Order: In the Matter of Pro-Financial Asset Management Inc.

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

-AND-

IN THE MATTER OF PRO-FINANCIAL ASSET MANAGEMENT INC.

ORDER
(Subsections 127(1), (2) and (8))

    WHEREAS on May 17, 2013, the Ontario Securities Commission (the “Commission”) issued a temporary order (the “Temporary Order”) with respect to Pro-Financial Asset Management Inc. (“PFAM”) pursuant to subsections 127(1) and (5) of the Securities Act, R.S.O. 1990, c. S.5, as amended (the “Act”) ordering that:

    1.     Pursuant to paragraph 1 of subsection 127(1) of the Act, the registration of PFAM as a dealer in the category of exempt market dealer is suspended and the following terms and conditions apply to the registration of PFAM as an adviser in the category of portfolio manager and to its operation as an investment fund manager:

        (a) PFAM’s activities as a portfolio manager and investment fund manager shall be applied exclusively to the Managed Accounts and to the Pro-Hedge Funds and Pro-Index Funds; and

        (b) PFAM shall not accept any new clients or open any new client accounts of any kind in respect of the Managed Accounts;

    2.     Pursuant to subsection 127(6) of the Act, the Temporary Order shall take effect immediately and shall expire on the fifteenth day after its making unless extended by order of the Commission;

    AND WHEREAS it appeared to the Commission that PFAM: (i) is capital deficient contrary to subsection 12.1(2) of NI 31-103; and (ii) there is an ongoing reconciliation being conducted by PFAM for the nine series of principal protected notes (“PPNs”);

    AND WHEREAS on May 28, 2013, the Commission ordered: (i) the Temporary Order extended to June 27, 2013; (ii) the hearing to consider whether to further extend the terms of the Temporary Order and/or to make any further order as to PFAM’s registration, would proceed on June 26, 2013 at 10:00 a.m.;

    AND WHEREAS on June 26, 2013, the Commission ordered that: (i) the Temporary Order be extended to July 15, 2013; and (ii) the affidavit of Michael Denyszyn sworn May 24, 2013 not be marked as an exhibit until the next appearance in the absence of a Commission order to the contrary; and the hearing to consider this matter will proceed on July 12, 2012;

    AND WHEREAS on July 11, 2013, the Commission ordered that; (i) the Temporary Order be extended to July 22, 2013; (ii) the hearing be adjourned to July 18, 2013 at 11:00 a.m.; and (iii) the hearing date of July 12, 2013 at 10:00 a.m. be vacated;

    AND WHEREAS on July 18, 2013, PFAM brought a motion (the “PFAM Motion”) that the hearing be held in camera and that the affidavits of Michael Denyszyn sworn May 24 or June 24, 2013 and the affidavit of Michael Ho sworn July 17, 2013 (collectively the “Staff Affidavits”) either not be admitted as evidence or else be treated as confidential documents and the parties agreed that the motion should be heard in camera;

    AND WHEREAS on July 18, 2013, PFAM’s counsel filed supporting documents (the “PFAM Materials”) in support of the PFAM Motion and counsel for PFAM and Staff made oral submissions and filed written submissions;

    AND WHEREAS on July 22, 2013, the Commission ordered that: (i) the Temporary Order extended to August 26, 2013; (ii) that leave be granted to the parties to file written submissions in respect of the PFAM Motion; the Staff Affidavits, the transcript of the PFAM motion, the PFAM Materials, written submissions filed by Staff and PFAM and other documents presented during the course of the PFAM Motion shall be treated as confidential documents until further direction or order of the Commission; and (iii) the hearing adjourned to August 23, 2013 at 10:00 a.m.;

    AND WHEREAS on August 23, 2013, Staff filed the affidavit of Michael Ho sworn August 22, 2013 with the Commission and PFAM’s counsel filed the affidavit of Stuart McKinnon dated August 23, 2013 but the parties did not seek to mark these affidavits as exhibits;

    AND WHEREAS on August 23, 2013, Staff and counsel for PFAM advised the Commission that the parties had agreed on the terms of a draft order;

    AND WHEREAS on August 23, 2013, PFAM requested that the hearing be conducted in camera so PFAM’s submissions on certain confidentiality issues could be heard and Staff did not oppose PFAM’s request;

    AND WHEREAS on August 23, 2013, the Commission ordered that: (i) the Temporary Order is extended to October 11, 2013; (ii) the affidavit of Michael Ho sworn August 22, 2013 and the affidavit of Stuart McKinnon sworn August 23, 2013 will be treated as confidential documents until further order of the Commission; (iii) PFAM will deliver to Staff the final PPN reconciliation report by 4:30 p.m. on September 30, 2013; and (iv) the hearing to consider whether to: (i) make any further order as to PFAM’s registration as an adviser in the category of PM or in respect of its operation as an IFM, as a result of PFAM’s ongoing capital deficiency; and/or (ii) otherwise vary or extend the terms of the Temporary Order, will proceed on October 9, 2013 at 11:00 a.m.;

    AND WHEREAS on October 9, 2013, PFAM brought a second motion (the “Second PFAM Motion”) for an order that the hearing be held in camera and for a confidentiality order treating: (i) Staff and PFAM affidavits; (ii) all facta and correspondence exchanged by Staff and PFAM; and (iii) any transcript of this and prior in camera proceedings, as confidential documents;

    AND WHEREAS on October 9, 2013, PFAM’s counsel filed written submissions dated October 8, 2013 and the affidavit of Stuart McKinnon sworn October 7, 2013 and the affidavit of Kenneth White sworn October 7, 2013 in support of the Second PFAM Motion and Staff filed the Affidavit of Michael Ho sworn October 8, 2013 and opposed the request for an in camera hearing and for the confidentiality order;

    AND WHEREAS on October 9, 2013, the Commission heard submissions from counsel on the Second PFAM Motion in camera;

    AND WHEREAS the Commission is of the opinion that it is in the public interest to make this order;

IT IS HEREBY ORDERED that:

1.     the Temporary Order is extended to December 15, 2013;

2.     the affidavit of Michael Ho sworn October 8, 2013, the affidavit of Stuart McKinnon sworn October 7, 2013, the affidavit of Kenneth White sworn October 7, 2013 and the written submissions of the parties dated October 8 and 9, 2013 will be treated as confidential documents until further order of the Commission;

3.     the hearing to consider whether to: (i) make any further order as to PFAM’s registration as an adviser in the category of PM or in respect of its operation as an IFM, as a result of PFAM’s ongoing capital deficiency; and/or (ii) otherwise vary or extend the terms of the Temporary Order, will proceed on December 12, 2013 at 10:00 a.m.

        DATED at Toronto this 11^th day of October, 2013.