IN THE MATTER OF THE SECURITIES ACT
R.S.O. 1990, c. S.5, AS AMENDED
AND IN THE MATTER OF THE REGISTRATION OF
- This settlement agreement (the Settlement Agreement) relates to the registration status under the Securities Act (Ontario) (the Act) of Arkady Burdo (Burdo).
Agreed Statement of Facts
- Staff of the Ontario Securities Commission (Staff of the OSC) and Burdo agree to the facts as stated herein.
- Burdo is registered under the Act as a dealing representative in the category of scholarship plan dealer, sponsored by Global RESP Corp.
- Burdo was first registered under the Act on November 21, 2000. With the exception of some very brief periods of non-renewal, he has been registered under the Act continuously since that time.
- The only securities in which Burdo has ever been authorized to trade under the Act are securities of scholarship plans, educational plans or educational trusts.
The Investment Program
- In or about 2007 and 2008, Roger T. Blair (Blair) and I. Jeffrey Eshun, acting on behalf of their company “Solutions 21 Financial,” offered investors an opportunity to participate in a “Revenue Capital Agreement” (an RCA) in which investors would lend money to a company called Xeris Capital Initiative Ltd. (Xeris) (the Investment Program). The purported business of Xeris related to a real estate development in the Caribbean.
- Burdo attests that he personally participated in the Investment Program.
Burdo’s Dealings With VV
- In 2001, Burdo sold a variety of financial products to his client VV, including a scholarship plan for one of VV’s children and a number of insurance products for VV and his wife. There have been no problems or issues with any of these products VV purchased from Burdo. VV expressed a low risk tolerance to Burdo at the time he purchased these products.
- VV is an inexperienced investor with limited investment knowledge.
- Burdo admits that he engaged in the following acts in furtherance of VV’s investment in the Investment Program:
- In or about 2007, Burdo introduced VV to the Investment Program. VV was interested in the Investment Program because of its projected rate of return.
- Burdo, as a participant himself, explained, in general terms, the business of the Investment Program to VV.
- Burdo, as a participant himself, explained the minimum investment required to participate in the Investment Program and the projected returns associated with an investment.
- VV ultimately contributed $56,400 USD from a home equity line of credit to the Investment Program on January 11, 2008.
- Burdo provided VV with an RCA for signature in VV’s home, and indirectly provided the RCA on VV’s behalf to the principals of the Investment Program.
Conduct Subsequent to VV’s Participation in the Investment Program
- Between 2008 and 2010, VV contacted Burdo to obtain updates on the status of his investment in the Investment Program. Burdo consistently told VV that, according to his knowledge, the Investment Program was working properly.
- Burdo provided VV with cheques from a third party covering VV’s bank interest in 2009 and 2010. Each of these cheques was in the amount of $1,800 CAD.
- In or about February 2011, VV sought to redeem his investment. It was only after this request that Burdo advised VV that the principals of the Investment Program were experiencing difficulties in redeeming matured investments.
- Although Burdo did not communicate this information to VV until 2011, Burdo attests that he had been informed by Blair in the autumn of 2010 that the Investment Program had limited resources to redeem investments. Burdo’s own investment could not be redeemed.
- VV suffered a total loss of his principal invested in the Investment Program. VV must now pay back his home equity line of credit, plus interest.
- Burdo acknowledges that he referred a number of other clients to a promoter of the Investment Program and of other investments. Some of these other clients suffered total or partial losses of the principal of their investments. Burdo admits to acting in furtherance of other trades in securities by, for example, responding to investors’ questions about the investment vehicles rather than merely referring them to the relevant issuer or promoter.
- Burdo attests that he suffered a total loss of his principal as a result of his own participation in the Investment Program, and that he received no compensation for referring others to participate in the Investment Program.
Staff Recommends Suspension of Registration
- On December 27, 2013, Staff informed Burdo that Staff had recommended to the Director that his registration be suspended pursuant to section 28 of the Act, and informing him of his right to request an opportunity to be heard (an OTBH).
- On January 13, 2014, counsel for Burdo notified Staff in writing that Burdo wished to have an OTBH before the Director made a decision regarding Staff’s recommendation.
Admission of Non-Compliance with Ontario Securities Law
- On the basis of the Agreed Statement of Facts, Burdo admits that he acted in furtherance of trades in securities other than those permitted by his category of registration, contrary to subsection 25(1) of the Act and subsection 7.1(2)(c) of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations.
- On the basis of the Agreed Statement of Facts, Burdo admits that he failed to properly discharge all of his obligations as a registered dealing representative under the Act.
Joint Recommendation to Director
- In order to resolve the OTBH requested by Burdo, and on the basis of the Agreed Statement of Facts and the admission of non-compliance with Ontario securities law, Staff and Burdo (the Parties) have agreed to the following terms, and make the following joint recommendation to the Director:
- The registration of Burdo as a dealing representative shall be suspended pursuant to section 28 of the Act, and he may apply for a reactivation of registration after a period of 18 months. If Burdo applies for a reactivation of registration, the conduct giving rise to this Settlement Agreement may be considered by Staff in assessing his suitability for registration, together with any other relevant consideration; and
- Burdo will successfully complete the Conduct and Practices Handbook Course before applying to be registered as a dealing representative in the category of scholarship plan dealer.
- The Parties submit that their joint recommendation is reasonable, having regard to the following factors:
- The misconduct by Burdo was significant and investors, including VV, suffered financial losses as a result of investments referred to them by Burdo;
- Burdo attests that he did not profit from any losses caused by, or misconduct engaged in by, the principals of the Investment Program, and in fact himself suffered a total loss of his principal invested in the Investment Program;
- Burdo attests that although he did not recover his own investment in the Investment Program, he assisted three investors in obtaining full early redemptions of their investment in the Investment Program, and others in obtaining partial early redemptions;
- Burdo has not previously been the subject of any regulatory action by the OSC relating to allegations of misconduct;
- Burdo has accepted full responsibility for his misconduct and has expressed remorse for that misconduct; and
- By agreeing to this Settlement Agreement, Burdo has saved the Director the time and resources that would have been required for an OTBH.
- The Parties acknowledge that if the Director does not accept this joint recommendation:
- This joint recommendation and all discussions and negotiations between the Parties in relation to this matter shall be without prejudice to the Parties; and
- Burdo will be entitled to an OTBH in accordance with section 31 of the Act in respect of any recommendation that may be made by Staff regarding his registration status.
“August 21, 2014”
“August 21, 2014”
Decision of the Director
Having reviewed and considered the agreed facts, admissions, representations and submissions contained in the settlement agreement (the Settlement Agreement) signed on behalf of Arkady Burdo and by staff of the Ontario Securities Commission on August 21, 2014, and on the basis of those agreed facts, admissions, representations and submissions, I, Marrianne Bridge, in my capacity as Director under the Securities Act (Ontario) (the Act), accept the joint recommendation of the parties, and make the following decision pursuant to section 28 of the Act:
- Effective immediately, the registration of Arkady Burdo as a dealing representative is suspended.
- Mr. Burdo may apply for reactivation of registration after a period of 18 months from today’s date. If Mr. Burdo applies for reactivation of registration, the conduct giving rise to the Settlement Agreement may be considered by Staff in assessing his suitability for registration, together with any other relevant consideration.
- Mr. Burdo must successfully complete the Conduct and Practices Handbook Course before applying to be registered as a dealing representative in the category of scholarship plan dealer.
“August 21, 2014”