Settlement Agreement

I. INTRODUCTION

1. By News Release, the Mutual Fund Dealers Association of Canada (the “MFDA”) will announce that it proposes to hold a hearing to consider whether, pursuant to section 24.4 of MFDA By-law No. 1, a hearing panel of the Atlantic Regional Council (the “Hearing Panel”) of the MFDA should accept the settlement agreement entered into between Staff of the MFDA (“Staff”) and the Respondent, Robert Henry Young (the “Settlement Agreement”).

II. JOINT SETTLEMENT RECOMMENDATION

2. 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 the Hearing Panel pursuant to section 24.1 of MFDA By-law No. 1.

3. Staff and the Respondent recommend settlement of the matters disclosed by the investigation 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 Part IV herein and consents to the making of an Order in the form attached as Schedule “A”.

4. Staff and the Respondent agree that the terms of this Settlement Agreement, including the attached Schedule “A”, will be released to the public only if and when the Settlement Agreement is accepted by the Hearing Panel.

III. ACKNOWLEDGEMENT 

5. Staff and the Respondent agree with the facts set out in Part IV 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 Part IX) or any civil or other proceedings which may be brought by any other person, corporation or agency, whether or not this Settlement Agreement is accepted by the Hearing Panel.

IV. AGREED FACTS

Registration History 

6. Between January 2003 and September 30, 2008, the Respondent was registered in Nova Scotia as a mutual fund salesperson (now known as a dealing representative[1]) with AEGON Dealer Services Canada Inc. (“AEGON”), a former Member of the MFDA.

7. On September 30, 2008, AEGON amalgamated with Investia Financial Services Inc. (“Investia”), a Member of the MFDA, and thereafter operated under the Investia name. From September 30, 2008 to June 2009, the Respondent was registered in Nova Scotia as a mutual fund salesperson with Investia.

8. Between June 2009 and November 2012, the Respondent was registered in Nova Scotia as a mutual fund salesperson with Quadrus Investment Services Ltd. (“Quadrus”), a Member of the MFDA.

9. The Respondent resigned from Quadrus on November 16, 2012.

10. At all material times, the Respondent conducted business in Dartmouth, Nova Scotia.

11. The Respondent is not currently registered in the securities industry in any capacity.

Outside Business Activities 

East River Holdings

12. East River Holdings Limited (“ERH”) was a corporation incorporated pursuant to the laws of Nova Scotia, which operated as a boat yard and marina. ERH was incorporated in 2004 and became insolvent in 2012. In 2006, the numbered company 3113571 Nova Scotia Limited, owned by the Respondent’s spouse, became a shareholder of ERH.

13. From 2012 until it became insolvent in 2013, the boat yard and marina operated as East River Marine (“ERM”).

14. Between 2004 and at least December 12, 2009, the Respondent was a director of ERH.

15. On October 22, 2013, Justice P.J. Murray of the Nova Scotia Supreme Court determined in RCBS Holdings Inc. East River Holdings Ltd., 2013 NSSC 410 that:

It is reasonably clear from the evidence that Robert Young is still a directing mind of the Company, East River.  He had a key role in the refinancing and transferring of the Deed to the property up to and as recent as June of 2013.

This included financing to keep the Company and family enterprises running, which included being able to employ his son and pay Phillip’s salary, albeit a modest one.  It is evident that East River, at some point, was “placed aside” and became less important in the family’s operations.

While Mr. Robert Young did not give evidence, it was apparent in the evidence that was given that he was actively working behind the scenes to direct the manner in which the financing was arranged and the Company was operated.  From this, I draw an appropriate inference that he is still controlling the assets and making key decisions in respect of the Company.

16. At some point prior to July 7, 2006 while the Respondent was involved with ERH, an individual, RB, paid $300,000 to ERH to acquire preferred shares.

17. On or about September 7, 2006, the Respondent signed a Promissory Note, together with ERH and the Respondent’s son, PY, in the amount of $57,500 payable to RB in respect of monies which RB had loaned to ERH. These monies were not paid to RB. Accordingly, on or about May 13, 2010, the Respondent signed, together with the Respondent’s son, PY, an agreement with RB to pay monies owed under the terms of the Promissory Note. In November 2012, RB commenced a lawsuit against the Respondent, his son, PY and ERH.

18. In about 2009 (while the Respondent was involved with ERH), an individual, EC, paid $250,000 to ERH to acquire preferred shares. ERH defaulted on its dividend payment obligations and EC commenced a lawsuit against ERH in October 2012.

19. The Respondent disclosed his activities with respect to ERH to his current employer at that time, Quadrus in 2012. 

PYMC Sailing Centre 

20. PYMC Sailing Centre Inc. (“PYMC”) was a corporation incorporated pursuant to the laws of Nova Scotia. PYMC owned the land on which the boat yard and marina (described above) operated.

21. In 2003, the Respondent owned 40% of PYMC’s shares.

22. In 2004, the Respondent sold 36% of PYMC’s shares to 3113571 Nova Scotia Ltd., a corporation owned by the Respondent’s spouse.

23. The Respondent states that until 2012, the Respondent continued to own 4% of PYMC’s shares.

24. Between 2003 and 2004, the Respondent was a director and Chairman of the Board of PYMC.

25. On or about September 5, 2008, the Respondent signed, as guarantor of the debt, a Promissory Note in the amount of $573,750 payable to an individual, EE, in respect of monies which EE had loaned to PYMC.

26. The Respondent did not disclose his activities with respect to PYMC to his Members, and his Members did not approve these activities.

V. CONTRAVENTIONS

27. The Respondent admits that, between 2003 and 2009, the Respondent engaged in outside business activities in relation to his involvement with two corporations which were not disclosed to or approved by, the Member, contrary to the Member’s policies and procedures, and MFDA Rules 1.2.1(c) (now MFDA Rule 1.3), 2.5.1, 1.1.2 and 2.1.1.

VI. TERMS OF SETTLEMENT 

28. The Respondent agrees to the following terms of settlement:
    1. A five year prohibition of the authority of the Respondent to conduct securities related business in any capacity while in the employ of or associated with any MFDA Member, commencing on the date the Settlement Agreement is accepted by the Hearing Panel, pursuant to section 24.1.1(e) of MFDA By-law No. 1;
    2. The Respondent shall pay a fine in the amount of $5,000, on or before June 30, 2017, pursuant to section 24.1.1(b) of MFDA By-law No. 1;
    3. The Respondent shall pay costs in the amount of $5,000, on or before the date set for the Settlement Hearing, pursuant to section 24.2 of MFDA By-law No. 1;
    4. The Respondent shall in the future comply with all MFDA By-laws, Rules and Policies, and all applicable securities legislation and regulations made thereunder, including MFDA Rules3, 2.5.1, 1.1.2 and 2.1.1; and
    5. The Respondent will attend in person on the date set for the Settlement Hearing. 

VII. STAFF COMMITMENT

29. 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 in respect of the contravention described in Part V of this Settlement Agreement, subject to the provisions of Part IX below. Nothing in this Settlement Agreement precludes Staff from investigating or initiating proceedings in respect of any contraventions that are not set out in Part V of this Settlement Agreement or in respect of conduct that occurred outside the specified date ranges of the contraventions set out in Part V, whether known or unknown at the time of settlement.  Furthermore, nothing in this Settlement Agreement shall relieve the Respondent from fulfilling any continuing regulatory obligations. 

VIII. PROCEDURE FOR APPROVAL OF SETTLEMENT

30. Acceptance of this Settlement Agreement shall be sought at a hearing of the Atlantic Regional Council of the MFDA on a date agreed to by counsel for Staff and the Respondent. MFDA Settlement Hearings are typically held in the absence of the public pursuant to section 20.5 of MFDA By-law No. 1 and Rule 15.2(2) of the MFDA Rules of Procedure. If the Hearing Panel accepts the Settlement Agreement, then the proceeding will become open to the public and a copy of the decision of the Hearing Panel and the Settlement Agreement will be made available at www.mfda.ca.

31. 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 his 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.

32. 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 Hearing Panel pursuant to section 24.1.1 of MFDA By-law No. 1 for the purpose of giving notice to the public thereof in accordance with section 24.5 of MFDA By-law No. 1.

33. 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 him. 

IX. FAILURE TO HONOUR SETTLEMENT AGREEMENT

34. 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 section 24.3 of the By-laws of the MFDA against the Respondent based on, but not limited to, the facts set out in Part IV of the Settlement Agreement, as well as the breach of the Settlement Agreement. If such additional enforcement action is taken, the Respondent agrees that the proceeding(s) may be heard and determined by a hearing panel comprised of all or some of the same members of the hearing panel that accepted the Settlement Agreement, if available.

X. NON-ACCEPTANCE OF SETTLEMENT AGREEMENT

35. 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 MFDA By-law No. 1, unaffected by this Settlement Agreement or the settlement negotiations.

36. Whether or not this Settlement Agreement is accepted by the Hearing Panel, the Respondent agrees that he 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.

XI. DISCLOSURE OF AGREEMENT

37. 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.

38. Any obligations of confidentiality shall terminate upon acceptance of this Settlement Agreement by the Hearing Panel. 

XII. EXECUTION OF SETTLEMENT AGREEMENT

39. This Settlement Agreement may be signed in one or more counterparts which together shall constitute a binding agreement.

40. A facsimile copy of any signature shall be effective as an original signature.

[1] On September 28, 2009 when National Instrument 31-103 came into force, the Respondent’s registration category was changed from mutual salesperson to dealing representative.