Amended Statement of Allegations: In the Matter of Wayne S. Umetsu

IN THE MATTER OF THE

COMMODITY FUTURES ACT , R.S.O. 1990, c.C.20, AS AMENDED AND

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

AND

IN THE MATTER OF WAYNE S. UMETSU

AMENDED STATEMENT OF ALLEGATIONS OF

STAFF OF THE ONTARIO SECURITIES COMMISSION

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

The Respondent

1. Wayne S. Umetsu (AUmetsu@) was registered with the Ontario Securities Commission (the ACommission@) as a salesperson pursuant to the Commodity Futures Act (the AAct@) for various periods of time since approximately August, 1981. During the material time, Umetsu was registered with the Commission as a salesperson, pursuant to the Act, with F.C. Canada Investments Inc. (AF.C. Canada@) from April 8, 1997 to May 2, 1997 and again with F.C. Canada from December 16, 1997 to February 28, 1998. F.C. Canada was, at the material time, registered as an Introducing Broker pursuant to the Act.

2. Umetsu was not registered with the Commission in any capacity during the period between May 2, 1997 and December 16, 1997.

3. Umetsu has not been registered with the Commission in any capacity since his employment with F.C. Canada was terminated on February 28, 1998.

Facts

4. W. E. is an individual who was a client of Umetsu.

5. In or around April, 1997, W.E. attended an information seminar hosted by F.C. Canada that was advertised as an opportunity to learn about commodities, futures and options trading (the ASeminar@). W.E. met Umetsu (then a salesperson employed by F.C. Canada) at the Seminar who advised W.E. that he had 15 years experience trading in futures contracts.

6. At the Seminar W.E. asked Umetsu about investing and opening an account with F.C. Canada. Umetsu advised W.E. that he would be leaving F.C. Canada in the near future and joining a better investment company. Umetsu requested that W.E. wait to make his investment until Umetsu had joined the new company.

 

7. Umetsu left the employ of F.C. Canada on or about May 2, 1997, at which time his registration as a salesperson was suspended pursuant to the Act.

 

8. In early May, 1997, Umetsu joined Prime Canadian Futures Company (APrime@) (an Investment Dealers Association of Canada member). Prime was registered as a Futures Commission Merchant under the Act. Prime did not , however, at any time provide the Commission with notice in writing of Umetsu=s employment by Prime. As such, Umetsu=s registration as a salesperson under the A ct was not reinstated when he became employed by Prime.

 

9. On or about May 7, 1997, W.E. met with Umetsu at Prime=s office to open an account. Umetsu did not advise W.E. that he was no longer registered under the Act to trade in contracts.

 

10. Between May 27, 1997 and September 16, 1997, W.E. deposited $23,000 into his account at Prime. W.E. instructed Umetsu to effect certain transactions in a commodity futures contract and three commodity futures contracts were in fact purchased and sold in W.E.=s account at Prime.

 

11. Late in the summer of 1997, Umetsu advised W.E. that he was moving to a new company and W.E. agreed to keep his business with Umetsu rather than transfer it to another representative at Prime. W.E. withdrew all funds from his account at Prime and received two cheques dated September 22, 1997 for Cdn$11,000 and US$5,342. At this time there were no open contracts in his account at Prime, but W.E. believed that Umetsu had between 10 and 20 commodity futures contracts for him in an account under Umetsu=s name.

 

12. On September 23, 1997, Umetsu instructed W.E. to make a cheque payable to ALFG, care of Wayne Umetsu@, so that Umetsu could transfer W.E.=s account to Umetsu=s new firm. Later the same day, Umetsu contacted W.E. and requested him to reissue the cheque to Umetsu personally. Umetsu picked up the $19,000 cheque at W.E.=s home and deposited it into his personal account at Canada Trust. Umetsu made no investment on behalf of W.E. with respect to the $19,000.

 

13. At Umetsu=s request, on October 31, 1997, W.E. made an emergency wire transfer to Umetsu=s account at Canada Trust in the amount of $15,000. W.E. was advised by Umetsu that funds were required to protect his investments. Umetsu made no investment on behalf of W.E. with respect to the $15,000.

 

14. On or about December 23, 1997, W.E. provided Umetsu with a cheque in the amount of $1,000 to be invested and the cheque was deposited into Umetsu=s account at Canada Trust. Umetsu made no investment on behalf of W.E. with respect to the $1,000.

 

15. Between March 17, 1998 and July 23, 1998, W.E. paid another $44,500 (cash of $3,500 and six cheques totaling $41,000) to Umetsu for the purposes of investment which was deposited into Umetsu=s account at Canada Trust. Again, Umetsu made no investment on behalf of W.E. with respect to the $ 44,500.

 

16. By a handwritten agreement dated December 7, 1999 (the AAgreement@), Umetsu agreed to pay back to W.E. the sum of $150,000 in connection with the monies given to him by W.E. for investment purposes. In connection with the Agreement, Umetsu provided W.E. with 6 postdated cheques totaling $100,000. W.E. attempted to cash the first cheque, but it was returned NSF. Shortly thereafter, Umetsu advised W.E. that he did not intend to honour the Agreement.

 

17. Umetsu breached the Act by trading in futures contracts without being registered to do so contrary to section 22 of the Act, by holding himself out as being registered to trade in futures contracts contrary to section 52 of the Act and by misappropriating monies provided to him by W.E. for investment purposes .

 

Conduct Contrary To the Public Interest

18. The conduct of Umetsu as described above was contrary to the public interest.

Other

19. Such further and other allegations as Staff may make and the Commission may permit.

Dated at Toronto this 23rd day of August , 2001.