ALBERTA SECURITIES COMMISSION DECISION Wealthstreet Inc ... Decisions Orders Rulings...آ  [1] In...

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Transcript of ALBERTA SECURITIES COMMISSION DECISION Wealthstreet Inc ... Decisions Orders Rulings...آ  [1] In...

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    ALBERTA SECURITIES COMMISSION

    DECISION

    Citation: Wealthstreet Inc., Re, 2011 ABASC 456 Date: 20110825

    Wealthstreet Inc., Colin David Jones aka David Colin Jones and Rachael Poffenroth

    Panel: Glenda A. Campbell, QC Beverley A. Brennan, FCA Glen D. Roane

    Appearing: Carla Murray for Commission Staff

    David Jones for himself

    Rachael Poffenroth for herself

    Submissions Completed: 8 July 2011

    Date of Decision: 25 August 2011

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    I. INTRODUCTION [1] In an amended notice of hearing dated 13 January 2011, staff ("Staff") of the Alberta Securities Commission (the "Commission") alleged that three respondents – Wealthstreet Inc. ("Wealthstreet"), Colin David Jones aka David Colin Jones ("Jones") and Rachael Poffenroth ("Poffenroth") (together, the "Respondents") – contravened Alberta securities laws and engaged in conduct contrary to the public interest, the specifics of the alleged misconduct being:

    • in the case of all Respondents, by trading in and distributing Wealthstreet securities without registration and a prospectus or an exemption;

    • in the case of Jones: • by acting as an advisor1 without registration; • by making misleading or untrue statements to investors; and • by engaging in an unfair practice to pressure investors into buying

    securities from Wealthstreet. [2] The hearing into the merits of the allegations (the "Merits Hearing") began on 26 April 2011 and concluded on 29 April 2011. We received documentary evidence and heard testimony from one Staff investigator, five Alberta investors (for privacy reasons, we identify investor witnesses by their initials), the Trustee in Bankruptcy for Wealthstreet (the "Trustee") and Poffenroth. Jones attended only portions of the Merits Hearing, did not testify and cross- examined only some of the witnesses. Poffenroth attended the Merits Hearing and testified, but declined to cross-examine any witnesses. The Trustee testified; however, counsel for the Trustee did not attend the Merits Hearing. We received written argument from Staff on 27 May 2011. Although invited to do so, none of the Respondents provided written argument. In an email dated 12 July 2011, the Registrar of the Commission (the "Registrar") advised the panel that Staff did not request an opportunity to make oral argument and that the Registrar had received no communication from any of the Respondents on that matter. Accordingly, no oral arguments were made. [3] Our decision and reasons on the merits of the allegations against the Respondents follow. Stated briefly, we find that:

    • contrary to sections 75(1)(a) and 110(1) of the Securities Act, R.S.A. 2000, c. S- 4 (the "Act"), each of the Respondents illegally traded in and distributed securities of Wealthstreet;

    • contrary to section 75(1)(b), Jones acted as an advisor without being registered

    to do so; • contrary to section 92, Jones engaged in an unfair practice by unreasonably

    pressuring at least one investor to purchase securities through Wealthstreet; and

    1 The term "advisor" was used in Alberta securities laws until 28 September 2009, when it was replaced by "adviser". This decision uses the former terminology.

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    • in so doing, each of the Respondents engaged in conduct contrary to the public interest.

    II. PRELIMINARY MATTERS A. Jones's Participation in Merits Hearing [4] Jones participated sporadically in the Merits Hearing. He did not attend the first day of the Merits Hearing on 26 April, arrived late for the morning session on 27 April, did not attend the afternoon session on 27 April, arrived late for the morning session on 28 April, did not attend the afternoon session on 28 April, and did not attend the final morning of the Merits Hearing on 29 April 2011. [5] At the start of the Merits Hearing on the morning of Thursday 28 April 2011 Staff advised that "given that emotions were running quite high yesterday, we have requested and we do have security present for the rest of the hearing". Later that morning Staff indicated that they would be closing their case that afternoon, after the lunch break. The panel inquired as to whether any of the Respondents wished to call evidence. Poffenroth had earlier indicated that she was calling no witnesses, but was given until 1:00 pm that day to consider whether she wished to testify. Jones requested that he be allowed to call witnesses even though he had failed to provide the names of any proposed witnesses to the other parties as previously directed in earlier pre-hearing appearances, and he had yet to make arrangements with any such proposed witnesses, or even to contact some or all of them. Jones indicated that he was not ready to proceed with his case, and he gave no indication as to when he would be ready or his witnesses would be available. Jones also indicated that he might testify. Staff and Poffenroth opposed Jones's very late request to call witnesses. Counsel for the Trustee indicated through Staff that Jones should be required to provide "will say" statements, if allowed to call any witnesses. The panel advised Jones that it would adjourn to consider his request and deliver its decision when the Merits Hearing resumed at 1:00 pm. Jones indicated several times that he would not attend the Merits Hearing in the afternoon, for reasons unknown. [6] When the Merits Hearing resumed that afternoon, Staff stated that Jones had contacted Staff and asked Staff to advise the panel that "an incident in his driveway" over the noon hour precluded him from attending. No other explanation was given and no requests were made. The panel declined Jones's late request to call witnesses not previously identified to Staff and the other Respondents but ruled that Jones could testify should he wish to, such testimony to take place the next day. Poffenroth testified and completed her direct evidence that afternoon. Jones was not in attendance to cross-examine Poffenroth. Staff requested that their cross- examination of Poffenroth commence the next morning. Because Jones was not in attendance that afternoon, the clerk of the Commission was asked to communicate to Jones the panel's ruling on his request to call witnesses and to advise him that the Merits Hearing would resume Friday 29 April 2011 at 10:00 am with the cross-examination of Poffenroth. [7] At the start of the Merits Hearing on Friday morning the panel was advised by Staff that Jones may not attend because he had "some personal safety concerns". No elaboration was provided and, again, no requests were made of the panel. The Merits Hearing resumed with Staff's cross-examination of Poffenroth, followed by questioning by the panel, after which Poffenroth closed her case. With no representations from Jones, the panel declared that the

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    evidence portion of the Merits Hearing was completed and that the Merits Hearing would proceed to the argument phase, with a schedule set out for the receipt of written arguments from the parties. The Merits Hearing was then adjourned at 10:58 am to await written argument from the parties. Subsequent to this, the Registrar of the Commission informed the panel of an email communication from Jones – which the Registrar had received at 10:45 am – in which Jones advised that a claimed incident at his home on Thursday 28 April 2011, apparently made known to the police, precluded his attendance at the Merits Hearing on Thursday afternoon and on the following morning, Friday 29 April 2011, and requested that "this hearing be postponed till a time that security can be arranged to secure my safety". That email and an earlier telephone conversation between Jones and the Registrar both occurred after the start of the Merits Hearing on Friday morning. We understand that the Registrar subsequently advised Jones that the evidence portion of the Merits Hearing had been completed. Jones then sent a second email communication stating: "I do not understand how this case can be closed if I was not safe to be in attendance and give my closing arguments or cross examination of Ms. Poffenroth." [8] The panel communicated the following response to all the parties:

    With respect to Mr. Jones' cross-examination of Ms. Poffenroth, Mr. Jones had the opportunity to do so over a two-day period. First, as he had advised the panel earlier that morning, Mr. Jones did not attend on Thursday afternoon, with no sufficient explanation. Second, his non- attendance on Friday morning occurred without his having made a timely request for and establishing the need for measures such as increased security (security was already in place), an in-camera session or an adjournment. The only request received was one on Friday for an indefinite adjournment (with no supporting evidence) after the evidence portion of the Merits Hearing had been completed, closing arguments had been scheduled and all the other parties had left the hearing room. Ms. Poffenroth has now been excused as a witness. With respect to argument, Mr. Jones, as with the other parties, will have an opportunity to make closing argument to the panel. The panel has directed the following timetable for the submission of argument on the merits of Staff's allegations set out in the Amended Notice of Hearing dated 13 January 2011: • Staff are to provide their written argument on the merits of Staff's allegations to the panel

    and each of the Respondents by the close of business on Friday