Hearing"), the Ontario SecuritiesCommission (the "Commission") announced that itproposed to hold a hearing to consider, among other things,whether pursuant to subsection 127(1) and section 127.1 ofthe Securities Act, R.S.O. 1990, c. S.5 (the "Act"),it is in the public interest for the Commission to make anorder:

(a) that trading in any securities by therespondent Donald McCrory ("McCrory") cease permanentlyor for such time as the Commission may direct;

(b) prohibiting McCrory from becoming oracting as a director or officer of any issuer permanentlyor for such period as specified by the Commission;

(c) reprimanding McCrory;

(d) requiring McCrory to pay the costs ofthe Commission's investigation and the hearing; and

(e) such other terms and conditions as theCommission may deem appropriate.


2. Staff of the Commission ("Staff")agrees to recommend settlement of the proceeding respectingMcCrory initiated by the Notice of Hearing in accordance withthe terms and conditions set out below. McCrory consents tothe making of an order against him in the form attached asSchedule "A" based on the facts set out in PartIII of this Settlement Agreement.



3. Solely for the purposes of this proceeding,and of any other proceeding commenced by a securities regulatoryagency, Staff and McCrory agree with the facts set out inparagraphs 4 through 24 of this Settlement Agreement.


(i) McCrory's Registration

4. In early May 1996, McCrory became registeredwith the Commission to sell mutual funds and limited marketproducts. McCrory was sponsored by Triple A Financial ServicesInc. ("Triple A"). Triple A's sponsorship of McCrorycontinued until mid-October 1998. McCrory subsequently wassponsored by the Investment and Tax Centre. McCrory has notbeen registered with the Commission since the end of September2001.

5. During the time that Triple A employedand sponsored McCrory, Roderick Alton ("Alton")was Triple A's President and a director and McCrory's BranchManager.

(ii) The North George Capital Limited Partnerships

6. In the mid-nineteen nineties, Alton andMichael Magee ("Magee") formed several limited partnerships.North George Capital Limited Partnership was formed on September8, 1995 pursuant to the laws of Ontario. North George CapitalII Limited Partnership, North George Capital III Limited Partnership,North George Capital IV Limited Partnership and North GeorgeCapital V Limited Partnership (collectively with North GeorgeCapital Limited Partnership, the "North George LimitedPartnerships" or the "Partnerships") were formedon August 16, 1996.

7. The general partner of the North GeorgeLimited Partnerships was North George Capital Management Limited("North George Management"). North George Managementwas a private corporation owned equally by Alton and Magee.

(iii) The Distribution of Units of theNorth George Limited Partnerships

8. The North George Limited Partnerships raisedfunds by offering investors/subscribers the opportunity topurchase units in one or more of the Partnerships. Each subscriberbecame a limited partner of the Partnership(s) in which heor she invested. Through the sale of units, the North GeorgeLimited Partnerships raised approximately US$4.4 million.

9. The distribution of the North George LimitedPartnerships securities contravened section 53 of the Act.None of the Partnerships filed a preliminary prospectus orprospectus with the Commission.

10. The North George Limited Partnershipsprepared Offering Memoranda, according to which the Partnershipsrelied on the seed capital prospectus exemption containedin paragraph 72(1)(p) of the Act. Neither this, nor any other,prospectus exemption under the Act was available to the Partnerships.

11. Effectively, the Partnerships were oneissuer. Among other things, such Partnerships raised fundsbased on virtually identical Offering Memoranda and co-mingledinvestors' funds to be used for a common purpose. SeveralPartnerships were formed as an attempt to circumvent the seedcapital exemption requirement that sales be made to no morethan 25 purchasers.

12. Only the Offering Memorandum of NorthGeorge Capital IV Limited Partnership was filed with the Commission.Only North George Capital IV Limited Partnership filed reports(Form 20's) as required by the Act.

13. The Partnerships' Offering Memoranda providedinsufficient information about and/or inadequate explanationof how the investment worked and how the Partnerships wouldrender a rate of return of at least 48% to 120% per year (24%to 60% to investors).

14. The North George Limited Partnershipsgenerated little income. Any "interest" paid tosubscribers came largely out of other subscribers' capital.Most investors lost a significant portion of their investment.

(iv) The Distribution of Lionaird CapitalCorp. Promissory Notes

15. In May 1997, Lionaird Capital Corp. ("Lionaird")was incorporated pursuant to the laws of Ontario. Lionairdwas a private corporation the shares of which were held byAlton, Magee and others in trust for an unnamed party. Altonwas the President, Chief Operating Officer and a directorof Lionaird. Magee was Lionaird's Vice-President and a director.Kenneth Gill ("Gill") also was an officer and adirector.

16. Lionaird raised monies through the saleof promissory notes to investors. Through the purchase ofpromissory notes by investors, Lionaird raised in excess of$3.4 million. Such sales did not go through Triple A or anyother registered dealer.

17. The distribution of Lionaird promissorynotes contravened section 53 of the Act. Lionaird did notfile a preliminary prospectus or a prospectus with the Commission.On September 12, 1997, Lionaird filed with the Commissionan Offering Memorandum dated July 25, 1997. The Lionaird OfferingMemorandum related to a purported private placement of 12%secured redeemable promissory notes. Such notes were describedin the Offering Memorandum as having a five year term andpaying interest of 12% per year (with a potential bonus paymentof up to 12%).

18. According to its Offering Memorandum,Lionaird relied on the private placement and seed capitalprospectus exemptions contained in paragraphs 72(1)(d) and(p) of the Act. Neither these, nor any other, prospectus exemptionsunder the Act were available to Lionaird.

19. Further, the Lionaird Offering Memorandumprovided insufficient information about, or inadequate explanationof, among other things, how Lionaird would realize the promisedrate of return of 12% to 24% to investors.

20. Most of the investors in Lionaird lostall, or substantially all, of their investment.

(v) McCrory's Conduct

21. Between September 1996 and February 1998,McCrory sold approximately US$312,100 worth of units in theNorth George Limited Partnerships to 7 Ontario investors andapproximately $447,000 worth of Lionaird promissory notesto 25 clients.

22. McCrory participated in illegal distributionsof a security and engaged in other conduct contrary to Ontariosecurities law and the public interest by:

(a) failing to act in the best interestsof his clients. The North George Limited Partnerships andLionaird investments were the first and only limited marketproducts McCrory ever sold. McCrory failed to conduct theappropriate due diligence, and only made inquiries of theprincipals of the Partnerships and Lionaird who were inan obvious conflict position, to educate himself concerninglimited market products in general and the nature and qualityof the North George Limited Partnerships and Lionaird investmentsspecifically.

McCrory did not have sufficient regard tothe Partnerships and Lionaird Offering Memoranda. Further,in at least one case, he did not provide his client witha copy of the Offering Memorandum prior to the client'spurchase. McCrory pursued his sales of the Partnershipsunits notwithstanding that the financial statements indicatedthat the "interest" being paid to investors wastaken largely from other investors' capital;

(b) representing to his clients:

(i) that the North George Limited Partnershipsand Lionaird investments were safe and that an investor'sprincipal was 100% guaranteed notwithstanding, among otherthings, that the Offering Memoranda stated that the securitieswere speculative;

(ii) that all his or her funds could beretrieved on 30 days notice notwithstanding, among otherthings, that only Lionaird had the right to redeem itspromissory notes; and

(iii) that the rate of return for investorswould be at least 24% to 60% in the case of the NorthGeorge Limited Partnerships and 12% to 24% respectingLionaird; and

(c) selling Lionaird notes to investorsonce he was aware that the North George Limited Partnershipswere facing difficulties and were failing to pay the promisedreturn. McCrory knew that Alton was a principal of bothand that the investment programs were similar; and

(d) recommending and selling investmentsunsuitable for his clients. One elderly client investedthe vast majority of her money in the Partnerships and Lionairdon the recommendation of McCrory.

23. As a result of selling units in the NorthGeorge Limited Partnerships and promissory notes of Lionairdto clients, McCrory earned commissions and trailer fees ofapproximately $62,000.

24. McCrory and his wife invested approximatelyUS$68,000 worth of units in the North George Limited Partnershipsand $20,000 in Lionaird.


25. McCrory represents to Staff that:

(a) as a newly-registered salesperson, herelied on the representations of Alton that the North GeorgeLimited Partnerships and Lionaird investments were legaland that clients' original principal was guaranteed andrefundable;

(b) he believed that the North George LimitedPartnerships and Lionaird investments were legitimate; and

(c) the majority of his clients were familymembers and friends.


26. McCrory agrees to the following termsof settlement:

(a) the making of an order:

(i) approving this settlement;

(ii) that trading in any securities byMcCrory cease for 5 years with the exceptions that:

(a) McCrory is permitted to trade securitiesthrough a registered dealer pursuant to his powers ofattorney for property of Helen and (Stanley) EmmettMcCrory (McCrory's parents) and/or as the executor ofeither of their estates; and

(b) after three years from the dateof the approval of this settlement, McCrory is permittedto trade securities through a registered dealer forthe account of his registered retirement savings plan(as defined in the Income Tax Act (Canada));and

(iii) reprimanding McCrory;

(b) McCrory will undertake to the Commissionin writing that he will not apply to the Commission forregistration in any capacity for 10 years;

(c) within one year prior to applying forregistration with the Commission, McCrory will successfullycomplete the Canadian Securities Course and Conduct PracticesHandbook Course; and

(d) in the event that McCrory becomes registeredwith the Commission, he agrees to be subject to close supervisionfor the first year of his registration.


27. If this settlement is approved by theCommission, Staff will not initiate any other proceeding underthe Act against McCrory in relation to the facts set out inPart III of this Settlement Agreement.


28. Approval of the settlement set out inthis Settlement Agreement shall be sought at the public hearingof the Commission scheduled for November 15, 2002 or suchother date as may be agreed to by Staff and McCrory (the "SettlementHearing"). McCrory will attend in person at the SettlementHearing.

29. Counsel for Staff or McCrory may referto any part, or all, of this Settlement Agreement at the SettlementHearing. Staff and McCrory agree that this Settlement Agreementwill constitute the entirety of the evidence to be submittedat the Settlement Hearing.

30. If this settlement is approved by theCommission, McCrory agrees to waive his rights to a full hearing,judicial review or appeal of the matter under the Act.

31. Staff and McCrory agree that if this settlementis approved by the Commission, they will not make any publicstatement inconsistent with this Settlement Agreement.

32. If, for any reason whatsoever, this settlementis not approved by the Commission, or an order in the formattached as Schedule "A" is not made by the Commission:

(a) this Settlement Agreement and its terms,including all discussions and negotiations between Staffand McCrory leading up to its presentation at the SettlementHearing, shall be without prejudice to Staff and McCrory;

(b) Staff and McCrory shall be entitledto all available proceedings, remedies and challenges, includingproceeding to a hearing of the allegations in the Noticeof Hearing and Statement of Allegations of Staff, unaffectedby this Agreement or the settlement discussions/negotiations;

(c) the terms of this Settlement Agreementwill not be referred to in any subsequent proceeding, ordisclosed to any person, except with the written consentof Staff and McCrory or as may be required by law; and

(d) McCrory agrees that he will not, inany proceeding, refer to or rely upon this Settlement Agreement,the settlement discussions/negotiations or the process ofapproval of this Settlement Agreement as the basis for anyattack on the Commission's jurisdiction, alleged bias orappearance of bias, alleged unfairness or any other remediesor challenges that may otherwise be available.


33. Except as permitted under paragraph 29above, this Settlement Agreement and its terms will be treatedas confidential by Staff and McCrory until approved by theCommission, and forever, if for any reason whatsoever thissettlement is not approved by the Commission, except withthe consent of Staff and McCrory, or as may be required bylaw.

34. Any obligations of confidentiality shallterminate upon approval of this settlement by the Commission.


35. This Settlement Agreement may be signedin one or more counterparts which together shall constitutea binding agreement.

36. A facsimile copy of any signature shallbe as effective as an original signature.

November 14, 2002.

"Donald McCrory"
Donald McCrory

November 14, 2002.

"Brian Butler"
Staff of the Ontario Securities Commission
Per: Michael Watson