Statement of Allegations: In the Matter of Dual Capital Management Limited et al.

October 13, 1999

Statement of Allegations

IN THE MATTER OF THE SECURITIES ACT
R.S.O. 1990, c. S.5, AS AMENDED

AND

IN THE MATTER OF
DUAL CAPITAL MANAGEMENT LIMITED, WARREN LAWRENCE WALL,
SHIRLEY JOAN WALL,DJL CAPITAL CORPORATION, DENNIS JOHN LITTLE,
AND BENJAMIN EMILE POIRIER

STATEMENT OF ALLEGATIONS OF STAFF OF THE ONTARIO SECURITIES COMMISSION

Staff of the Ontario Securities Commission ("Staff") make the following allegations:

Introduction

1. Dual Capital Management Limited ("Dual Capital") is incorporated under the laws of Ontarioand since October, 1994, has carried on business as the general partner of Dual CapitalLimited Partnership (the "Limited Partnership"). Dual Capital has not been registered in anycapacity pursuant to section 25(1) of Ontario Securities Act R.S.O. 1990 c.S.5, as amended(the "Act").

2. Warren Lawrence Wall ("Warren Wall") is an individual residing in Ontario and at all materialtimes was the President and a director of Dual Capital. Warren Wall has not been registeredin any capacity pursuant to section 25(1) of the Act.

3. Shirley Joan Wall ("Joan Wall") is an individual residing in Ontario, and at all material timeswas a director and the secretary/treasurer of Dual Capital. Prior to June 28, 1995, Joan Wallwas not registered in any capacity pursuant to section 25(1) of the Act. Joan Wall wasregistered as a salesperson with Triple A Financial Services Inc. ("Triple A"), a mutual funddealer and limited market dealer, pursuant to section 26(1) of the Act from June 28, 1995 toOctober 13, 1998. Since October 20, 1998, Joan Wall has been registered as a salespersonwith Investment and Tax Counsel Corporation, a mutual fund dealer, and also a limitedmarket dealer (as of May 5, 1999) pursuant to section 26(1) of the Act.

4. DJL Capital Corporation ("DJL Capital") is incorporated under the laws of Ontario andcarries on business in London, Ontario. During the material times, DJL Capital was thepromoter of the offering for sale of the Units of the Limited Partnership (the "Units"). SinceJuly 7, 1995, DJL Capital has been registered as a dealer in the category of limited marketdealer, pursuant to section 26(1) of the Act, (with the exception of the period from August7, 1999 to October 7, 1999 for failure to pay renewal fees as required).

5. Dennis John Little ("Little") is an individual residing in Ontario and at all material times wasthe President and sole director of DJL Capital. Since July 7, 1995, Little has been registeredas an officer and director with DJL Capital, a limited market dealer pursuant to section 26(1)of the Act (with the exception of the period from August 7, 1999 to October 7, 1999 asdescribed above in paragraph 4.)

6. Benjamin Emile Poirier ("Poirier") is an individual who resides in Ontario. Poirier wasregistered as a salesperson from January 16, 1991 to May 31, 1999 with W.H. Stuart MutualLtd. ("W.H. Stuart"), a mutual fund dealer and limited market dealer, pursuant to section26(1) of the Act.

Trading Without a Prospectus Contrary to the Requirements of Ontario Securities Law

7. During the period from October, 1994 to December, 1996, the general partner, Dual Capital,accepted subscriptions to the Units from approximately forty-seven investors residing inOntario and raised funds in the amount of at least U.S. $1,495,046.00.

8. During the material times, the respondents, Dual Capital, Warren Wall, Joan Wall, Little andPoirier, traded in securities, namely the Units, where such trading was a distribution of suchsecurities, without having filed a preliminary prospectus and a prospectus and obtainingreceipts therefor from the Director as required by section 53(1) of the Act.

9. The Units were purportedly offered for sale pursuant to the "seed capital" prospectusexemption set out in section 72(1)(p) of the Act. The requirements of the "seed capital"exemption from the prospectus requirements in Ontario securities law were not satisfied.

10. Further, the Offering Memorandum dated October 18, 1994 as amended on December 19,1994 for the Limited Partnership (the "Offering Memorandum") was not delivered to theCommission as required under Ontario securities law. The Offering Memorandum was alsonot provided to each investor who purchased the Units.

11. In addition, on or about May 27, 1997, Warren Wall, on behalf of the general partner, DualCapital, filed with the Commission a Form 20 purporting to report a trade underclause 72(1)(p) of the Act. The Form 20 filed with the Commission did not contain completeand/or accurate information as required under Ontario securities law, including, but notlimited to, accurate and complete information concerning the date(s) the trade(s), the namesof the purchaser(s), and the amount or number of securities purchased under the offering ofthe Units. In addition, the Form 20 filed stated that the promoter, DJL Capital, received$47,233.85 as compensation, when in fact DJL Capital received payments in the amount ofapproximately U.S. $161,525.00.

Trading in the Units Contrary to Requirements of Ontario Securities Law

12. During the material times, Dual Capital and Warren Wall were not registered to trade in anycapacity pursuant to section 25(1) of the Act.

13. During the material times, Little traded in securities, namely the Units, prior to beingregistered on July 7, 1995 as an officer and director of DJL Capital pursuant to section 26(1)of the Act.

14. Further, Little sold speculative securities, namely the Units, to unsophisticated investors andfailed to assess the suitability of the investments to the needs of the investors.

15. During the material times, Joan Wall traded in securities, namely the Units, prior to beingregistered as a salesperson with Triple A on June 28, 1995. Thereafter, Joan Wall engagedin trading, including conduct in furtherance of the sale of the Units, without the knowledgeor approval of Triple A and accordingly, did not trade in accordance with her registrationunder section 26(1) of the Act.

16. Further, Joan Wall sold speculative securities, namely the Units, to unsophisticated investorsand failed to assess the suitability of the investments to the needs of the investors.

17. During the material times, Poirier traded in securities, namely the Units, without theknowledge or approval of W.H. Stuart and accordingly, did not trade in accordance with hisregistration under section 26(1) of the Act.

18. Further, W.H. Stuart expressly prohibited the sale of the Units by its salespersons andcommunicated the firm's disapproval prior to the sale of these securities by Poirier to hisclients. Poirier accepted commissions from Dual Capital in respect of the sale of the Unitswhich he did not disclose to W.H. Stuart or to his clients.

19. In addition, Poirier sold speculative securities, namely the Units, and failed to assess thesuitability of the investments to the needs of the investors.

Misrepresentations to Investors Contrary to the Public Interest

(i) Use of Proceeds

20. The summary of the Offering Memorandum states, in part, the following with respect to "Useof Proceeds":

"The net proceeds of this Offering, after deducting the expenses of theissue, are estimated to be a maximum of $5,000,000.00 and aminimum of $860,000.00. The Limited Partnership will use the netproceeds of this Offering to facilitate trades in financial instruments,such as bank debentures, thereby providing income to the LimitedPartnership."

21. The Offering Memorandum represented that the "Trading Partner" (which party is notidentified in the Offering Memorandum) would seek to provide an annual rate of return to theLimited Partnership and related parties equal to 30% of the funds placed on deposit. TheOffering Memorandum further represented that the "....foregoing will be paid on a monthlybasis and is subject to the Trading Partner effecting trades."

22. During the material times, Dual Capital, Warren Wall and Joan Wall failed to disclose toinvestors that certain funds accepted from investors for the purchase of Units were not usedto "facilitate trades in financial instruments", and further failed to disclose that investors' fundsinstead were used for payments to various companies and persons, including monthlypayments to existing investors, commissions and/or other payments to Little and/orDJL Capital, commissions and/or other payments to Dual Capital and/or Dual FinancialGroup Inc., a company owned by Warren and Joan Wall, and commissions and/or otherpayments to salespersons who sold the Units, including the respondent Poirier.

23. The Offering Memorandum represented that DJL Capital would not receive any benefits,directly or indirectly from the issuance of the Limited Partnership Units other than asdescribed therein. The Offering Memorandum further represented that DJL Capital wouldreceive payment equal to 4.5% of the 30% rate of return described above. During thematerial times, DJL Capital and/or Little received payments from Dual Capital in the amountof approximately U.S. $161,525.00 when DJL or Capital and/or Little knew that the sourceof payments were funds received from investors and not income earned from anyinvestment(s) made by the Limited Partnership.

24. Dual Capital, Warren Wall, DJL Capital and Little sold Units and/or engaged in conduct toeffect sales of Units with knowledge of the foregoing contrary to the public interest. JoanWall sold Units and/or engaged in conduct to effect sales of Units when she knew of theforegoing, or ought to have known in her capacity as a director and officer of Dual Capital,contrary to the public interest.

(ii) Representations in Promotional Material

25. Further, a brochure (the "Brochure") entitled "International Lending Programme - InvestorInformation" prepared by Warren Wall and/or Little under the name of Dual Capital, wasdistributed to investors in furtherance of the sale of the Units, and made variousrepresentations to investors which were contrary to the public interest. Such representationsto investors included the promise of high annual returns under the heading in the Brochure"High Annual Returns .... with Absolutely No Risk" which representations were misleadingto investors and contrary to the public interest.

Conduct Contrary to the Public Interest

26. Dual Capital acted contrary to the public interest by reason of the following:

(a) trading in securities without being registered contrary to section 25(1) of the Act;

(b) trading in securities which constituted a distribution without a prospectus contrary tosection 53(1) of the Act;

(d) failing to disclose to investors that investors' funds were used to fund payments tovarious persons and companies as outlined above; and

(e) making representations to investors in promotional material for the purpose ofeffecting trades which representations were misleading to investors and contrary tothe public interest.

27. Warren Wall acted contrary to the public interest by:

(a) trading in securities without being registered contrary to section 25(1) of the Act;

(b) trading in securities which constituted a distribution without a prospectus contrary to section 53(1) of the Act;

(c) authorizing, permitting or acquiescing in the filing of Form 20 on behalf of the Limited Partnership which report was inaccurate and incomplete contrary to the requirements of Ontario securities law;

(d) failing to disclose to investors that investors' funds were used to fund payments to various persons and companies as outlined above, and trading in Units with knowledge of the foregoing; and

(e) authorizing, permitting or acquiescing in the representations made by Dual Capital to investors in promotional material for the purpose of effecting trades which representations were misleading to investors.

28. Joan Wall acted contrary to the public interest by:

(a) trading in securities without being registered contrary to section 25(1) of the Act and trading in securities contrary to her registration under section 26(1) of the Act;

(b) trading in securities which constituted a distribution without a prospectus contrary to section 53(1) of the Act;

(c) failing to disclose to investors that investors' funds were used to fund payments to various persons and companies as outlined above, and trading in Units when she knew or ought to have known of the foregoing in her capacity as an officer and/or director of Dual Capital;

(d) failing to assess the suitability of the Units sold by Joan Wall to the needs of investors; and

29. Little acted contrary to the public interest by:

(a) trading in securities without being registered contrary to section 25(1) of the Act;

(b) trading in securities which constituted a distribution without a prospectus contrary to section 53(1) of the Act;

(c) failing to disclose to investors that investors' funds were used to fund payments to DJL Capital and/or Little, and trading in the Units, when Little knew or ought to have known of the foregoing in his capacity as an officer and director of DJL Capital; and

(d) failing to assess the suitability of the Units sold by Little to the needs of the investors.

30. DJL Capital acted contrary to the public interest in that DJL Capital received payments from Dual Capital when DJL Capital knew, through its trading officer and director, Little, that investors' funds were the source of such payments and not income earned from any investment made by the Limited Partnership. DJL Capital, through its officer and director, Little, sold Units and/or engaged in conduct to effect the sale of Units, when it knew of the foregoing.

31. Poirier acted contrary to the public interest by:

(a) trading in securities contrary to his registration under section 26(1) of the Act, and trading in the Units which he knew his firm had disapproved and expressly prohibited Poirier and other salespeople registered with the firm to sell to clients;

(b) failing to assess the suitability of the Units which he sold to the needs of investors;

(c) failing to disclose to W.H. Stuart that he accepted commission payments from Dual Capital in respect of the sale of the Units; and

(d) trading in securities which constituted a distribution without a prospectus contrary to section 53(1) of the Act.

32. Such additional allegations as counsel may advise and the Commission may permit.

DATED at Toronto this 13th day of October, 1999.