Settlement Agreement

I. INTRODUCTION

1. By Notice of Settlement Hearing, 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 Central Regional Council (the “Hearing Panel”) of the MFDA should accept the settlement agreement entered into between Staff of the MFDA (“Staff”) and the Respondent, Jon Robert Snelson (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 or agency, whether or not this Settlement Agreement is accepted by the Hearing Panel.

IV. AGREED FACTS

Registration History

6. Between April 16, 2007 and January 29, 2016, the Respondent was registered in Ontario as a mutual fund salesperson (now known as a dealing representative)[1] with IPC Investment Corporation (“IPC”), a Member of the MFDA.

7. The Respondent resigned from IPC on January 19, 2016.

8. At all material times, the Respondent conducted business in Mississauga, Ontario.

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

The Respondent was Appointed as a Director of Threegold

10. At all material times, IPC’s policies and procedures required its Approved Persons to disclose, and obtain approval in order to engage in any outside business activities.

11. In 2010, the Respondent became a shareholder of a junior mining company, Threegold Resources Inc. (“Threegold”). Threegold’s headquarters are located in Val d’Or, Québec and it is listed on the TSX Venture Exchange.

12. Between May and September 2014, Threegold was cease traded in Ontario, British Columbia, Manitoba, Québec, and Alberta for failing to file audited annual financial statements for the year ended December 31, 2013, management’s discussion and analysis relating to the audited annual financial statements, and certification of the filings as required by National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings.

13. On October 9, 2014, the Respondent was appointed to Threegold’s Board of Directors. The Respondent did not disclose this appointment to IPC at this time.

    Threegold’s financial statements state that from 2014 to March 2015, the Respondent earned $60,000 from his involvement with Threegold. The Respondent states that he was owed these monies but did not actually receive any remuneration from his involvement with Threegold.

14. On March 9, 2015, the Respondent completed IPC’s OBA/Community Service Questionnaire (“OBA Questionnaire”) and disclosed for the first time that he had been appointed to Threegold’s Board of Directors. In the OBA Questionnaire and in response to further inquiries from IPC’s compliance staff, the Respondent provided, among other things, the following information:
    • Threegold is “a junior mining exploration company focusing on gold and precious metals”;
    • The Respondent’s “[g]eneral duties as a Director are to act in a way the director considers (in good faith) is most likely to promote the success of the company”;
    • In response to the question in the OBA Questionnaire, “Do you invest money or make investment decisions for this activity?”, the Respondent stated, “No”;
    • In response to the question in the OBA Questionnaire, “Are any IPC clients involved with this activity?”, the Respondent stated, “No”;
    • In response to the question in the OBA Questionnaire, “Do you receive any remuneration for this activity?”, the Respondent stated, “No”.

15. On March 12, 2015, IPC approved the Respondent acting as a Director of Threegold as an outside business activity based on the information provided by the Respondent.

16. At the time that IPC approved the Respondent to act as a Director of Threegold, IPC advised the Respondent, in writing, that “[i]f there are any material changes with your OBA or you are no longer involved with an outside business activity, please email…with the details of the change.”

The Respondent Sold Threegold Debentures to Investors

17. At all material times, IPC’s policies and procedures required that its Approved Persons only offer products it had approved for sale, and that all products be sold through IPC.

18. Between August 19, 2015 and November 13, 2015, the Respondent recommended, sold and/or facilitated the sale of investments to at least 15 IPC clients and 4 individuals totaling approximately $310,000 in debentures offered by Threegold, as described below:

Date of Investment	Investor	Amount of Investment	IPC Client?
August 19, 2015	Investor 1	$100,000	Yes
August 22, 2015	Investor 2	$10,000	Yes
August 28, 2015	Investor 3	$30,000	Yes
August 28, 2015	Investor 4	$10,000	Yes
August 31, 2015	Investor 5	$10,000	Yes
September 1, 2015	Investor 6	$10,000	No
September 2, 2015	Investor 7	$10,000	No
September 3, 2015	Investor 8	$20,000	Yes
September 3, 2015	Investor 9	$10,000	Yes
September 8, 2015	Investor 10	$10,000	No
September 9, 2015	Investor 11	$10,000	Yes
September 10, 2015	Investor 12	$10,000	Yes
September 10, 2015	Investor 13	$10,000	Yes
September 10, 2015	Investor 14	$10,000	Yes
September 11, 2015	Investor 15	$10,000	Yes
September 14, 2015	Investor 16	$10,000	Yes
October 8, 2015	Investor 17	$10,000	Yes
October 10, 2015	Investor 18	$10,000	Yes
November 13, 2015	Investor 19	$10,000	No
TOTAL	19	$310,000

19. All of the investors in the debentures signed a “Loan Agreement” with Threegold, which stated the “[b]orrower hereby warrants that the loan may be converted into shares” subject to certain conditions which Threegold “expected” would be met.

20. The debentures included the following terms with respect to the use of the proceeds raised from the investors:
    1. Threegold will use the first $30,000 to “bring the company to good standing with Computershare, the lawyers, and the TSX”;
    2. Threegold will use $50,000 to $60,000 to complete an initial report validating the historical data on a property known as “Lotus”;
    3. Threegold will use $15,000 to make an option payment on the Lotus property;
    4. Threegold will hold all funds raised over and above $100,000 in trust, until the work in points (a) and (b) are complete;
    5. upon the positive validation of the historical data from the Lotus property, the debenture will be converted into flow-through shares in Threegold as per the terms and conditions of the debenture offering; and
    6. should the validation process of the Lotus property prove negative, the funds will be returned to investors plus 5% interest for the use of the funds.

21. To the Respondent’s knowledge, the proceeds raised from investors were used in an effort to get Threegold relisted on the TSX (which turned out to be well in excess of the original estimate of $30,000.00) and in pursuit of legitimate business objectives. This included payments to Threegold’s lawyers, accountants, chief geologist, website designers, and employees and for business related travel expenses.

22. Staff does not have jurisdiction over Threegold, and therefore cannot account for how these monies were used.

23. The Respondent signed all of the Loan Agreements as the “Authorized Signatory” for Threegold.

24. The Threegold debentures were not approved for sale by Approved Persons of IPC.

25. None of the transactions involving the Threegold debentures were conducted for the account of IPC or through its facilities.

26. In addition, the Respondent’s conduct gave rise to at least a potential conflict of interest between his interests as a Director and shareholder of Threegold and his clients’ interests. The Respondent states that he verbally disclosed to all of the investors that he owned shares and was a director of Threegold and that the investments were not being arranged in his capacity as an IPC mutual fund salesperson.

The Respondent’s Activities Relating to the Threegold Debentures Were Not Disclosed to or Approved by IPC

27. As stated above, IPC approved the Respondent acting as a Director of Threegold on March 12, 2015 based upon the information he provided to IPC regarding the nature and scope of his activities.

28. The Respondent did not disclose to IPC that, between August 19, 2015 and November 13, 2015, he had recommended, sold and/or facilitated the sale of investments to at least 15 clients and 4 individuals totaling approximately $310,000 in debentures offered by Threegold at the time he engaged in these activities.

29. The Respondent’s conduct relating to the Threegold debentures exceeded the scope of what IPC had approved the Respondent to do as a Director of Threegold.

30. The Respondent failed to abide by the condition imposed by IPC at the time it approved him to act as a Director of Threegold, which required the Respondent to notify IPC “[i]f there are any material changes with your OBA” (see paragraph 16 above). The Respondent knew or ought to have known that his involvement with the Threegold debentures was a material change because IPC had specifically asked him in the OBA Questionnaire whether “any IPC clients [were] involved with this activity?” and he had stated “No”.

31. In addition, on November 24, 2015, the Respondent failed to disclose his involvement with the Threegold debentures when he completed IPC’s annual compliance questionnaire (the “Compliance Questionnaire”). In response to the question, “Have you sold or do you promote any investments other than mutual funds (offered by simplified prospectus), GICs and if you are life licensed, segregated funds and other insurance products?”, the Respondent inaccurately stated, “No.”

Misleading the Member

32. The Respondent completed the Compliance Questionnaire on November 24, 2015. In response to the question, “Have you sold or do you promote any investments other than mutual funds (offered by simplified prospectus), GICs and if you are life licensed, segregated funds and other insurance products?”, the Respondent stated “No.” The Respondent’s response was inaccurate as he had, by that time, sold investments in Threegold to 15 clients and 4 individuals totaling $310,000.

Additional

33. On December 3, 2015, the Respondent was appointed Chief Financial Officer (“CFO”) of Threegold. On December 15, 2015, the Respondent advised IPC that he had become the CFO of Threegold, with an annual salary of $60,000. On December 21, 2015, in response to IPC’s questions, “Are any clients involved in this activity? Do you solicit clients for this activity?, the Respondent stated, “I am not sure what you mean, are any clients involved in this activity. Some of my clients have advanced funds to Threegold in the form of debentures.” On December 28, 2015, in response to IPC’s request, the Respondent provided IPC with the names of the clients who invested in Threegold and a copy of the Loan Agreement.

34. On January 12, 2016, IPC informed the Respondent that it would not approve his outside business activity relating to Threegold.

35. On January 19, 2016, the Respondent resigned from IPC.

36. Staff is unaware of any client complaints relating to the investments in Threegold.

V. CONTRAVENTIONS

37. The Respondent admits that between October 9, 2014 and March 8, 2015, the Respondent failed to disclose to the Member that he had been appointed to the Board of Directors of a junior mining company, thereby engaging in an undisclosed and unapproved outside business activity, contrary to the Member’s policies and procedures, and MFDA Rules 1.2.1(c) (now MFDA Rule 1.3), 1.1.2, 2.5.1, and 2.1.1.

38. The Respondent admits that between August 19, 2015 and November 13, 2015, the Respondent recommended, sold and/or facilitated the sale of investments to at least 15 clients and 4 individuals totaling approximately $310,000 in debentures offered by a junior mining company, thereby engaging in securities related business which was not carried on for the account of the Member or conducted through its facilities, contrary to MFDA Rules 1.1.1, 2.1.4, and 2.1.1.

39. The Respondent admits that between August 19, 2015 and November 24, 2015, the Respondent failed to provide fulsome and accurate information to the Member with respect to his involvement with a junior mining company, contrary to MFDA Rule 2.1.1.

VI. TERMS OF SETTLEMENT

40. The Respondent agrees to the following terms of settlement:
    1. The Respondent’s authority to conduct securities related business in any capacity while in the employ of or associated with any MFDA Member shall be prohibited for a period of four years 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 $20,000, payable in four monthly instalments of $5,000 each, commencing two months from the date the Settlement Agreement is accepted by the Hearing Panel, 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, pursuant to section 24.2 of MFDA By-law No. 1, payable as follows:
       1. $2,500 payable on or before the date of the settlement hearing;
       2. $2,500 payable one month from the date the Settlement Agreement is accepted by the Hearing Panel;
    4. The Respondent shall in the future comply with all MFDA By-laws, Rules and Policies, and all applicable securities legislation and regulation made thereunder, including MFDA Rules 1.1.1, 1.2, 1.3, 2.1.1, 2.1.4, and 2.5.1;
    5. The Respondent will attend in person, on the date set for the Settlement Hearing.

VII. STAFF COMMITMENT

41. 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 contraventions 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

42. Acceptance of this Settlement Agreement shall be sought at a hearing of the Central 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 mfda.ca.

43. 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.

44. 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.

45. 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

46. 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

47. 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.

48. 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

49. 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.

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

XII. EXECUTION OF SETTLEMENT AGREEMENT

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

52. 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 fund salesperson to dealing representative.