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Reasons For Decision

Re:

Reasons For Decision

Reasons for Decision
File No. 200814


IN THE MATTER OF A DISCIPLINARY HEARING
PURSUANT TO SECTIONS 20 AND 24 OF BY-LAW NO. 1 OF
THE MUTUAL FUND DEALERS ASSOCIATION OF CANADA


Re: Gary Alan Price


MOTIONS


Heard: September 9, 2010 in Toronto, Ontario
Reasons for Decision: September 30, 2010

REASONS FOR DECISION


Hearing Panel of the Central Regional Council:

Thomas J. Lockwood, Q.C.
Chair

Gary Legault
Industry Representative

Robert Guilday
Industry Representative

Appearances:

Michelle Pong
)
For the Mutual Fund Dealers Association of

)
Canada

Gary Alan Price
)
In writing

)

Page 1 of 27

1.
At the First Appearance in this matter, on June 1, 2010, the Respondent advised that he
wished to bring a number of Pre-Hearing Motions. By Order, dated June 1, 2010, the Hearing
Panel, inter alia, established a schedule for the serving and filing of Motion materials by both
the Respondent and Staff. Both parties complied with this schedule.

2.
The Respondent has brought six Pre-Hearing Motions, each dated July 26, 2010. The
Motions were all made returnable on September 9, 2010. In each case, the Respondent
proposed that the Motions be conducted as a written hearing. This is consistent with Rule
6.3(2) of the MFDA Rules of Procedure, which provides as follows:

“6.3
Motions – To Whom to be Made and Form of Motion

“(2)
The Moving Party may propose that the motion be conducted as an oral
hearing, a written hearing, or an electronic hearing, and the motion shall be
heard in that form unless a Responding Party objects or the Panel directs
otherwise;”

3.
Rules 6.3(3), (4) and (5) provide the procedural framework for the hearing of the
Motions, consequent upon the selection of the hearing forum by the Moving Party. They
provide as follows:

“(3)
A Responding Party may object to the proposed form of a motion by
advising all other parties and the Secretary in writing of the grounds for the
objection no later than two days after the effective date of service of the Motion
Record;

(4)
The Panel shall determine the form of the motion and in doing so may
consider any relevant factors, including:

(a)
convenience;
(b)
fairness;

(c)
cost, efficiency and timeliness;

(d)
public access to and participation in the hearing;
(e)
the
Panel’s
mandate;
(f)
whether the proposed form of the motion is appropriate having
regard to the evidence and the issues to be considered.

(5)
Where the Panel determines that the motion will be heard in a form other
than the form proposed by the Moving Party, the Secretary shall notify the
parties of the Panel’s determination.”
Page 2 of 27

4.
Staff did not object to a written hearing of the Motions. After a consideration of, inter
alia, the factors set out in Rule 6.3(4), the Hearing Panel determined that these six Motions
should be heard in the form requested by the Respondent.

5.
On August 27, 2010, Staff delivered a Responding Record, lengthy Written
Submissions and a Book of Authorities. On September 9, 2010, the Hearing Panel met, at
length, to consider and determine each of the Motions. In light of the nature of the Motions
and the history of this matter, the Hearing Panel concluded that it was appropriate to provide
written Reasons for our various Decisions.

6.
The following constitutes our Decisions and Reasons with respect to each of the
Respondent’s motions

A.
The Respondent brought a Motion that:

1.
all four Allegations against him be immediately dismissed; and
2.
the MFDA be required to remove all references to him and this case from its
website immediately and permanently.

The grounds for this Motion were “A Lack of Timeliness and Due Process.”

7.
In the Motion, the Respondent put forward his version of the relevant events by a series
of 22 “Whereases”. He did not provide any Affidavit evidence to support or substantiate his
allegations. In contrast, the position of Staff, on all six Motions, was detailed in a lengthy
Affidavit of John Gallimore, which, with Exhibits, ran to some 178 pages.

8.
The essence of the position of the Respondent on this Motion is that he became aware
of the MFDA investigation into his activities on May 3, 2007, some 40 months ago. He alleges
that “a period of 40 months represents an acute lack of process and timeliness by the MFDA”,
which he describes as “pathetic, disgraceful and unconscionable.” He asserts that the “lack of
timeliness and due process represents an impact and a punishment far worse than anything the
Respondent deserves.”
Page 3 of 27

9.
In response, Staff has provided a detailed timetable of events starting on May 22, 2001,
when the Respondent executed an Agreement of Approved Persons, pursuant to which he
agreed “to be bound by, observe and comply with MFDA By-laws and Rules.”

10.
The Gallimore Affidavit traces the history of events from the first Compliance
Examination of Select Financial Services Inc. (“Select”), conducted by MFDA Staff in April of
2003, at which time it purported to find blank investment instruction forms, in the possession
of the Respondent, on which signatures of clients had been completed. It requested Select to
confirm that all pre-signed forms had been destroyed.

11.
According to the Gallimore Affidavit, a second Compliance Examination was
conducted of Select, commencing in September of 2006. This Examination purportedly found
that the Respondent was in possession of several photocopies of a blank trade order form on
which the signature of a client had been completed.

12.
A Report of the Second Examination was completed and forwarded to Select in January
of 2007. The MFDA Enforcement Department’s Case Assessment Group opened a file, with
respect to the Respondent, in March of 2007.

13.
The file was escalated to the MFDA Enforcement Department’s Investigation Group,
also in March of 2007.

14.
On May 3, 2007, MFDA Investigators conducted an inspection of Select and
purportedly found, in the possession of the Respondent, 81 blank investment instruction forms
on which the signatures of clients had been completed. May 3, 2007, is when the Respondent
states that he became aware of the investigation.

15.
The investigation continued during the Fall of 2007. An interview was conducted of
the Respondent on January 23, 2008.

16.
Upon completion of Staff’s investigation, the file was forwarded to the Enforcement
Department’s Litigation Group in March of 2008 and, on June 23, 2008, a Notice of Hearing
Page 4 of 27

was issued and subsequently served on the Respondent.

17.
As detailed in paragraph 15 of Mr. Gallimore’s Affidavit, all stages of the enforcement
process were completed within the timeframe outlined in the MFDA Enforcement
Department’s published benchmarks.

18.
The Respondent retained counsel, who immediately requested disclosure of the case
against his client. On July 18, 2008, some disclosure was provided.

19.
On August 14, 2008, the Respondent served a Reply in response to the Notice of
Hearing.

20.
On September 15, 2008, the first appearance was held by teleconference. The
Respondent requested that the Hearing on the Merits take place in London, Ontario. Staff
opposed this position. The Hearing Panel reserved its decision in respect of the venue and
ordered that the Hearing be adjourned to November 2, 2008, and that the Hearing on the Merits
take place on December 2 to 5, 2008.

21.
On November 6, 2008, Respondent’s counsel requested additional disclosure. More
disclosure was provided on November 7, 2008.

22.
On November 12, 2008, the second appearance was held by teleconference. The
Respondent, through his counsel, requested a pre-hearing conference. Same was scheduled by
the Hearing Panel for December 2, 2008.

23.
The Hearing Panel further reserved its decision in respect of the venue of the Hearing
on the Merits. On November 12, 2008, it ordered that the Hearing be adjourned to January 14,
2009, and the Hearing on the Merits be re-scheduled to take place on May 11 to 14, 2009.

24.
A further disclosure request was made by Respondent’s counsel on December 4, 2008.

25.
On January 14, 2009, the third appearance was held by teleconference. Staff requested
Page 5 of 27

amendments to the Notice of Hearing. This request was granted by the Hearing Panel on the
basis that the Amended Notice of Hearing be served by 12:00 p.m. on January 16, 2009. The
Hearing Panel continued to reserve its decision on venue. The Hearing was adjourned to
February 3, 2009, with the date of the Hearing on the Merits remaining unchanged.

26.
On February 3, 2009, the Respondent abandoned his request for the change in venue.
The Hearing on the Merits commenced, as scheduled, on May 11, 2009, and was completed on
May 12, 2009.

27.
On June 12, 2009, the Hearing Panel issued its Decision and Reasons with respect to
the alleged misconduct and scheduled the submissions on penalty to be heard on July 23, 2009.

28.
On July 23, 2009, the Chair of the Hearing Panel advised Staff and the Respondent that
one of the members of the Hearing Panel had withdrawn himself from the case.

29.
Staff requested an adjournment of the Hearing with respect to penalty. After reading
certain affidavit material and hearing submissions of the parties, the Hearing Panel ordered that
the Hearing be adjourned to October 13, 2009, at which time it would proceed as a two-
member Hearing Panel, pursuant to Section 19.9(6) of MFDA By-law No. 1.

30.
On October 8, 2009, Staff brought a Motion for an Order that:
i.
The Decision and Reasons with respect to misconduct in this matter, dated June
12, 2009, be declared and void and removed from the MFDA website;
ii.
The Hearing Panel be struck; and
iii. The disciplinary proceedings against the Respondent be remitted for a new
hearing before a reconstituted Hearing Panel.

31.
Submissions from both parties were heard by the Hearing Panel on October 13, 2009.
On December 1, 2009, the Hearing Panel’s Decision and Reasons, dated October 30, 2009,
were released.

Page 6 of 27

32.
The Hearing Panel set aside its Decision and Reasons, dated June 12, 2009.

33.
According to Mr. Gallimore, there was correspondence between the parties with respect
to the October 30, 2009 Decision, between December 4 and 16, 2009. Settlement discussions
took place between Staff and the Respondent between December 19, 2009, and January 25,
2010.

34.
Again, according to the Gallimore Affidavit, on January 28, 2010, the Respondent was
advised that Staff was going to submit a request to the Corporate Secretary’s Office (“CSO”)
for a first appearance before an MFDA Hearing Panel to reschedule dates for a Hearing. This
was done on January 29, 2010, and the Respondent was so advised on February 1, 2010.

35.
On February 2, 2010, according to Mr. Gallimore, Staff received a request from
Respondent’s counsel to “stop” this request. Staff did so. Further settlement discussions
occurred from February 2, 2010, to April 16, 2010.

36.
On April 20, 2010, Staff asked the CSO to schedule a first appearance. This occurred
on June 1, 2010, before this Hearing Panel.

37.
In Blencoe v. British Columbia (Human Rights Commission), [2000] 2 S.C.R. 307, the
Supreme Court of Canada stated that:

“There is no doubt that the principles of natural justice and the duty of fairness
are part of every administrative proceeding. Where delay impairs a party’s
ability to answer the complaint against him or her, because, for example,
memories have faded, essential witnesses have died or are unavailable, or
evidence has been lost, then administrative delay may be invoked to impugn the
validity of the administrative proceedings and provide a remedy. It is thus
accepted that the principles of natural justice and the duty of fairness include the
right to a fair hearing and that undue delay in the processing of an
administrative proceeding that impairs the fairness of the hearing can be
remedied.”

Re: Blencoe v. British Columbia (Human Rights Commission), [2000] 2 S.C.R. 307, para. 102.

Page 7 of 27

38.
The Supreme Court went on to say that the delay must be such that it “would
necessarily result in a hearing that lacks the essential elements of fairness.”

Re: Blencoe v. British Columbia (Human Rights Commission), supra, para. 104.

39.
In order to find an abuse of process, the Court held that: “the damage to the public
interest in the fairness of the administrative process should the proceeding go ahead would
exceed the harm to the public interest in the enforcement of the legislation if the proceedings
were halted”. For there to be abuse of process, the proceedings must be “unfair to the point
that they are contrary to the interests of justice. Cases of this nature will be extremely rare”.

Re: Blencoe v. British Columbia (Human Rights Commission), supra, para. 120.

40.
The Supreme Court held that: “There is no abuse of process by delay per se. The
respondent must demonstrate that the delay was unacceptable to the point of being so
oppressive as to taint the proceedings.”

Re: Blencoe v. British Columbia (Human Rights Commission), supra, para. 121.

41.
The Supreme Court further held that: “There must be more than merely a lengthy delay
for an abuse of process; the delay must have caused actual prejudice of such magnitude that the
public’s sense of decency and fairness is affected.”

Re: Blencoe v. British Columbia (Human Rights Commission), supra, para. 133.

42.
Finally, the Supreme Court held that: “The determination of whether a delay has
become inordinate depends on the nature of the case and its complexity, the facts and issues,
the purpose and nature of the proceedings, whether the respondent contributed to the delay or
waived the delay, and other circumstances of the case.”

Re: Blencoe v. British Columbia (Human Rights Commission), supra, para. 122.

Page 8 of 27

43.
In the case before us, we do not find that there is either a lack of timeliness or an abuse
of process.

44.
With respect to the alleged lack of timeliness, until at least July 23, 2009, the case
proceeded in an orderly fashion. The delay was not inordinate. The Respondent has not
presented any evidence of prejudice that would come close to the principles set down by the
Supreme Court of Canada in Blencoe.

45.
The Hearing on the Merits was originally scheduled to take place on December 2 to 5,
2008. On November 12, 2008, the Respondent, through his counsel, requested a pre-hearing
conference. This was immediately scheduled but caused an adjournment of the Hearing on the
Merits for a number of months. The actual Hearing commenced and was completed on the
dates scheduled. The Decision and Reasons were issued in a month’s time and the Penalty
Hearing was scheduled for approximately one month later.

46.
It is clear that the events which transpired on July 23, 2009, which ultimately caused
the Decision and Reasons of June 12, 2009 to be set aside, were unfortunate and
unprecedented. They were clearly not the fault of the Respondent. On the other hand, they
were not the fault of Staff.

47.
Between the release of the Hearing Panel’s Decision and Reasons on December 1, 2009
and April 16, 2010, the parties were, apparently, engaged in consensual discussions to ascertain
if an appropriate resolution could be achieved. At the conclusion of the discussions, the matter
was placed before this Hearing Panel for determination.

48.
Further, according to the undisputed submissions of Staff, the Respondent has
continued to work as a mutual fund salesperson with Select without any terms or conditions
placed on his registration.

49.
The Hearing on the Merits is currently scheduled to commence on October 18, 2010,
and continue, if necessary, to October 22, 2010. These were dates agreed to by the Respondent
on June 1, 2010. We are not, currently, aware of any reason why the proceedings could not be
Page 9 of 27

completed within the agreed upon timeframe.

50.
We, likewise, do not find any lack of due process.

51.
It would appear, from the Record before us, that the Respondent has been provided
with a very significant opportunity to explain and defend his actions against the allegations of
misconduct.

52.
The Respondent received a detailed Notice of Hearing, on or about June 23, 2008. He
has received significant disclosure. There was correspondence between counsel with respect to
disclosure. Any disclosure concerns could have been brought to the attention of the original
Hearing Panel. We are not aware of any disclosure Orders made by the original Hearing Panel,
which have not been complied with by Staff. In fact, the parties have not brought to our
attention that any such Orders even exist.

53.
There is a current disclosure request by the Respondent before this Hearing Panel. This
request will be dealt with infra.

54.
The Respondent has, apparently, appeared either in person or by counsel at all previous
appearances. He has brought this series of Pre-Hearing Motions. He will be given the
opportunity to present testimony and cross-examine Staff’s witnesses at the Hearing on the
Merits.

55.
In conclusion, the Respondent’s Motion for relief based on a lack of timeliness and due
process is dismissed.

B.
The Respondent has brought a Motion that:
1.
all four Allegations against him be immediately dismissed; and
2.
the MFDA be required to remove all references to him and this case from its
website immediately and permanently.

The grounds for this Motion were “An MFDA Violation of MFDA Rules.”
Page 10 of 27

56.
The essence of the Respondent’s Motion is that the MFDA does not have the
jurisdiction or authority to proceed against him a second time.

57.
In a series of 28 “Whereases”, the Respondent traces the history of the first proceeding
culminating in the Decision and Reasons of June 12, 2009.

58.
The Respondent then makes allegations with respect to John Armstrong, a member of
the original Hearing Panel, who advised the Chair of the Panel, on July 22, 2009, that he found
it “necessary to withdraw from the case.”

59.
After considering all of the relevant facts, the two remaining members of the original
Hearing Panel concluded: “We accept, in light of the evidence presented, that a reasonable and
well-informed person, with knowledge of all the relevant circumstances, viewing the matter
realistically and practically, might well conclude that a reasonable apprehension exists that the
member of the Panel who has since resigned may, consciously or unconsciously, have been
biased. While we, the remaining two members of the Panel, do not harbour such an
apprehension, that is not the test. The test is how a member of the public (and that includes the
parties) may view the matter.”

60.
The Hearing Panel then went on to consider whether the presence of the third member
“infected” the other members of the Panel. They concluded that “a reasonable and well-
informed person might have a legitimate apprehension that the process was tainted, and that the
results offended the principles of natural justice.”

61.
The two-member Hearing Panel then sent through an exhaustive analysis as to whether
it had the jurisdiction to rescind the Decision which it had rendered as a three-member Panel
on June 12, 2009. It concluded that it did and the Decision was set aside. The Respondent did
not appeal this latter Decision.

62.
The Respondent states that “there is absolutely nothing in the MFDA Rules which
speaks to, considers or contemplates in any way these unique, unprecedented circumstances.”

Page 11 of 27

63.
The Respondent concludes that “given that the Rules do not speak to, consider or
contemplate these circumstances in any way, the MFDA is acting beyond the very clear
provisions and limitations of its own rules . . . and . . . to do so is not only unethical and
unbecoming, but also illegal.”

64.
In its submissions, Staff conceded that “the circumstances of this case may be unique
and unprecedented in respect of MFDA cases.”

65.
However, Staff goes back to February 16, 2001, when the Ontario Securities
Commission (“OSC”) issued a Recognition Order under Section 21.1 of the Securities Act
(Ontario) R.S.O. 1990 c. S.5. By making this Order, the OSC approved the MFDA’s mandate
to regulate the securities-related business and conduct of its members and Approved Persons.

66.
Section 8(A) of the Recognition Order states as follows:

“The MFDA shall, as a matter of contract, have the right to and shall
appropriately discipline its members and their Approved Persons for violations
of the rules of the MFDA and shall cooperate with the Commission in the
enforcement of applicable securities legislation relating to the operations,
standards of practice and business conduct of the members and Approved
Persons…[.]”

67.
Section 8(C) of the Recognition Order states:

“[t]he MFDA shall require its members and their Approved Persons to be
subject to the MFDA’s review, enforcement and disciplinary procedures.”

68.
The Respondent confirmed his membership in the MFDA on May 22, 2001, and agreed
to submit to the jurisdiction of the MFDA and conduct himself according to its Rules,
Regulations and By-laws. It is according to those Rules, Regulations and By-laws which Staff
is seeking to have the conduct of the Respondent adjudged.

69.
The former Decision has been set aside by the Hearing Panel which made it, including
the Allegation which it found to have been proven.

Page 12 of 27

70.
The matter is to be heard afresh. It is to be heard according to well established MFDA
Rules, Regulations and By-laws.

71.
We do not find the procedure to be a violation of the MFDA Rules.

72.
The Motion is dismissed.

C.
The Respondent brought a Motion that:
1.
all four Allegations against him be immediately dismissed; and
2.
the MFDA be required to remove all references to him and this case from its
website immediately and permanently.

The grounds for this Motion were “A Lack of Fairness”.

73.
In a series of 116 “Whereases”, the Respondent outlines a number of events and
arguments which he believes culminates in the “unfairness” of the process. Many of the
factual assertions are matters which should be brought before the Hearing Panel on the Hearing
on the Merits.

74.
Some, such as those dealing with the alleged conduct of Mr. Armstrong, as well as the
other Approved Persons of Select, and the alleged responses or lack thereof, of the MFDA, are
of more dubious relevance but could be brought before the Hearing Panel at the Hearing on the
Merits where Staff could present arguments as to admissibility and relevance and the Hearing
Panel could make a ruling with respect to same.

75.
The arguments dealing with the alleged legal status of pre-signed forms, during the
material time period, are central to the Hearing on the Merits and should be presented by the
Respondent at that time. Similarly, the considerations and arguments concerning the
Respondent’s alleged use of pre-signed forms, the lack of client harm and the Respondent’s
record in the industry, are matters of importance and relevance at the Hearing on the Merits
and should be presented at that time.
Page 13 of 27

76.
The assertions and arguments concerning the actions of the two-member Hearing Panel,
subsequent to July 23, 2009, have been dealt with previously in these Reasons.

77.
The alleged lack of disclosure by the MFDA of documentation and information relating
to Mr. Armstrong and Mr. Davis are dealt with in the following Motion dealing with several
other matters of disclosure.

78.
The events surrounding the alleged actions of Mr. Armstrong are, indeed, unfortunate.
As indicated, these events were caused neither by the actions of the Respondent nor Staff.

79.
The events resulted in a careful consideration by the remaining Hearing Panel Members
as to the appropriate course of action. They determined that the appropriate and the fairest
approach was to set aside their Decision and Reasons of June 12, 2009.

80.
Consequently, this Hearing Panel, at the moment, has heard no evidence whatsoever
against the Respondent. The hearing of evidence commences on October 18, 2010. At that
time, the Respondent will have a full opportunity to object to, test and respond to any
admissible evidence presented against him with respect to all four Allegations. This Hearing
Panel will then make a determination, based on the evidence, both testamentary and
documentary, which it receives.

81.
In our view, at the present time, there is no unfairness in the process. The Motion is
dismissed.

D.
The Respondent has brought a Motion that:
1.
all four Allegations against him be immediately dismissed; and
2.
the MFDA be required to remove all references to him and this case from its
website immediately and permanently.

The grounds for this Motion were “A Lack of Full, Fair and Timely Disclosure”.

Page 14 of 27

82.
In a series of 110 “Whereases” and 7 Exhibits, the Respondent complains about the
lack of disclosure to the date hereof of certain defined documentation and the lack of timely
disclosure by Staff with respect to the specified documents.

83.
In response, Staff states that it adheres to the disclosure standards first enunciated in R.
v. Stinchcombe [1991] 3 S.C.R. 326. This disclosure obligation is referenced in the MFDA
Enforcement Department’s Litigation Manual under the heading “Disclosure Guidelines”, as
follows:

“In determining what should be disclosed, Enforcement Counsel should apply
the following guidelines:

(a) Staff is under a general duty to disclose all “relevant” material gathered in
the course of Staff’s investigation – the “fruits of the investigation”;
(b) Information is “relevant” if it could reasonably be used by the Respondent
for one or more of three purposes: (i) to respond to the allegations; (ii) to
advance a defence; or (iii) to make a decision concerning the conduct of the
defence, such as whether to call evidence;
(c) When assessing relevance, Staff is required to err on the side of inclusion
and should only exclude material which is “clearly irrelevant” or which is
subject to a valid claim of privilege;
(d) The obligation to disclose applies to all material, whether inculpatory or
exculpatory;
(e) The obligation to disclose applies to all material, regardless of whether Staff
intends to adduce the material as evidence at the hearing;
(f) The obligation to disclose extends beyond the substance of allegations to
include all information which might reasonably reflect upon the credibility
of Staff’s evidence;
(g) All statements from persons who have provided relevant information to
Staff should be disclosed, notwithstanding that those persons may not be put
forward by Staff as witnesses; and
(h) In the ordinary course, the obligation to disclose is triggered by a request
made by or on behalf of the Respondent.

The obligation to disclose does not extend to Staff’s internal work product, such
as, for example, the Investigation Plan or Report, the Proceedings Authorization
Memo, research materials, notes or memos of internal discussions or meetings
concerning aspects of the investigation or prosecution, or charts and summaries
of materials gathered during the course of the investigation prepared by Staff –
unless and to the extent Staff proposes to introduce any such materials at the
hearing, in which case they must be disclosed.”

Page 15 of 27

84.
The pre-hearing disclosure obligations of Staff are also set out in Rules 10 and 11 of the
MFDA Rules of Procedure, as follows:

“RULE 10:
DISCLOSURE OF DOCUMENTS

10.1
Obligation to Disclose Documents and Items – Corporation

(1)
The Corporation shall, as soon as reasonably practicable after service of the
Notice of Hearing, and in any case at least 14 days prior to the commencement
of the hearing of the proceeding on its merits, provide the Respondent with
copies of all documents, and a list of items other than documents, that the
Corporation intends to rely on at the hearing.

(2)
The Corporation shall make available for inspection by the Respondent
any item referred to in sub-Rule (1).

10.3
Failure to Disclose Documents or Items

(1)
If a party fails to provide a document, or make an item available for
inspection, in accordance with Rules 10.1 and 10.2, then the party may
not rely on the document or item at the hearing without permission of
the Hearing Panel and on such terms as the Hearing Panel considers
appropriate.

10.4
Corporation’s Duty to Disclose

(1)
Nothing in this Rule 10 derogates from the Corporation’s obligation to
make disclosure as required by common law, as soon as reasonably
practicable after service of the Notice of Hearing.

RULE 11:
WITNESS LISTS AND STATEMENTS

11.1
Provision of Witness Lists and Statements

(1)
Subject to Rule 12, a party to a proceeding shall provide every other
party with:

(a)
a list of the witnesses the party intends to call at the hearing of the
proceeding on its merits; and

(b)
in respect of each witness named on the list, other than a Respondent
who has already provided a statement recorded by the Corporation,
either:

(i)
a witness statement signed by the witness; or
Page 16 of 27

(ii)
a transcript of a recorded statement made by the witness; or

(iii)
if no signed witness statement or transcript referred to in sub-
Rules (i) and (ii) is available, a summary of the evidence that the
witness is expected to give at the hearing.

(3)
The parties shall comply with the requirements of sub-Rules (1) and (2) at least
14 days prior to the commencement of the hearing.

11.2
Contents of Witness Statements

(1)
A witness statement, transcript of a recorded statement or summary of the
expected evidence of a witness required by Rule 11.1 shall contain:

(a)
the substance of the evidence the witness is expected to give at the
hearing; and

(b)
the name and address of the witness or, in the alternative, the name and
address of a person through whom the witness can be contacted.”

85.
As indicted above, we are not aware as to whether any Motions were brought by the
Respondent before the original Hearing Panel with respect to requests for disclosure, and, if so,
whether any rulings were made by this Panel. Consequently, we will deal with the disclosure
requests according to the above-outlined principles and, where necessary, subsequent case law.

86.
According to the Gallimore Affidavit, on July 18, 2008, Staff provided the
Respondent’s counsel with two volumes of material in satisfaction of what it viewed as its pre-
hearing disclosure obligations in this matter.

87.
Counsel for the Respondent made additional disclosure requests in November and
December of 2008 and January of 2009. Except for Staff’s Investigation Report, it is the
position of Staff that it had produced everything that had been requested of it, prior to the
commencement of the Hearing on the Merits in May of 2009.

88.
Dealing with the specific requests and submissions in the Notice of Motion:

(a)
The first 45 “Whereases” deal with Compliance Examinations apparently
Page 17 of 27

conducted on Select in April of 2003 and September of 2006, which resulted in
Compliance Examination Reports of Select, dated December 20, 2003, and January 5,
2007. The Respondent received copies of these Reports on July 18, 2008.

89.
The arguments and assertions which the Respondent makes in the Motion material,
both as to the contents of the Reports and what he might have done if he had received the
Reports at or about the dates of their respective release, are arguments and assertions which are
open for the Respondent to make at the Hearing on the Merits.

90.
What is clear is that the Respondent has had copies of these Reports in his possession
for a period in excess of two years and, thus, will have had ample opportunity to decide what
steps, if any, to take if Staff seeks to introduce these Reports at the Hearing on the Merits.

(b)
In “Whereases” 46 to 50, the Respondent seeks to provide evidence relating to
three of his clients with respect to whom the MFDA auditors allegedly found pre-
signed forms. Should Staff seek to introduce these forms at the Hearing on the Merits,
the Respondent is at liberty to both make representations as to their respective
admissibility or lead evidence with respect to same.

(c)
In “Whereases” 51 to 70, the Respondent seeks to lead evidence and make
observations with respect to the attendance of MFDA investigators on his office on
May 3, 2007, what material they reviewed and what documentation they removed from
the premises. This evidence and these observations are more properly the subject
matter of the Hearing on the Merits. They do not seek to relate to the issue of
disclosure and the timeliness thereof.

(d)
“Whereases” 71 to 79, deal with the alleged conduct of the MFDA investigators
leading up to a request that the Respondent appear in Toronto on January 23, 2008, to
provide a statement. If, in fact, the Respondent did provide such a statement and if, at
the Hearing on the Merits, Staff seeks to introduce that statement, in whole or in part,
the Respondent will be at liberty to make any appropriate arguments with respect to the
admissibility of the statement because of the alleged conduct of the investigators.
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(e)
“Whereases” 80 to 89 contain representations with respect to the utility and
legitimacy of pre-signed forms. They do not deal with disclosure issues but contain
material germane to the Hearing on the Merits.

(f)
“Whereases” 90 to 92 contain a request for disclosure of the Investigator’s
Report. This request is also the partial subject matter of the next Motion. The
Respondent also requests disclosure of “who made the decision to litigate against him
and on what basis they made that decision.”

91.
Staff’s submission is that the Staff’s Investigation Report contains only Staff’s analysis
and is therefore irrelevant to the proceedings. Likewise, Staff submits that information
concerning who made the decision to litigate is irrelevant.

92.
Following the Stinchcombe principles, Staff submits that the “fruits of the
investigation”, i.e. the basis for Staff’s decision to litigate, were disclosed in the material
delivered to the Respondent’s counsel on July 18, 2008.

93.
The only reason given by the Respondent as to why the Investigation Report should be
disclosed is the assertion that “based at least partially on that Report”, the MFDA made a
decision to proceed against the Respondent.

94.
The MFDA Enforcement Department’s Litigation Manual (quoted supra) states that the
obligation to disclose does not extend to Staff’s internal work product, such as the
Investigation Report, “unless and to the extent Staff proposes to introduce any such materials at
the hearing, in which case they must be disclosed.” With this proposition, we agree.

95.
We, likewise, agree that information as to who made the decision to litigate against the
Respondent and on what basis they made that decision is irrelevant.

96.
We are only interested in receiving admissible evidence showing why or why not the
four Allegations against the Respondent can be sustained.

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(g)
“Whereases” 93 to 98 request disclosure of information relating to a Mr. Terry
Davis, whom the Respondent describes as a co-owner of Select. The allegation is that
Mr. Davis was under investigation at the same time as was the Respondent and that the
MFDA proceeded against the Respondent and not Mr. Davis.

97.
We agree with Staff that this information is irrelevant and, unless and until a
proceeding is commenced against Mr. Davis, this information should remain confidential.

(h)
“Whereases” 99 to 105 request disclosure of information concerning Mr. John
Armstrong, who was a member of the original Hearing Panel.

98.
We, again, agree with Staff that this information is irrelevant and, unless and until a
proceeding is commenced against Mr. Armstrong, this information should remain confidential.

(i)
“Whereases” 106 to 110 requests disclosure of “basic professional C.V.
information” with respect to the members of this Hearing Panel.

99.
On the basis of the material presented, we fail to see how this information is relevant or
could be of assistance to the Respondent. Should, during the course of the Hearing on the
Merits, we become of the view that information of this nature would be of assistance to the
Respondent, it will be provided.

100.
For the reasons set out above, this Motion is dismissed.

E.
The Respondent has brought a Motion that:
1.
The January 2004 memorandum from Deryl Drysdale of Select Financial
Services Inc. to all of Select Financial Services Inc.’s Approved Persons be declared
inadmissible as part of the MFDA’s case against the Respondent;
2.
The MFDA be ordered to provide a true copy of the 2008 Investigators Report
to the Respondent well before October 18, 2010;
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3.
The MFDA be ordered to provide a true copy of the 2008 Investigators Report
to the Rehearing Panel, and that the Rehearing Panel then make a subsequent decision
on the appropriateness and fairness of providing that report to the Respondent.

The grounds for the Motion were “Fairness”.

101. The Respondent argues that a January 2004 memorandum from Deryl Drysdale of
Select to all of Select’s Approved Persons “be declared inadmissible as part of the MFDA’s
case against the Respondent.” The argument is based on the assertion by the Respondent that
the “memorandum is confidential internal communication between the Member and the
Approved Persons and, as such, the MFDA has no right to it.”

102.
In response, Staff refers to sections 21 and 22 of MFDA By-law No. 1 and Rule 1.6 of
the MFDA Rules of Procedure. These provide as follows:

Section 21 and 22 of MFDA By-law No. 1

“21.
POWER TO CONDUCT EXAMINATIONS AND INVESTIGATIONS

The Corporation shall make such examinations of and investigations into
the conduct, business or affairs of any Member, Approved Person of a Member
or any other person under the jurisdiction of the Corporation pursuant to the By-
laws and/or the Rules as it considers necessary or desirable in connection with
any matter relating to compliance by such person with:

21.1
the By-laws, Rules or Policies of the Corporation;

21.2 any securities legislation applicable to such person including any
rulings, policies, regulations or directives of any securities commission; or

21.3 the by-laws, rules, regulations and policies of any self-regulatory
organization.

22. INVESTIGATORY
POWERS

22.1
For the purpose of any examination or investigation pursuant to this By-
law, a Member, Approved Person of a Member or other person under the
jurisdiction of the Corporation pursuant to the By-laws or the Rules may be
required by the Corporation:

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(a)
to submit a report in writing with regard to any matter involved in any
such investigation;

(b)
to produce for inspection and provide copies of the books, records and
accounts of such person relevant to the matters being investigated; and

(c)
to attend and give information respecting any such matters;

(d)
to make any of the above information available through any directors,
officers, employees, agents and other persons under the direction or control of
the Member, Approved Person or other person under the jurisdiction of the
Corporation;

and the Member or person shall be obliged to submit such report, to permit such
inspection, provide such copies and to attend, accordingly. Any Member or
person subject to an investigation conducted pursuant to this By-law may be
invited to make submission by statement in writing, by producing for inspection
books, records and accounts and by attending before the persons conducting the
investigation. The person conducting the investigation may, in his or her
discretion, require that any statement given by any Member or person in the
course of an investigation be recorded by means of an electronic recording
device or otherwise and may require that any statement be given under oath.

22.2
For the purpose of any examination or investigation pursuant to this By-
law, the Corporation shall be entitled to free access to, and to make and retain
copies of, all books of account, securities, cash, documents, bank accounts,
vouchers, correspondence and records of every description of the Member or
person concerned, and no such Member or person shall withhold, destroy or
conceal any information, documents or thing reasonably required for the
purpose of such examination or investigation.

22.3
The Corporation, may, with respect to any information received:

(a)
refer a matter to the applicable Regional Council for consideration in
accordance with the provisions of Section 24; or

(b)
refer a matter to the appropriate securities regulatory authority, self-
regulatory organization or law enforcement agency; or

(c)
take such other action under the By-laws or Rules which it considers
appropriate in the circumstances.

Rule 1.6 of the MFDA Rules of Procedure

“1.6
Admissibility of Evidence

(1)
Subject to sub-Rule (3), a Panel may admit as evidence any testimony,
document or other thing, including hearsay, which it considers to be relevant to
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the matters before it and is not bound by the technical or legal rules of evidence.

(2)
A Panel may admit a copy of any document or other thing as evidence if
it is satisfied that the copy is authentic.

(3)
Nothing is admissible in evidence which would be inadmissible by
reason of a statute or a legal privilege.”

103. These
provisions,
prima facie, provide justification for Staff to be in possession of the
memorandum in question and, if thought appropriate, to seek to introduce it at the Hearing on
the Merits. Consequently, at this time, we are not prepared to declare this memorandum
inadmissible.

104. That being said, should Staff, at the Hearing on the Merits, seek to introduce this
memorandum into evidence as part of its case against the Respondent, the Respondent is
entitled to make further submissions on the issues of its inadmissibility and the Panel will make
a further ruling based on the arguments presented at that time.

105.
In the alternative, in this Motion, the Respondent makes a further request for a copy of
the 2008 Investigator’s Report or that the Hearing Panel be provided, at this time, with a copy
of the Report and then make a decision on the “appropriateness and fairness” of providing a
copy of this Report to the Respondent.

106.
The Respondent makes, essentially, two submissions as to why he should be given the
requested relief:

(a)
Stephen Glanville, a purported co-author of this Report, testified under
oath as to the contents of the Report during the Hearing on the Merits on May
11 – 12, 2009. Unless Mr. Glanville perjured himself, the essential elements of
the Report are already known and, thus, there is no compelling reason for Staff
not to provide the Respondent with a copy.

(b)
The Respondent has reason to believe that Mr. Glanville “may have
perjured himself” during his testimony and, thus, the Respondent should be
provided with a copy of the Report.

107. As indicated above, the position of Staff is that it has adhered to the Stinchcombe
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principles in providing disclosure and has disclosed all of the relevant facts, which underpin
the Report. The Report contains only Staff’s analysis and is therefore irrelevant to the
proceedings.

108.
We agree with the approach taken by the OSC in the Taylor Shambleau case and are
not prepared to infer that the Report may contain undisclosed facts. As the OSC stated:
“Should an issue arise at the hearing which results in some specific aspect of the “report”
becoming relevant to a fact in issue, the panel may very well determine that it is relevant and
therefore that it should be produced in part”

Re: Ontario (Securities Commission) v. Shambleau [2003] O.J. No. 4089, para. 4.

109. This approach by the OSC was found by the Ontario Divisional Court not to be
“unreasonable”.

110.
With respect to the prior testimony of Mr. Glanville, it is not before us. We have not,
as yet, heard any testimony. Should Staff seek to call Mr. Glanville at the Hearing on the
Merits, the Respondent will be given an opportunity to cross-examine him and/or object to any
or all of his evidence.

111.
This Motion is dismissed.

E.
The Respondent has brought a Motion that:
1.
the Rehearing on the Merits, currently set for October 18-22, 2010 in Toronto,
Ontario, be relocated to London, Ontario;
2.
the MFDA be mandated to pay the Respondent five thousand ($5,000) dollars in
costs.

The grounds for the Motion were “Fairness, Accountability and the Accepting of
Responsibility”.

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112.
In this Motion, the Respondent traces the history of the first Hearing on the Merits from
May 11 – 12, 2009, to the October 30, 2009 Decision and Reasons of the two remaining
Members of the Hearing Panel setting aside its June 12, 2009 Decision on the basis that “a
reasonable and well-informed person might have a legitimate apprehension that the process
was tainted, and that the result offended the principles of natural justice.”

Re: Decision and Reasons (of first Hearing Panel) – October 30, 2009, para. 23.

113. We agree with the Respondent that the circumstances surrounding this case “are
anything but normal” and are “unique and unprecedented.” We agree that these circumstances
were not caused by the Respondent. Nor, as indicated earlier, were they caused by Staff.

114.
With respect to the request for costs, we agree with the previous Hearing Panel, when,
in its Decision and Reasons, dated October 30, 2009, it stated:

“The second matter concerns costs. The Respondent asks that costs be assessed
against the MFDA. It is not an unreasonable request because, through no fault
of his own, he found himself involved in proceedings which put in question the
Decision made in the case against him. Regrettably, we are unable to do so.
Section 24.2 of By-law No. 1 (as amended) permits a Hearing Panel to order
that a Member or Approved Person “pay the whole or part of the costs of the
proceedings.” But it is silent about costs against the MFDA, and this precludes
us from considering the request.”

115.
With respect to the request for a change of venue, the Respondent has not provided any
evidence that his ability to make full answer and defence to the Allegations would be hindered
or affected if the Hearing on the Merits remained in Toronto.

116.
There is no indication before us of how many witnesses he intends to call or where they
are located in relation to either Toronto or London. The sole basis for his change of venue
Motion is that “the Respondent cannot possibly be further penalized by issues, developments
and circumstances which are beyond his control, not his fault or not his responsibility.”

117. We have great sympathy with the Respondent in the circumstances in which he has
found himself because of events beyond his control.
Page 25 of 27

118. We also have sympathy with the position of Staff that it does not wish to create a
precedent for future cases. One hopes and expects that the circumstances leading to the setting
aside of the Hearing Panel’s Decision are unique and will not be repeated.

119.
On the basis of the material before us, we have no alternative but to dismiss the Motion
for a change of venue and we do so.

120. However, we note Rules 1.3(1) and (2), as well as Rule 1.5(1)(c) of the Rules of
Procedure, which provide as follows:

“1.3
General Principles

(1)
These Rules shall be liberally construed to secure the most expeditious
and cost-effective determination of every proceeding on its merits consistent
with the requirements of fairness.

(2)
Where matters are not provided for in these Rules, the practice may be
determined by analogy to them.

1.5
General Powers of a Panel

(1)
A Panel may:

(c)
issue directions or make interim orders concerning the practice or
procedure to be followed during a proceeding, on such terms as it considers
appropriate.”

121.
Under these Rules, and under the unique and unprecedented circumstances of this case,
it might be possible to infer that it would not be unreasonable for the MFDA to provide
appropriate travel expenses for the Respondent and his witnesses from London, Ontario to the
Hearing on the Merits in Toronto.

122. At this time, we do not make such a finding as we have not provided Staff with an
opportunity to make submissions. Also, as indicated, we are not aware of how many witnesses
the Respondent intends to call or where they normally reside.

123.
If the parties cannot agree on appropriate arrangements and, if the Respondent sees fit
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to do so, he may review this issue with the Hearing Panel at the conclusion of the Hearing on
the Merits.

DATED this 30th day of September, 2010.

“Thomas J. Lockwood”
Thomas J. Lockwood, Q.C.,
Chair
“Gary Legault”
Gary Legault,
Industry Representative
“Robert Guilday”
Robert Guilday,
Industry Representative

Doc 227730
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