Settlement Agreement - Schedule "A": In the Matter of Brian Anderson et al.
IN THE MATTER OF THE SECURITIES ACT
R.S.O. 1990, c. S.5, AS AMENDED
AND
IN THE MATTER OF
BRIAN ANDERSON, LESLIE BROWN, DOUGLAS BROWN,
DAVID SLOAN AND FLAT ELECTRONIC DATA INTERCHANGE (a.k.a. F.E.D.I.)
SETTLEMENT AGREEMENT
I. INTRODUCTION
a) By Notice of Hearing dated June 11, 2003, the Ontario Securities Commission proposed to hold a hearing on
June 18, 2003 to consider whether, pursuant to sections 127 and 127.1 of the Securities Act, R.S.O. 1990, c. S.5, as amended (the “Act”), it was in the public interest for the Commission to:
b) extend the temporary order made June 5, 2003 until the conclusion of this hearing pursuant to s. 127(7);2. From time to time since the original hearing date of June 18, 2003, the Commission has continued the temporary order made on June 5, 2003, as against Brian Anderson (“Anderson”), Leslie Brown, Douglas Brown and David Sloan (“Sloan”). The temporary order was not continued against Flat Electronic Data Interchange (“FEDI”).
c) at the conclusion of this hearing, make an order pursuant to paragraph 2 of s. 127(1) that trading in any securities by the Respondentscease until further order by this Commission;
d) at the conclusion of this hearing, make an order pursuant to paragraph 5 of s. 127(1) that the Respondents be prohibited from providing to any person or company the documents attached as Schedules A to H to the Statement of Allegations; and
e) make such other order as the Commission considers appropriate.
3. On July 7, 2004, the Commission released reasons for its decision respecting Leslie Brown and Douglas Brown, finding they had not committed acts in furtherance of a trade and therefore no further order was necessary.
4. On September 17, 2004, the Commission approved a settlement entered into between Staff and Sloan.
II. JOINT SETTLEMENT RECOMMENDATION
5. Staff recommend settlement of the allegations against Anderson in accordance with the terms and conditions set out below. Anderson agrees to the settlement on the basis of the acknowledgement provided in Part III and the facts agreed to as provided in Part IV and consents to the making of an order against him in the form attached as Schedule “I” on the basis of the acknowledgement provided in Part III and the facts set out in Part IV.
6. This settlement agreement, including the attached proposed order (collectively, the “Settlement Agreement”) will be released to the public only if and when the Settlement Agreement is approved by the Commission.
III. ACKNOWLEDGEMENT
7. Staff and Anderson agree with the facts set out in Part IV for the purpose of this settlement proceeding only and further agree that this agreement of facts is without prejudice to Anderson in any other proceeding of any kind including, but without limiting the generality of the foregoing, any proceedings brought by the Commission under the Act or any civil or other proceedings which may be brought by any other person or agency.
IV. AGREED FACTS
8. Anderson resides in White Rock, British Columbia.
9. On the evening of June 4, 2003, Anderson participated in making a presentation (the “Presentation”) in respect of FEDI to approximately 20 persons at the Bristol Place Hotel in Etobicoke, Ontario. The purpose of Anderson’s Presentation was to solicit individuals to invest in FEDI. There was a similar meeting at the Bristol Place Hotel on the previous day.
10. At the Presentation, the documents attached were made available by Anderson to persons attending the seminar:
i) “What is F.E.D.I. and How Do They Make Their Income?” (Schedule A)
ii) “F.E.D.I. Flow Chart” (Schedule B)
iii) “Bank Wire Coordinates” (Schedule C)
iv) “Bank Wire Transfer Procedure” (Schedule D)
v) “Joint Venture Agreement” (Schedule E)
vi) “Email from Gordon Rothwell dated May 15, 2003 ” (Schedule F)
vii) “Email from bjanderson dated April 17, 2003” (Schedule G)
viii) “Email from Brian D. Anderson dated May 13, 2003 ” (Schedule H)
11. Anderson led the Presentation. Individuals present were told by Anderson that they could invest in FEDI by acquiring an interest in a desk (“Desk”). The interest in each Desk was to cost $125,000 USD. It was stated at the Presentation that a Desk would entitle its holder to an income stream. To confirm an investment in FEDI, persons were to complete a confidential joint venture agreement (schedule “E”) with Anderson. Anderson was identified as the trustee of the project and a “designate” lessee.
12. No persons present invested in FEDI through Anderson at or following the June 4, 2003 meeting. On June 5, 2003, the Commission issued a temporary cease trade order, prohibiting the trading by the Respondents in Desks.
13. Anderson had introduced Sloan to the FEDI program in 2001. Sloan personally invested $45,000 to acquire an interest in a Desk. After the issuance of the Temporary Order, Sloan demanded from FEDI and received a full refund of his investment in FEDI.
14. The sale of interests in Desks are securities as defined by the Act.
15. Anderson is not registered pursuant to the Act to trade in securities in Ontario.
16. Persons who attended the Presentation were not provided with a prospectus.
V. CONDUCT CONTRARY TO THE PUBLIC INTEREST
a) Anderson attempted to sell interests in Desks of FEDI without being registered to trade in securities, contrary to section 25 of the Act; and
b) Anderson attempted to sell interests in Desks of FEDI without filing a preliminary prospectus and a prospectus contrary to section 53 of the Act.
18. Further, Anderson and Staff agree that the conduct described above was contrary to the public interest.
VI. TERMS OF SETTLEMENT
19. Anderson agrees to the following terms of settlement:
a) pursuant to paragraph 2 of subsection 127(1) of the Act, Anderson will cease trading in Desks permanently, effective from the date of the order of the Commission approving the Settlement Agreement;
b) pursuant to paragraph 3 of subsection 127(1) of the Act, any exemptions contained in Ontario securities law will not apply to Anderson for a period of 48 months, effective from the date of the order of the Commission approving the Settlement Agreement, save and except trades that Anderson is permitted to effect through the use of an agent who is a registered dealer, in accordance with s. 35(1) 10 of the Act;
c) pursuant to paragraph 5 of subsection 127(1) of the Act, Anderson will be prohibited from providing to any person or company the documents attached as Schedules A to H herein;
d) pursuant to paragraph 6 of subsection 127(1) of the Act, Anderson will be reprimanded by the Commission;
e) Anderson agrees to attend, in person, the hearing scheduled before the Commission on November 1, 2004 to consider the Settlement Agreement, or such other date as may be agreed to by the parties for the scheduling of the hearing to consider the Settlement Agreement; and
f) Anderson will make a payment of $10,000 to the Commission in respect of a portion of the Commission’s costs of the investigation of this matter.
VII. STAFF COMMITMENT
20. If this settlement is approved by the Commission, Staff will not initiate any other proceeding under the Act against Anderson respecting the facts set out in Part IV of the Settlement Agreement.
VIII. PROCEDURE FOR APPROVAL OF SETTLEMENT
21. Approval of the settlement set out in the Settlement Agreement shall be sought at a public hearing of the Commission scheduled for November 1, 2004 or such date as may be agreed to by Staff and Anderson.
22. Counsel for Staff or for Anderson may refer to any part, or all, of the Settlement Agreement at the Settlement Hearing. Staff and Anderson agree that the Settlement Agreement and the transcript of the proceeding held April 26, 2004 will constitute the entirety of the evidence to be submitted at the Settlement Hearing, unless the parties later agree that further evidence should be submitted at the Settlement Hearing.
23. If the Settlement Agreement is approved by the Commission, Anderson agrees to waive his right to a full hearing, judicial review or appeal of the matter under the Act.
24. Subject to the acknowledgement in Part III, Staff and Anderson agree and undertake that if the Settlement Agreement is approved by the Commission, they will not make any statement inconsistent with the Settlement Agreement.
25. Whether or not the Settlement Agreement is approved by the Commission, Anderson agrees that he will not, in any proceeding, refer to or rely upon the Settlement Agreement or the settlement negotiations as the basis of any attack on the Commission’s jurisdiction, alleged bias or appearance of bias, alleged unfairness or any other remedies or challenges that may otherwise be available.
26. If, for any reason whatsoever, the Settlement Agreement is not approved by the Commission, or an order in the form attached as Schedule “I” is not made by the Commission;
a) the Settlement Agreement and its terms, including all settlement negotiations between Staff and Anderson leading up to its presentation at the Settlement Hearing, shall be without prejudice to Staff and Anderson;
b) Staff and Anderson shall be entitled to all available proceedings, remedies and challenges, including proceeding to a hearing on the merits of the allegations in the Notice of Hearing and Amended Statement of Allegations of Staff, unaffected by the Settlement Agreement or the settlement negotiations; and
c) the terms of the Settlement Agreement will not be referred to in any subsequent proceeding, or disclosed to any person except with the written consent of Staff and Anderson, or as may be required by law.
IX. DISCLOSURE OF SETTLEMENT AGREEMENT
27. The Settlement Agreement will be treated as confidential by Staff and Anderson until approved by the Commission, and forever if, for any reason whatsoever, the Settlement Agreement is not approved by the Commission, except with the written consent of Staff and Anderson, or as may be required by law.
28. Any obligations of confidentiality shall terminate upon approval of the Settlement Agreement by the Commission.
29. It the Settlement Agreement is approved by the Commission, and at any subsequent time Anderson fails to honour the terms contained in paragraph 21, Staff reserve the right to bring proceedings under Ontario securities law against Anderson based on the facts set out in Part IV of the Settlement Agreement, as well as the breach of the terms.
X. EXECUTION OF SETTLEMENT AGREEMENT
30. The Settlement Agreement may be signed in one or more counterparts which together shall constitute a binding agreement.
31. A facsimile copy of any signature shall be as effective as an original signature.
DATED this day of October, 2004
| Signed in the presence of: | |
| __________________________ | __________________________ |
| Brian Anderson |
DATED this day of October, 2004
| Signed in the presence of: | Staff of the Ontario Securities Commission |
| ___________________________ | ___________________________ |
| Kathryn Daniels Assistant Manager, Enforcement Branch |
Michael Watson Director, Enforcement Branch |
Schedule "A"
available in PDF only