IN THE MATTER OF
THE SECURITIES ACT
R.S.O. 1990, c. S.5, AS AMENDED
IN THE MATTER OF
WHEREAS on June 11, 2003, the Ontario Securities Commission issued a Notice of Hearing pursuant to sections 127(1) and 127.1 of the Securities Act in respect of David Sloan;
AND WHEREAS David Sloan entered into a Settlement Agreement with Staff of the Commission in which he agreed to a proposed settlement of the proceeding, subject to the approval of the Commission;
AND WHEREAS Staff recommend approval of the Settlement Agreement;
AND UPON reviewing the Settlement Agreement and the Notice of Hearing of Staff of the Commission and upon hearing the submissions of counsel for Staff and counsel for David Sloan;
IT IS HEREBY ORDERED THAT pursuant to ss. 127(1) and 127.1 of the Act:
1. The Settlement Agreement dated April 26, 2004, a copy of which is attached hereto is hereby approved;
2. Trading by David Sloan in the securities of Flat Electronic Data Interchange (a.k.a. F.E.D.I.) and its successors shall cease permanently, effective immediately;
3. The exemptions contained in Ontario securities law will not apply to David Sloan for a period of 24 months, effective from the date of the order of the Commission approving the Settlement Agreement, save and except trades that David Sloan is permitted to effect through the use of an agent who is a registered dealer, in accordance with s. 35(1) 10 of the Act;
4. David Sloan shall be prohibited from providing to any person or company the documents attached to this order as Scheduled "A" to "G";
5. David Sloan is hereby reprimanded; and
6. David Sloan will pay $5,000.00 to the Commission for a portion of the costs of the investigation pursuant to section 127.1 of the Act;
September 17, 2004.
"Susan Wolburgh Jenah"
IN THE MATTER OF
THE SECURITIES ACT
R.S.O. 1990, c. S.5, AS AMENDED
IN THE MATTER OF
BRIAN ANDERSON, LESLIE BROWN, DOUGLAS BROWN, DAVID SLOAN AND
FLAT ELECTRONIC DATA INTERCHANGE (a.k.a. F.E.D.I.)
1. By Notice of Hearing dated June 11, 2003, the Ontario Securities Commission announced that it proposed to hold a hearing on June 18, 2003 to consider whether, pursuant to sections 127 and 127.1 of the Securities Act, R.S.O. 1990, c. S.5, as amended, it was in the public interest for the Commission to:
a) extend the temporary order made June 5, 2003 until the conclusion of this hearing pursuant to s. 127(7);
b) at the conclusion of this hearing, make an order pursuant to paragraph 2 of s. 127(1) that trading in any securities by the Respondents cease until further order by this Commission;
c) at the conclusion of this hearing, make an order pursuant to paragraph 5 of s. 127(1) that the Respondents be prohibited from providing to any person or company the documents attached as Schedules A to H to the Statement of Allegations; and
d) make such other order as the Commission considers appropriate.
From time to time since the original hearing date of June 18, 2003, the Commission has continued the temporary order made on June 5, 2003, as against Brian Anderson (Anderson), Leslie Brown, Douglas Brown and David Sloan (Sloan). The Temporary order was not continued against Flat Electronic Data Interchange ("FEDI").
II. JOINT SETTLEMENT RECOMMENDATION
2. Staff recommend settlement of the allegations against the respondent, David Sloan ("Sloan") in accordance with the terms and conditions set out below. Sloan agrees to the settlement on the basis of the facts agreed to as provided in Part IV and consents to the making of an order against him in the form attached as Schedule "I" on the basis of the facts set out in Part IV.
3. This settlement agreement, including the attached proposed order (collectively, the "Settlement Agreement") will be released to the public only if and when the Settlement Agreement is approved by the Commission.
4. Staff and Sloan agree with the facts set out in Part IV for the purpose of this settlement proceeding only and further agree that this agreement of facts is without prejudice to the Sloan or any of the other respondents in any other proceedings of any kind including, but without limiting the generality of the foregoing, any proceedings brought by the Commission under the Act or any civil or other proceedings which may be brought by any other person or agency.
IV. AGREED FACTS
5. Sloan is a person resident in Courtice, Ontario;
6. On the evening of June 4, 2003, Sloan participated in making a presentation (the Presentation) in respect the FEDI to potential investors at the Wyndham Bristol Place Hotel, Etobicoke. The purpose of the Presentation was to solicit individual investors to invest in FEDI. There was a similar meeting at the Bristol Place Hotel on the previous day.
7. Brian Anderson, Leslie Brown and Douglas Brown were also at the Presentation.
8. At the Presentation, the documents attached were made available to persons attending the seminar:
i) "What is F.E.D.I. and How Do They Make Their Income?" (Schedule A)
ii) "F.E.D.I. Flow Chart" (Schedule B)
iii) "Bank Wire Coordinates" (Schedule C)
iv) "Bank Wire Transfer Procedure" (Schedule D)
v) "Joint Venture Agreement" (Schedule E)
vi) "Email from Gordon Rothwell dated May 15, 2003" (Schedule F)
vii) "Email from bjanderson dated April 17, 2003" (Schedule G)
viii) "Email from Brian D. Anderson dated May 13, 2003" (Schedule H)
9. Investors were told they would invest in a "Desk". Each "Desk" was to cost $125,000.00 USD. It was stated at the presentation that a "Desk" would entitle its holder to an investment income stream.
10. The "Desks" are securities as defined by the Securities Act.
11. Persons who attended the Presentation were not provided with a prospectus which would qualify a "Desk" for sale in Ontario.
12. Sloan participated in making the presentation to those in attendance and he thereby committed acts in furtherance of a trade.
13. Sloan did not receive any proceeds from the sale of "Desks" on the June 5, 2003 meeting or otherwise.
14. Sloan was earlier introduced to the FEDI program by Anderson in 2001 and had personally invested $45,000 in a share of a "Desk".
15. Before the June 5, 2003 presentation, Sloan introduced a number of people to Anderson, for the purpose of investing in "Desks", or shares of "Desks" in FEDI. Sloan did not receive any proceeds or funds as a result of these introductions.
16. After the Commission made its temporary order on June 5, 2003, Sloan demanded the return of his investment and did so receive a refund.
17. Sloan is not registered pursuant to the Securities Act for the purpose of trading securities in the Province of Ontario.
18. The attempted sales of "Desks" on June 5, 2003 were made in breach of sections 25 and 53 of the Securities Act, R.S.O. 1990 c.S.5.
Conduct Contrary to Ontario Securities Law and the Public Interest
19. By engaging in the conduct described above:
(a) Sloan attempted to sell "Desks" of FEDI without being registered to trade in securities, as required by section 25 of the Act; and
(b) Sloan attempted to sell "Desks" of FEDI without filing a preliminary prospectus and a prospectus as required by section 53 of the Act.
20. Further, the conduct described above was contrary to the public interest.
V. TERMS OF SETTLEMENT
21. Sloan agrees to the following terms of settlement:
(a) pursuant to paragraph 2 of subsection 127(1) of the Act, Sloan will cease trading in FEDI securities permanently, effective from the date of the order of the Commission approving the Settlement Agreement;
(b) pursuant to paragraph 3 of subsection 127(1) of the Act, any exemptions contained in Ontario securities law will not apply to Sloan for a period of 24 months, effective from the date of the order of the Commission approving the Settlement Agreement, save and except trades that Sloan is permitted to effect through the use of an agent who is a registered dealer, in accordance with s. 35(1) 10 of the Act;
(c) pursuant to paragraph 5 of subsection 127(1) pf the Act, Sloan will be prohibited from providing to any person or company the documents attached as Schedule A to H herein.
(d) pursuant to paragraph 6 of subsection 127(1) of the Act, Sloan will be reprimanded by the Commission;
(e) Sloan agrees to attend, in person, the hearing before the Commission on April 26, 2004 to consider the Settlement Agreement, or such other date as may be agreed to by the parties for the scheduling of the hearing to consider the Settlement Agreement; and
(f) Sloan will make a payment of $5,000.00 to the Commission in respect of a portion of the Commission's costs of the investigation of this matter.
VI. STAFF COMMITMENT
22. If this settlement is approved by the Commission, Staff will not initiate any other proceeding under the Act against Sloan respecting the facts set out in Part IV of the Settlement Agreement.
VII. PROCEDURE FOR APPROVAL OF SETTLEMENT
23. Approval of the settlement set out in the Settlement Agreement shall be sought at a public hearing of the Commission scheduled for April 26, 2004 or such date as may be agreed to by Staff and Sloan.
24. Counsel for Staff or for Sloan may refer to any part, or all, of the Settlement Agreement at the Settlement Hearing. Staff and Sloan agree that the Settlement Agreement will constitute the entirety of the evidence to be submitted at the Settlement Hearing, unless the parties later agree that further evidence should be submitted at the Settlement Hearing.
25. If the Settlement Agreement is approved by the Commission, Sloan agrees to waive his right to a full hearing, judicial review or appeal of the matter under the Act.
26. Staff and Sloan agree and undertake that if the Settlement Agreement is approved by the Commission, they will not make any statement inconsistent with the Settlement Agreement.
27. Whether or not the Settlement Agreement is approved by the Commission, Sloan agrees that he will not, in any proceeding, refer to or rely upon the Settlement Agreement or the settlement negotiations as the basis of any attack on the Commission's jurisdiction, alleged bias or appearance of bias, alleged unfairness or any other remedies or challenges that may otherwise be available.
28. If, for any reason whatsoever, the Settlement Agreement is not approved by the Commission, or an order in the form attached as Schedule "A" is not made by the Commission;
(a) the Settlement Agreement and its terms, including all settlement negotiations between Staff and Sloan leading up to its presentation at the Settlement Hearing, shall be without prejudice to Staff and Sloan;
(b) Staff and Sloan shall be entitled to all available proceedings, remedies and challenges, including proceeding to a hearing on the merits of the allegations in the Notice of Hearing and Amended Statement of Allegations of Staff, unaffected by the Settlement Agreement or the settlement negotiations; and
(c) the terms of the Settlement Agreement will not be referred to in any subsequent proceeding, or disclosed to any person except with the written consent of Staff and Sloan, or as may be required by law.
VIII. DISCLOSURE OF SETTLEMENT AGREEMENT
29. The Settlement Agreement and its terms will be treated as confidential by Staff and Sloan until approved by the Commission, and forever if, for any reason whatsoever, the Settlement Agreement is not approved by the Commission, except with the written consent of Staff and Sloan, or as may be required by law.
30. Any obligations of confidentiality shall terminate upon approval of the Settlement Agreement by the Commission.
31. It the Settlement Agreement is approved by the Commission, and at any subsequent time Sloan fails to honour the terms contained in paragraph 21, Staff reserve the right to bring proceedings under Ontario securities law against Sloan based on the facts set out in Part IV of the Settlement Agreement, as well as the breach of the terms.
IX. EXECUTION OF SETTLEMENT AGREEMENT
32. The Settlement Agreement may be signed in one or more counterparts which together shall constitute a binding agreement.
33. A facsimile copy of any signature shall be as effective as an original signature.
April 23, 2004.
April 23, 2004.
(Note: Schedules A to H have not been included as they are copies of original documents. A scanned version of Schedules A to H is available on the OSC website at www.osc.gov.on.ca under Enforcement Proceedings, 2004 - "Sloan -- Order & Settlement Agreement".)