Settlement Agreement: In the Matter of Alexis Capital Advisors Inc.
R.S.O. 1990, c. S.5, as amended
AND
IN THE MATTER OF
ALEXIS CAPITAL ADVISORS INC.
SETTLEMENT AGREEMENT
I. INTRODUCTION
1. By notice of hearing dated August 25, 1999 (the "Notice of Hearing"), the Ontario Securities Commission (the "Commission") announced that it proposed to hold a hearing to consider:
(a) whether, pursuant to section 127 of the Act, it is in the public interest for the Commission to make an order:
(i) that the registration of Alexis Capital Advisors Inc. ("Alexis") be suspended or restricted for such time as the Commission may direct, or be terminated, or be subject to such terms and conditions as the Commission may order;
(ii) that Alexis submit to a review of its practices and procedures and institute such changes as may be ordered by the Commission;
(iii) that Alexis be reprimanded; and/or
(iv) such other order as the Commission may deem appropriate; and
(b) such other matters as the Commission considers appropriate.
II. JOINT SETTLEMENT RECOMMENDATION
2. The Staff of the Commission ("Staff") agree to recommend settlement of the proceeding initiated in respect of Alexis by the Notice of Hearing in accordance with the terms and conditions set out below. Alexis consents to the making of an order against it in the form attached as Schedule 'A' on the basis of the facts set out below.
3. Staff and Alexis agree that this settlement agreement, including the attached Schedule 'A', will be released to the public only if and when the settlement is approved by the Commission. Nothing in this agreement shall restrict the right of Staff or Alexis to refer to the agreement or any of its terms at the settlement hearing.
III. STATEMENT OF FACTS
Acknowledgment
4. Alexis agrees with the facts set out in this Part III.
Factual Background
5. Alexis is a corporation registered pursuant to Ontario securities law as a mutual fund dealer and limited market dealer. Alexis' financial year ends on January 31.
Late Delivery of 1998 Financial Statements
6. Section 139 of the Regulation ("the Regulation") under the Securities Act ("the Act") provides that every mutual fund dealer shall deliver to the Commission within ninety days after the end of its financial year, a copy of its audited financial statements for the financial year.
7. Pursuant to section 107 of the Regulation, Alexis is required at all times to maintain prescribed minimum free capital. Section 141 of the Regulation requires that Alexis deliver to the Commission, within ninety days after the end of its financial year, an audited report of its free capital prepared in accordance with Statement C of Form 9 of the Regulation.
8. Alexis' financial statements and audited report of free capital for the year ending January 31, 1998, were due on or before April 30, 1998. Alexis delivered those documents on June 30, 1998.
Failure to Maintain Minimum Free Capital
9. Alexis' report of free capital for the year ending January 31, 1998, disclosed a capital deficiency in the amount of $3,478.00. This capital deficiency was rectified as at May 31, 1998.
Late or Missing Monthly Filings
10. On July 15, 1998, pursuant to section 31 of the Act, the Director required that Alexis deliver to the Commission, within three weeks of each month end,
(a) unaudited, interim financial statements at month end prepared in accordance with generally accepted accounting principles;
(b) a calculation of minimum free capital at month end;
(c) a calculation of adjusted liabilities prepared in accordance with Statement C of Form 9 of the Regulation; and
(d) a reconciliation of all trust bank accounts.
11. The monthly filings referred to in paragraph 10 above, in respect of July 1998 to December 1998 inclusive, were all delivered on February 4, 1999.
12. The monthly filings in respect of February, March and April of 1999 were delivered on June 8, 1999.
13. The monthly filings in respect of May and June of 1999 were delivered as required.
1999 Financial Statements
14. Alexis' audited financial statements for the year ending January 31, 1999, due April 30, were not delivered by that time. Staff of the Commission attempted to contact the President of Alexis on May 5 and left a message requesting a return call. The call was not returned. On May 13, Staff called the President of Alexis. At that time, Alexis' President advised Staff that the financial statements might already have been delivered to the Commission. They had not.
15. On May 18, Alexis delivered draft unaudited financial statements. On May 26, Alexis delivered draft audited statements. On June 3, Alexis delivered its audited financial statements. Those financial statements disclosed a capital deficiency of $1,791.00.
Order Agreed To
16. Alexis' failure to deliver the required documents, and its failure to maintain the required minimum free capital, contravened the specific provision of Ontario securities law cited above. Alexis' conduct was contrary to the public interest.
17. Staff of the Commission and Alexis agree that it is in the public interest for the Commission to make an order in the form attached as Schedule 'A'.
IV. TERMS OF SETTLEMENT
18. Alexis agrees to the following terms of settlement:
(a) the terms and conditions imposed on its registration, referred to in paragraph 10 above, shall continue; and
(b) the following additional terms and conditions shall be imposed on its registration:
(i) Alexis shall deliver to the Commission, within three weeks of the end of each fiscal quarter, and beginning effective July 31, 1999, a certificate in the form attached as Schedule 'B' to this agreement, signed by the President of Alexis (provided that the certificate effective July 31, 1999 shall be delivered on or before September 8, 1999);
(ii) Alexis shall at all times maintain a minimum free capital equal to the amount calculated pursuant to section 107 of the Regulation, plus an additional $15,000; and
(iii) if at any time Alexis fails to comply with any of the terms and conditions described in paragraph 10, or in clauses 18(b)(i) and 18(b)(ii) of this agreement, then Alexis's registration will, at the instance of the Director, and without the need for the Director to conduct a hearing, be automatically suspended pending compliance with the terms and conditions.
V. STAFF COMMITMENT
19. If this settlement is approved by the Commission, Staff will not initiate any complaint to the Commission or request the Commission to hold a hearing or issue any other order in respect of any conduct or alleged conduct of Alexis in relation to the facts set out in Part III of this agreement.
20. If this settlement is approved by the Commission, Staff will not initiate any other proceeding against Alexis in relation to the facts set out in Part III of this agreement.
VI. PROCEDURE FOR APPROVAL OF SETTLEMENT
21. Approval of the settlement set out in this agreement shall be sought at the public hearing of the Commission scheduled for August 31, 1999, or such other date as may be agreed to by Staff and Alexis, in accordance with the procedures described in this agreement.
22. Staff and Alexis agree that if this agreement is approved by the Commission, it will constitute the entirety of the evidence to be submitted respecting Alexis in this matter, and Alexis agrees to waive its rights to a full hearing and appeal of the matter under the Act.
23. Staff and Alexis agree that if this settlement is approved by the Commission, neither Staff nor Alexis will make any public statement inconsistent with this agreement.
24. If, for any reason whatsoever, this settlement is not approved by the Commission or an order in the form attached as Schedule 'A' is not made by the Commission:
(a) each of Staff and Alexis will be entitled to all available proceedings, remedies and challenges, including proceeding to a hearing of the allegations in the Notice of Hearing and Statement of Allegations, unaffected by this agreement or the settlement negotiations;
(b) the terms of this agreement will not be referred to in any proceeding, or disclosed to any person, except with the written consent of both Staff and Alexis or as may be required by law; and
(c) Alexis agrees that it will not, in any proceeding, refer to or rely upon this agreement or the negotiation or process of approval of this agreement as the basis for any attack on the Commission's jurisdiction, alleged bias, appearance of bias, alleged unfairness or any other remedies or challenges that may otherwise be available.
25. If, prior to the approval of this agreement by the Commission, there are new facts or issues of substantial concern to Staff regarding the facts set out in Part III of this agreement, Staff will be at liberty to withdraw from this agreement. Notice of that intention will be provided in writing to Alexis. If that notice is given by Staff, the provisions of paragraph 24 of this agreement will apply as if the agreement had not been approved.
VII. DISCLOSURE OF AGREEMENT
26. Subject to paragraph 3 above, the terms of this agreement will be treated as confidential by Staff and Alexis until approved by the Commission, and forever if, for any reason whatsoever, this settlement is not approved by the Commission, except with the consent of both Alexis and Staff or as may be required by law.
27. Any obligations of confidentiality shall terminate upon approval of this settlement by the Commission.
VIII. EXECUTION OF AGREEMENT
28. This agreement may be signed in one or more counterparts which together shall constitute a binding agreement.
Dated this 25th day of August, 1999.
"ALEXIS CAPITAL ADVISORS INC."
STAFF OF THE ONTARIO SECURITIES COMMISSION
Per:"Charlie MacFarlane"