SETTLEMENT AGREEMENT

View and Download English PDF
Home › Settlement Agreement 200719 - RE: Berkshire Investment Group Inc.


Settlement Agreement

File No. 200719




IN THE MATTER OF A SETTLEMENT HEARING PURSUANT TO SECTION
24.4 OF BY-LAW NO. 1
OF THE MUTUAL FUND DEALERS ASSOCIATION OF CANADA

Re: Berkshire Investment Group Inc.



SETTLEMENT AGREEMENT

I.
INTRODUCTION
1.
By Notice of Settlement Hearing dated November 29, 2007, the Mutual Fund
Dealers Association of Canada (the “MFDA”) announced that it proposed to hold a
hearing to consider whether, pursuant to section 24.4 of By-law No. 1, a Hearing Panel of
the Pacific Regional Council of the MFDA (the “Hearing Panel”) should accept the
settlement agreement (the “Settlement Agreement”) entered into between Staff of the
MFDA (“Staff”) and the Respondent, Berkshire Investment Group Inc. (the
“Respondent”).
II.
JOINT SETTLEMENT RECOMMENDATION
2.
Staff and the Respondent recommend settlement of the matters disclosed by the
MFDA investigation described below in accordance with the terms and conditions set out
below. The Respondent agrees to the settlement on the basis of the facts set out in Parts

link to page 2 link to page 2 IV and V herein and consents to the making of an Order in the form attached as Schedule
“A”.
III.
ACKNOWLEDGEMENT
3.
Staff and the Respondent agree with the facts set out in Part V herein for the
purposes of this Settlement Agreement only and further agree that this agreement of facts
is without prejudice to the Respondent or Staff in any other proceeding of any kind
including, but without limiting the generality of the foregoing, any proceedings brought
by the MFDA (subject to paragraph 63) or any civil or other proceedings which may be
brought by any other person or agency, whether or not this Settlement Agreement is
accepted by the Hearing Panel.
Staff’s Investigation
4.
Staff conducted an investigation of the Respondent’s activities. The investigation
disclosed that the Respondent had engaged in activity for which the Respondent could be
penalized on the exercise of the discretion of a Hearing Panel pursuant to s. 24.1 of
By-law No.1.
IV.
STAFF’S CONCLUSIONS REGARDING THE CONDUCT OF THOW
5.
Staff’s investigation concluded that Ian Gregory Thow (“Thow”), more
particularly described in paragraph 10, had prior to his resignation, persuaded more than
40 individuals1 to provide him with at least $18 million2 for the purchase of investments

1This figure represents the total number of claims for compensation made against the Respondent which
have been brought to the attention of the MFDA calculated on a “household” basis. If spouses and related
corporations belonging to the same household are counted separately, then the total number of parties that
provided monies to Thow for investments outside the Respondent is 65. Of those parties, 46 were clients
of the Respondent at the time that they provided monies to Thow.
2 In bankruptcy proceedings, Thow sought protection from creditors advancing claims of more than $30
million, but only some of these creditors were victims of Thow’s investment schemes. The others were
creditors in respect of goods and services that Thow acquired but failed to pay for. The MFDA is aware of
claims for losses in the amount of approximately $18 million relating to monies provided to Thow for
investments outside the Respondent. The British Columbia Securities Commission (the “BCSC”) alleged
in its Notice of Hearing that Thow misappropriated approximately $30 million, but stated during the

– 2 –

link to page 3 link to page 3 outside the Respondent. Thow represented to the individuals that he would purchase the
following types of investments on their behalf3:
(a) shares of the National Commercial Bank Jamaica Limited (“NCBJ”), which
Thow claimed he could acquire and hold in trust for the individuals (the
“NCBJ Scheme”);
(b) shares issued in connection with an alleged initial public offering of the
Respondent, which Thow claimed he could acquire and hold in trust for the
individuals (the “IPO Scheme”); and
(c) high interest rate short term loans to building contractors and property
developers in British Columbia, which Thow claimed were secured by
mortgages (the “Mortgage Scheme”).
6.
Many of the individuals who provided money to Thow in connection with the
investment schemes described in paragraph 5 were clients or former clients of the
Respondent whose accounts were then or formerly the responsibility of Thow. Thow did
not use the monies that he received from the individuals to purchase investments on their
behalf. Instead, Thow used the monies for his personal benefit. In its October 16, 2007
decision, the British Columbia Securities Commission described Thow’s conduct as “one
of the most callous and audacious frauds this province has seen.”4
7.
Evidence gathered by MFDA Staff during its investigation indicated that of the
total amount of monies received by Thow, he repaid approximately $3.2 million to
certain individuals prior to his resignation (using monies received from some individuals
to repay others) but has not repaid or otherwise accounted for the remaining balance.

hearing that it was not necessary to prove the full amount misappropriated to establish that Thow
contravened the Act. The BCSC relied upon the evidence of 26 individuals (13 testified in-person at the
hearing and transcripts of interviews with the other 13 were filed at the hearing) to establish that Thow had
obtained approximately $8.7 million from those 26 investors, of which $6 million was never repaid or
otherwise accounted for.
3 The October 16, 2007 BCSC decision also described these 3 investment schemes [see Decision at para 8].
4 Decision at para 181.

– 3 –

V.
AGREED FACTS
Registration History
8.
The Respondent has been a Member of the MFDA since March 8, 2002 and is
registered to carry on business as a mutual fund dealer throughout Canada. The
Respondent’s Head Office is located in Burlington, Ontario.
9.
The Respondent has not been the subject of previous MFDA disciplinary
proceedings.
Agreed Facts Regarding The Conduct Of Thow
10.
Between November 1998 and June 2005, Thow was registered in British
Columbia as a mutual fund salesperson, branch manager and officer for the Respondent.
Thow held the titles of Senior Vice-President of the Respondent and co-Branch Manager
of the Respondent’s Victoria branch office. Thow resigned from the Respondent
effective June 1, 2005. On June 9, 2005, the Respondent reported Thow’s resignation on
the National Registration Database as resigned for cause.
11.
None of the investments described in paragraph 5 were approved for sale by the
Respondent. None of the monies that Thow obtained from individuals for the purpose of
purchasing such investments were made payable to the Respondent, nor deposited in any
account of the Respondent or its clients at the Respondent.
12.
The Respondent did not benefit from any of the improper conduct of Thow
described in this Settlement Agreement.
13.
As set out in this Settlement Agreement, Thow actively concealed his misconduct
from the Respondent. MFDA Staff accepts, and its investigation yielded no information
that contradicts the Respondent’s representation that except to the extent indicated in this
Settlement Agreement, the Respondent was not informed about or otherwise made aware
of Thow’s involvement with the investment schemes described in paragraph 5 including
the repayment of monies to certain individuals, prior to Thow’s resignation.

– 4 –

link to page 5 14.
MFDA Staff accepts, and its investigation yielded no information that contradicts
the Respondent’s representation that the Respondent did not receive, prior to
June 7, 2005,5 any complaints from clients of the Respondent, nor any complaints from
non-clients of the Respondent other than those identified in this Settlement Agreement,
with respect to Thow’s involvement with the investment schemes described in
paragraph 5.
The Report From LV
15.
On approximately Thursday, September 16, 2004, a former senior executive of
the Respondent (the “Former Senior Executive”), who was at the time working for a
mutual fund company affiliated with the Respondent, received a telephone call from a
lawyer (the “Lawyer”) speaking on behalf of LV, a wealthy businessman. On the basis
of discussions with LV on the golf course, the Lawyer called to inform the Former Senior
Executive that LV had told the Lawyer that LV had given money to Thow to invest in a
Jamaican bank and was seeking information about his investment. The Lawyer who
provided this information to the Former Senior Executive as an intermediary for LV also
acted as counsel for the Respondent on various matters. LV was not, in September 2004,
nor at any time, a client of the Respondent, nor did the Respondent have any prior
knowledge of, nor dealings with, LV.
16.
The Former Senior Executive immediately conveyed the information reported by
the Lawyer concerning LV’s dealings with Thow to representatives of the Respondent
including the President of the Respondent and the Respondent’s Legal department.
Although he was notified about the call from the Lawyer, the President of the Respondent
did not play a role in dealing with the matter. Apart from being informed of the matter,
he allowed the Respondent’s Legal department, with assistance from the Former Senior
Executive, to determine and take appropriate action.

5 On June 7, 2005, six days after the effective date of Thow’s resignation (which is described below), for
the first time, the Respondent received a complaint letter from clients concerning Thow’s involvement with
them in the NCBJ scheme described in para 5(c) of this Settlement Agreement.

– 5 –

17.
The Former Senior Executive told the Respondent’s Legal department that the
Lawyer had conveyed the following information to him:
• a group of four people gave money to Thow to buy shares of a bank in Jamaica
• one person gave Thow $1 million and another gave him $750,000.
18.
After the Former Senior Executive told the Respondent’s Legal department about
the call from the Lawyer, the Respondent’s Legal department immediately called the
Lawyer to obtain a more detailed account of the facts. The Lawyer told the Respondent
that the previous day, on the golf course, LV had told the Lawyer the following
information:
• LV had been among a group of guests on a fishing trip hosted by Thow at a lodge
on the coast of British Columbia and there had met Thow.
• During the fishing trip Thow stated that he and the President of the Respondent
were involved with or had invested in a bank in Jamaica which was involved
with or had invested in a bank in Trinidad.
• Thow told LV that he had the ability to invest in the Jamaican bank on LV’s
behalf and told LV that if LV invested, he could get his money back at any time.
• At least 3 or 4 individuals, including LV, provided money to Thow to purchase
shares of the Jamaican bank. The names of the 2-3 investors other than LV were
not provided by the Lawyer or LV.
• LV subsequently transferred $1.2 million to Thow’s bank account for the
purchase of shares in the Jamaican bank. LV believed that the other 2-3 investors
had provided Thow with lesser amounts for shares in the Jamaican bank but the
actual amounts provided to Thow by investors other than LV were not discussed.
• LV had not received any documentation concerning his purchase.
• When LV requested documentation from Thow, Thow had provided LV with
$1.2 million in travel vouchers relating to Thow’s aircraft leasing business.

– 6 –

link to page 7 link to page 7 19.
The information communicated to the Respondent by the Lawyer was not
confirmed in writing in follow-up correspondence from either the Respondent or the
Lawyer. The Respondent did not request and neither LV nor the Lawyer provided the
Respondent with documentation relating to the information communicated to the
Respondent by the Lawyer. At no time prior to Thow’s resignation for cause did LV
communicate directly with the Respondent, except on September 22, 2004 as described in
paragraph 24 below.
20.
After obtaining the more detailed account of the facts from the Lawyer, the
Respondent’s Legal department notified the Compliance department about the
information received concerning Thow’s dealings with LV, but did not inform anyone at
Thow’s branch including the Branch Manager.
21.
On Friday, September 17, 2004, the Former Senior Executive called Thow to tell
him about the call that he had received from the Lawyer. In response, Thow claimed to
the Former Senior Executive that the report received from the Lawyer was a “mistake”.6
Thow told the Former Senior Executive that he would contact LV and that LV or the
Lawyer would call the Former Senior Executive concerning the matter later in the day.
The Former Senior Executive informed the Respondent’s Legal department and
Compliance department about his discussion with Thow.
22.
On Monday, September 20, 2004, Thow called the Respondent’s Legal
department to respond to the report that had been received from the Lawyer regarding
Thow’s dealings with LV and to provide an explanation. Thow denied that he had
received monies from LV to invest in shares of NCBJ and claimed that LV had purchased
a block of flight time on his aircraft and now wanted the return of his monies. Thow told
the Respondent that if individuals expressed an interest in NCBJ, he provided them with
a name of a registered dealer in Jamaica. Thow told the Respondent that LV and others
were playing “some hardball”7 and had made up the story about the NCBJ shares to put
pressure on Thow to refund LV’s purchase of the flight time.

6 According to the Respondent’s records, this was the word that Thow used in his response.
7 According to the Respondent’s records, the words in quotation marks are Thow’s expression.

– 7 –

link to page 8 link to page 8 23.
On Monday, September 20, 2004, after receiving the call from Thow, the
Respondent’s Legal department organized a meeting with the Compliance and National
Sales departments to discuss Thow’s response. It was agreed at the meeting that the
Compliance department would follow up with Thow to obtain back-up for his account of
the facts concerning his dealings with LV and to ensure that the details of Thow’s
involvement in outside business activities were clarified and appropriately disclosed to
provincial securities regulators.8
24.
On Wednesday, September 22, 2004, before the Respondent’s Compliance
department followed up with Thow as described in paragraph 23, LV called the
Respondent’s Legal department and told the Respondent that the information previously
provided by the Lawyer was “a misunderstanding”.9 He also stated that Thow was his
personal friend and that one of his companies intended to do business with Thow’s
aircraft leasing company. The Respondent asked LV to call the Lawyer to inform him of
the misunderstanding. LV told the Respondent that he would. The Respondent heard
nothing further from the Lawyer or LV.
25.
Unbeknownst to the Respondent, after hearing about the Lawyer’s call to the
Respondent, Thow contacted LV and told LV that Thow would repay LV the $1.2
million that Thow had received from LV if LV would tell the Respondent that the
account of their dealings provided to the Respondent by the Lawyer was a
misunderstanding. Thow and LV agreed upon this arrangement and as a result, LV made
the call to the Respondent as described in paragraph 24, and Thow repaid LV the $1.2
million that Thow had previously received from LV.
26.
On Wednesday, September 22, 2004, the Respondent’s Legal department
informed the Former Senior Executive and the Respondent’s Compliance department

8 Prior to September 20, 2004, Thow had disclosed to the Respondent and provincial securities regulators
that he owned an aircraft leasing company but during his discussion with the Respondent’s Legal
department on September 20, 2004, Thow informed the Respondent that he was spending more time
working on the aircraft leasing business than he had previously indicated.
9 According to the Respondent’s records, the words in quotation marks were used by LV during his call to
the Respondent.

– 8 –

about the call from LV. The Former Senior Executive subsequently informed the
President of the Respondent about the call from LV.
27.
On the basis of LV’s telephone call to the Respondent on Wednesday,
September 22, 2004, the Respondent accepted LV’s statement that the information
conveyed by the Lawyer about LV’s dealings with Thow was a misunderstanding and
considered the matter resolved. The Respondent’s Legal and Compliance departments
agreed between themselves that the Respondent’s Compliance department should still
proceed with its plan to direct Thow to update his regulatory disclosure with provincial
securities regulators of his outside business activities, which activities included his
previously disclosed aircraft company.
28.
After receiving LV’s call on Wednesday, September 22, 2004, the Respondent
took no further steps to investigate the matters communicated by the Lawyer regarding
LV and others, including not taking the step of notifying the co-Branch Manager of the
Respondent’s Victoria branch office of the information received from the Lawyer.
29.
In light of the potentially serious implications of the information communicated to
the Respondent about Thow’s dealings with LV, the Respondent had an obligation to
conduct a reasonable supervisory investigation over and above its communications with
LV and Thow in order to ensure that Thow was complying with his regulatory
obligations and was acting in the best interests of the Respondent’s clients, but failed to
do so.
30.
In the circumstances, a reasonable supervisory investigation would have included,
among other things, obtaining written confirmation and documentary corroboration of
Thow’s and LV’s accounts of Thow’s dealings with LV.
31.
Had the Respondent conducted a further supervisory investigation of the
information originally communicated by the Lawyer, it would have increased the
likelihood that Thow’s solicitation of monies for the purchase of investments outside the
Respondent and improper outside business activities would have been discovered and

– 9 –

Thow would have been prevented from continuing to engage in such conduct while
registered as an Approved Person of the Respondent.
32.
MFDA Staff has concluded on the basis of its investigation that the Respondent’s
failure to conduct a reasonable supervisory investigation did not arise from any general
failure to maintain and adhere to appropriate supervisory policies and procedures or from
any intentional non-compliance on the part of the Respondent.
The Report by DS
33.
On Wednesday, April 20, 2005, the Respondent’s National Sales department
received a telephone call from an individual named DS reporting concerns about money
that DS had provided to Thow for an investment in shares of NCBJ. DS stated that he
had not received any confirmation of his investment and that Thow was not returning
phone calls or attending appointments to address the matter. DS stated that this had been
going on for 6 months to 1 year. DS stated that he just wanted his money back.
34.
The call from DS was immediately referred to the Respondent’s Compliance
department by the National Sales department. The Respondent’s Compliance department
determined that DS was not and had never been a client of the Respondent.
35.
On Friday, April 22, 2005, the Respondent’s Compliance department called DS to
obtain more information concerning his dealings with Thow. DS told the Respondent
that he had given Thow U.S. $200,000 to invest in shares of NCBJ. DS told the
Respondent that he had received no share certificates, but when he requested
documentation from Thow concerning his NCBJ shares, Thow sent him a receipt issued
by Thow’s aircraft leasing company in respect of a credit toward flight time. DS asked
the Respondent for assistance in recovering the monies that he had provided to Thow
personally for the purchase of NCBJ shares on his behalf.

– 10 –

link to page 11 36.
On Friday, April 22, 2005, following the telephone call with the Respondent’s
Compliance department, in response to a request from the Respondent’s Compliance
department for documentation, DS sent the Respondent a cheque dated April 22, 2004, in
the amount of U.S. $100,000 payable to Thow’s numbered company10 that he had
provided to Thow. The words “NCB bank shares” were written on the memo line of the
cheque. DS also provided the Respondent with two vouchers from Thow’s aircraft
leasing company, each one showing a U.S. $100,000 credit for flight time.
37.
The report by DS was substantially similar to the information previously
communicated by the Lawyer to the Respondent concerning LV.
38.
On Tuesday, April 26, 2005, the report from DS was brought to the attention of
the Respondent’s senior management at a meeting of the Respondent’s Compliance
Committee.
39.
Between Tuesday, April 26, 2005 and Thursday, May 5, 2005, the Respondent
attempted to arrange for senior members of the Respondent’s Compliance department to
visit Thow’s branch in Victoria to conduct an investigation into the report from DS.
However, each time the Compliance department contacted Thow to schedule visits to his
office, Thow declined requests by the Respondent to meet for the purpose of discussing
his dealings with DS.
40.
On Wednesday, April 27, 2005, the Respondent spoke with DS again, but
subsequently DS cancelled a scheduled in-person meeting with the Respondent and
thereafter, as it would turn out, refused to cooperate with the Respondent’s investigation.
41.
Unbeknownst to the Respondent, after DS contacted the Respondent to report
Thow’s conduct and agreed to attend an in-person meeting with the Respondent, Thow
and DS, through their respective lawyers, entered into negotiations for the return of DS’s
money. While DS was en route to his in-person meeting with senior representatives of

10 On June 13, 2005, subsequent to Thow’s departure from the Respondent, DS provided the Respondent
with a second cheque dated May 19, 2004, in the amount of $100,000 which was also payable to Thow’s
numbered company and showed the words “US $ NCB” in the memo line.

– 11 –

the Respondent’s Compliance and National Sales departments at the Respondent’s head
office in Burlington, Ontario, DS was contacted by his lawyer who stated that Thow had
the money in place. DS cancelled his meeting with the Respondent (without disclosing to
the Respondent his reason for doing so), but has subsequently stated that he was never
repaid by Thow.
42.
During the period between Wednesday, April 20 and Thursday, May 5, 2005, the
Respondent did not take sufficient steps in furtherance of a reasonable supervisory
investigation of Thow’s activities and did not impose any interim supervisory measures
to protect its clients’ interests until such time as it could assess the merits of DS’s report.
43.
On Thursday, May 5, 2005, at the request of the Respondent, senior
representatives of the Respondent’s Compliance and National Sales departments met with
Thow at the Respondent’s Head Office. At the commencement of the meeting, Thow
submitted a letter of resignation. Thow advised the Respondent that he was resigning in
order to spend more time on his outside business activities, including his aircraft leasing
business. During the meeting, Thow refused to answer most of the Respondent’s specific
questions concerning his dealings with DS because he said he was bound by contractual
confidentiality obligations with DS. Thow denied that he had sold shares in NCBJ to DS
and insisted that DS had wired money to Thow’s aircraft leasing company to purchase a
block of flight time. Thow’s story was inconsistent with the existence of the cheque
provided to Thow by DS for NCBJ shares. Although Thow insisted to the Respondent
that the money that he had received from DS had been wire transferred to his aircraft
leasing business, when the cheque from DS was shown to him by the Respondent, Thow
claimed that the memo line referencing “NCB bank shares” was not filled out on the copy
of the cheque that he had received.
44.
The Respondent accepted Thow’s resignation, but agreed to defer the effective
date to a mutually acceptable date in the future. Thow represented that he was going on
vacation in New Zealand. By subsequent agreement, Thow’s resignation became
effective on June 1, 2005. The Respondent did not conduct any further supervisory
investigations.

– 12 –

45.
In the circumstances as outlined above, the Respondent had an obligation to, at a
minimum, suspend Thow immediately on Thursday, May 5, 2005 and take such other
interim supervisory and disciplinary measures as were appropriate to protect its clients’
interests and preserve relevant documentation pending the outcome of an investigation of
DS’s report.
46.
In the circumstances, a reasonable supervisory investigation of DS’s report would
have included, among other things, obtaining written confirmation and documentary
corroboration of Thow’s and DS’s accounts of Thow’s dealings with DS.
47.
Had the Respondent conducted a reasonable supervisory investigation of DS’s
report, it is more likely that Thow’s solicitation of monies for the purchase of investments
outside the Respondent and improper outside business activities would have been
discovered at that time and Thow would have been prevented from continuing to engage
in such conduct while registered as an Approved Person of the Respondent.
48.
MFDA Staff has concluded on the basis of its investigation that the Respondent’s
failure to conduct a reasonable supervisory investigation did not arise from any general
failure to maintain and adhere to appropriate supervisory policies and procedures, or from
any intentional non-compliance on the part of the Respondent.
Current Practices
49.
MFDA Staff is satisfied that since these events occurred, the Respondent has
reviewed its policies and procedures and supplemented them concerning outside business
activity to ensure that reports of the type received from both non-clients such as LV and
DS, as well as clients, and events such as the withdrawal of LV’s report and DS’s
subsequent refusal to cooperate, will result in the Respondent conducting reasonable
supervisory investigations of the relevant subject matter.
Losses by Individuals Following the Reports of LV and DS
50.
The Respondent accepts that MFDA Staff’s investigation has concluded that
between September 16, 2004 and April 20, 2005, Thow solicited and obtained more than

– 13 –

link to page 14 link to page 14 $5.8 million11 from individuals by means similar to those employed in his dealings with
LV and DS. Of that amount, more than $4.3 million was obtained from clients of the
Respondent. Thow has not repaid or otherwise accounted for these monies, other than
any situations where Thow used monies received from some individuals to repay others.
51.
The Respondent accepts that MFDA Staff’s investigation has concluded that
between April 20, 2005 and June 1, 2005, Thow solicited and obtained approximately
$510,000 CDN and $30,000 USD12 from individuals by means similar to those employed
in his dealings with LV and DS. Of that amount, approximately $210,000 was obtained
from clients of the Respondent. Thow has not repaid or otherwise accounted for these
monies, other than any situations where Thow used monies received from some
individuals to repay others.
Compensation By The Respondent
52.
Following receipt of complaints from some individuals concerning losses
sustained in connection with Thow’s investment schemes as described in paragraph 5, the
Respondent voluntarily initiated mediations with 29 of its clients. All of these mediations
resulted in payments being made by the Respondent to the clients in settlement of their
claims. 27 of the 29 clients had provided Thow with monies in connection with the
Mortgage Scheme. The other two clients were an elderly couple who had been unclear as
to the nature of their investment with Thow prior to the mediation but subsequently
represented that some of the money they provided to Thow was provided in connection
with the NCBJ Scheme. The total payments made by the Respondent to the 29 clients at
the conclusion of the mediations was approximately $4.1 million.

11 This figure represents the amount of claims that the Respondent has been informed about for losses
sustained between September 16, 2004 and April 20, 2005 by both clients and non-clients of the
Respondent as a result of new money being provided to Thow for his investment schemes.
12 This figure represents the amount of claims that the Respondent has been informed about for losses
sustained between April 20, 2005 and June 1, 2005 by both clients and non-clients of the Respondent as a
result of new money being provided to Thow for his investment schemes.

– 14 –

link to page 15 Other Investor Losses
53.
Except to the extent that the Respondent has agreed to compensate clients as
described in paragraph 52, the Respondent has rejected claims for compensation and is
defending itself in both civil litigation and alternative dispute resolution proceedings
against claims for compensation for losses sustained by individuals (both clients and non-
clients) who paid money directly to Thow in connection with the investment schemes
described in paragraph 5, on grounds specific to each claim, including the following13:
(a) the individuals knew or ought to have known that they were not dealing with
the Respondent when they made their investment with Thow;
(b) in some cases the individuals who provided money to Thow were not clients
of the Respondent at the time that the investments were made;
(c) the investments were not purchased with funds payable to the Respondent or
for the benefit of the Respondent;
(d) the investment transactions were not processed through the facilities or bank
accounts of the Respondent; and
(e) the investment transactions were not recorded on the books and records of the
Respondent or confirmed on investment account statements or trade
confirmations provided by the Respondent to the individuals.
54.
The MFDA continues to monitor the Respondent’s complaint handling process in
relation to MFDA Rule 2.11 and MFDA Policy No. 3 with respect to complaints arising
from Thow’s conduct and reserves the right to take further disciplinary action against the
Respondent in respect of its future complaint handling and its obligations with respect to
the Ombudservice under section 24.A of By-law No. 1, if warranted.
55.
The Respondent has cooperated fully with Staff’s investigation of the matters
which are the subject of this Agreement.

13 Although this paragraph appears in the Agreed Facts section of this Settlement Agreement, the MFDA
should not be construed as taking a position on the merits of any of the listed defences that are being relied
upon by the Respondent in other proceedings.

– 15 –

VI.
CONTRAVENTIONS
56.
On the basis of the facts set out in Parts IV and V of this Settlement Agreement,
the Respondent admits that between September 16, 2004 and June 1, 2005, the
Respondent failed to conduct reasonable supervisory investigations of Thow’s activities
in response to the concerns communicated by DS and on behalf of LV and to take such
reasonable supervisory and disciplinary measures as would be warranted by the results of
its investigations, contrary to MFDA Rules 2.5.1, 2.1.1(c) and the public interest.
VII.
TERMS OF SETTLEMENT
57.
Upon the acceptance of this Settlement Agreement, the Respondent agrees to:
(a)
pay a fine in the amount of $500,000, pursuant to s. 24.1.2(b) of By-law
No. 1; and
(b)
pay costs of the MFDA’s investigation and of this hearing in the amount
of $50,000, pursuant to s. 24.2 of By-law No. 1.
VIII. STAFF COMMITMENT
58.
If this Settlement Agreement is accepted by the Hearing Panel, Staff will not
initiate any proceeding under the By-laws of the MFDA against the Respondent or any of
its officers or directors in respect of any conduct or alleged conduct of the Respondent in
relation to the facts set out in Parts IV and V of this Settlement Agreement except with
respect to future compliance on the part of the Respondent with complaint handling
obligations triggered by existing or future complaints concerning Thow’s conduct or the
Respondent’s conduct in relation to Thow’s activities and subject to the provisions of
paragraph 63 below.

– 16 –

IX.
PROCEDURE FOR APPROVAL OF SETTLEMENT
59.
Acceptance of this Settlement Agreement shall be sought at a hearing of the
Pacific Regional Council of the MFDA on a date agreed to by counsel for Staff and the
Respondent.
60.
Staff and the Respondent may refer to any part, or all, of the Settlement
Agreement at the settlement hearing. Staff and the Respondent also agree that if this
Settlement Agreement is accepted by the Hearing Panel, it will constitute the entirety of
the evidence to be submitted respecting the Respondent in this matter, and the
Respondent agrees to waive its rights to a full hearing, a review hearing before the Board
of Directors of the MFDA or any securities commission with jurisdiction in the matter
under its enabling legislation, or a judicial review or appeal of the matter before any court
of competent jurisdiction.
61.
Staff and the Respondent agree that if this Settlement Agreement is accepted by
the Hearing Panel, then the Respondent shall be deemed to have been penalized by the
Regional Council pursuant to s. 24.1.2 of By-law No. 1 for the purpose of giving notice
to the public thereof in accordance with s. 24.5 of By-law No. 1.
62.
Staff and the Respondent agree that if this Settlement Agreement is accepted by
the Hearing Panel, neither Staff nor the Respondent will make any public statement
inconsistent with this Settlement Agreement. Nothing in this section is intended to
restrict the Respondent from making full answer and defence to any civil or other
proceedings against it.
63.
If this Settlement Agreement is accepted by the Hearing Panel and, at any
subsequent time, the Respondent fails to honour any of the terms of settlement set out
herein, Staff reserves the right to bring proceedings under the By-laws of the MFDA
against the Respondent based on, but not limited to, the facts set out in Parts IV and V of
the Settlement Agreement, as well as the breach of the Settlement Agreement.

– 17 –

64.
If, for any reason whatsoever, this Settlement Agreement is not accepted by the
Hearing Panel or an Order in the form attached as Schedule “A” is not made by the
Hearing Panel, each of Staff and the Respondent will be entitled to any available
proceedings, remedies and challenges, including proceeding to a disciplinary hearing
pursuant to sections 20 and 24 of By-law No. 1, unaffected by this Settlement Agreement
or the settlement negotiations.
65.
Whether or not this Settlement Agreement is accepted by the Hearing Panel, the
Respondent agrees that it will not, in any proceeding, refer to or rely upon this Settlement
Agreement or the negotiation or process of approval of this Settlement Agreement as the
basis for any allegation against the MFDA of lack of jurisdiction, bias, appearance of
bias, unfairness, or any other remedy or challenge that may otherwise be available.
X.
DISCLOSURE OF AGREEMENT
66.
The terms of this Settlement Agreement will be treated as confidential by the
parties hereto until accepted by the Hearing Panel, and forever if, for any reason
whatsoever, this Settlement Agreement is not accepted by the Hearing Panel, except with
the written consent of both the Respondent and Staff or as may be required by law.
67.
Any obligations of confidentiality of the terms of this Settlement Agreement shall
terminate upon acceptance of this Settlement Agreement by the Hearing Panel.
XI.
EXECUTION OF SETTLEMENT AGREEMENT
68.
This Settlement Agreement may be signed in one or more counterparts which
together shall constitute a binding agreement.

– 18 –


69.
A facsimile copy of any signature shall be effective as an original signature.
Dated: November 26th, 2007
“Julie Clarke”

“Frank Laferriere”

Witness- Signature
Berkshire Investment Group Inc.
Per: Frank Laferriere
Chief Operating Officer, Chief Financial
Officer

“Mark T. Gordon”

Staff of the MFDA
Per:
Mark
T.
Gordon
Executive
Vice-President

– 19 –


Order

File No. 200719


Schedule “A”

IN THE MATTER OF A SETTLEMENT HEARING PURSUANT TO SECTION
24.4 OF MFDA BY-LAW NO. 1
OF THE MUTUAL FUND DEALERS ASSOCIATION OF CANADA

Re: Berkshire Investment Group Inc.



ORDER

WHEREAS on Thursday, November 29, 2007, the Mutual Fund Dealers
Association of Canada (the “MFDA”) issued a Notice of Settlement Hearing pursuant to
section 24.4 of MFDA By-law No. 1 in respect of Berkshire Investment Group Inc. (the
“Respondent”);

AND WHEREAS the Respondent entered into a settlement agreement with Staff
of the MFDA, dated Monday, November 26, 2007 (the “Settlement Agreement”), in
which the Respondent agreed to a proposed settlement of matters for which the
Respondent could be disciplined pursuant to ss. 20 and 24.1 of MFDA By-law No. 1;

AND WHEREAS the Hearing Panel is of the opinion that between
September 16, 2004 and June 1, 2005, the Respondent failed to conduct reasonable
supervisory investigations of the activities of former Approved Person, Ian Gregory
Thow and to take such reasonable supervisory and disciplinary measures as would be
warranted by the results of its investigations, contrary to MFDA Rules 2.5.1, 2.1.1(c) and
the public interest.


IT IS HEREBY ORDERED THAT the Settlement Agreement is accepted, as a
consequence of which:

1. The Respondent shall pay a fine in the amount of $500,000, pursuant to
s. 24.1.2(b) of MFDA By-law No. 1.
2. The Respondent shall pay the costs of the MFDA’s investigation and of this
hearing in the amount of $50,000, pursuant to s. 24.2 of MFDA By-law No. 1.

DATED at Vancouver this 13th day of December, 2007.

Per: “_____________”

[Name of Public Representative], Chair

Per: “_____________”

[Name of Industry Representative]

Per: “______________”

[Name of Industry Representative]

Doc #127310

– 2 –