Settlement Agreement: In the Matter of Michael McGuigan
R.S.O. 1990, c. S.5, AS AMENDED
AND
IN THE MATTER OF
MICHAEL MCGUIGAN
SETTLEMENT AGREEMENT
I INTRODUCTION
1. By Notice of Hearing dated September 9, 1999, (the "Notice of Hearing"), the OntarioSecurities Commission (the "Commission") announced that it proposed to hold a hearingto consider whether, pursuant to section 127 of the Securities Act, R.S.O. 1990, c. S.5, asamended, (the "Act"), in the opinion of the Commission it is in the public interest for theCommission:
a. to make an order that Michael McGuigan cease trading in securities,permanently or for such time as the Commission may direct;
b. to make an order that Michael McGuigan be reprimanded; and/or
c. to make such other order as the Commission may deem appropriate;
II JOINT SETTLEMENT RECOMMENDATION
2. The Staff of the Commission ("Staff") agree to recommend the settlement of theproceedings initiated in respect of Michael McGuigan ("McGuigan") by the Notice ofHearing in accordance with the terms and conditions set out below. McGuigan agreesto the settlement on the basis of the facts agreed to as set out below and consents to themaking of an order against him in the form attached as Schedule "A" on the basis ofthose facts.
3. This settlement agreement, including the attached Schedule "A", will be released to thepublic only if and when the settlement is approved by the Commission.
III STATEMENT OF FACTS
(i) Acknowledgement
4. Staff, and McGuigan agree with the facts set out in this Part III.
(ii) Factual Background
5. McGuigan is an individual who resides in the Province of Ontario. At all materialtimes, McGuigan was a partner of Lifeline Publications, a partnership formed pursuantto the laws of Ontario. McGuigan has never been registered with the Commission inany capacity.
6. The sole business of Lifeline Publications was to produce a monthly newsletter called"WealthLine" the content of which provided advice on investing in securities.Beginning in January 1997, WealthLine was offered to subscribers over the Internetfollowing payment of a subscription fee. As of October 1998, WealthLine had 113subscribers.
7. McGuigan wrote the contents of WealthLine which provided advice to subscribers onthe purchase and sale of specific securities in the North American market. McGuiganalso provided specific advice to individual subscribers in response to queries hereceived by electronic mail.
8. McGuigan held out to subscribers that WealthLine was in the business of giving adviceon investing in securities. Subscribers paid a fee to receive WealthLine andWealthLine represented that "senior investment advisers" were on staff to provideindividual advice. In addition, McGuigan held out that WealthLine employedresearchers who devoted time and effort to research and profits. WealthLine was alsoadvertised in the Financial Post newspaper in the section devoted to Internetnewsletters.
9. The representations made by McGuigan through WealthLine that senior investmentadvisers and researchers were on staff were false statements designed to induceindividuals to subscribe. McGuigan also made representations on the WealthLinewebsite which inflated the gains achieved by the recommended securities and whichsuggested a longer operating history for the newsletter than was the case.
10. McGuigan purchased and sold some of the same securities that he recommendedthrough WealthLine. McGuigan's interest in these securities was not disclosed to theWealthLine subscribers.
IV CONDUCT CONTRARY TO THE PUBLIC INTEREST
11. McGuigan agrees that his conduct was contrary to the public interest in thefollowing ways:
a. he acted as an adviser without registration in contravention of subsection 25(1)(c)of the Act;
b. he recommended the purchase and sale of securities in a publication withoutdisclosing his interest in those securities; and
c. he caused and permitted misrepresentations to appear on the WealthLine webpagewhich were designed to induce individuals to subscribe.
V TERMS OF SETTLEMENT
12. McGuigan agrees to the following term of settlement:
a. pursuant to clause 2 of subsection 127(1) of the Act, McGuigan will beprohibited from trading in securities for a period of two years from the date ofthis Order except that McGuigan will be permitted to sell securities of which heis the beneficial owner as of the date of this Order.
VI STAFF COMMITMENT
13. If this Settlement Agreement is approved by the Commission, Staff will not initiate anycomplaint to the Commission or request the Commission to hold a hearing or issue anyorder in respect of any conduct or alleged conduct of McGuigan in relation to the factsset out in Part III of this Settlement Agreement.
VII PROCEDURE FOR APPROVAL OF SETTLEMENT
14. The approval of the settlement as set out in the Settlement Agreement shall be sought ata public hearing before the Commission scheduled for such date as is agreed to by Staffand McGuigan in accordance with the procedures described herein and such furtherprocedures as may be agreed upon between McGuigan and Staff.
15. If this Settlement Agreement is approved by the Commission, it will constitute theentirety of the evidence to be submitted respecting McGuigan in this matter andMcGuigan agrees to waive his right to a full hearing and appeal of this matter under theAct.
16. If this Settlement Agreement is approved by the Commission, neither of the parties tothis Settlement Agreement will make any statement that is inconsistent with thisSettlement Agreement.
17. If, for any reason whatsoever, this settlement is not approved by the Commission, orthe order set forth in Schedule "A" is not made by the Commission:
a. each of Staff and McGuigan will be entitled to proceed to a hearing of theallegations in the Notice of Hearing and related Statement of Allegationsunaffected by the Settlement Agreement or the settlement negotiations;
b. the terms of the Settlement Agreement will not be raised in any otherproceeding or disclosed to any person except with the written consent ofMcGuigan and Staff or as may be otherwise required by law; and
c. McGuigan further agrees that he will not raise in any proceeding the SettlementAgreement or the negotiation or process of approval thereof as a basis for anyattack on the Commission's jurisdiction, alleged bias, appearance of bias,alleged unfairness or any other challenge that may otherwise be available.
18. If, prior to the approval of this Settlement Agreement by the Commission, there arenew facts or issues of substantial concern, in the view of Staff, regarding the facts setout in Part III of this Settlement Agreement, Staff will be at liberty to withdraw fromthis Settlement Agreement. Notice of such intention will be provided to McGuigan inwriting. In the event of such notice being given, the provisions of paragraph 17 in thispart will apply as if this Settlement Agreement had not been approved in accordancewith the procedures set out herein.
VIII DISCLOSURE OF SETTLEMENT AGREEMENT
18. The terms of the Settlement Agreement will be treated as confidential by both partieshereto until approved by the Commission and forever if for any reason whatsoever, theSettlement Agreement is not approved by the Commission.
19. Any obligation as to confidentiality shall terminate upon the approval of this SettlementAgreement by the Commission.
IX EXECUTION OF SETTLEMENT AGREEMENT
20. This Settlement Agreement may be signed in one or more counterparts which shallconstitute a binding agreement and a facsimile copy of any signature shall be aseffective as an original signature.
DATED this 16th day of September, 1999.
SIGNED IN THE PRESENCE OF:
"Michael McGuigan""Michael Watson"
Director of Enforcement on Behalf of Staff of the Ontario SecuritiesCommission