Ontario Securities Commission Bulletin

Issue 31/26 - June 27, 2008

Ont. Sec. Bull. Issue 31/26

Table of Contents

Chapter 1 - Notices / News Releases

Notices

• Current Proceedings Before The Ontario Securities Commission

• Notice of Ministerial Approval of Amendments to NI 51-102 Continuous Disclosure Obligations, Form 51-102F3 Material Change Report, NI 52-108 Auditor Oversight and NI 81-106 Investment Fund Continuous Disclosure

• OSC Notice 11-753 (Revised) -- Statement of Priorities for the Financial Year to End March 31, 2009

• CSA Staff Notice 52-321 - Early adoption of International Financial Reporting Standards, use of US GAAP and reference to IFRS-IASB

Notices of Hearing

• Sulja Bros. Building Supplies, Ltd. et al. - s. 127

• Betty Leung - ss. 127, 127.1

Notices from the Office of the Secretary

• Sulja Bros. Building Supplies, Ltd. et al.

• Shallow Oil & Gas Inc. et al.

• Rodney International et al.

• Roger D. Rowan et al.

• Betty Leung

• Stanton De Freitas

• David Watson et al.

Chapter 2 - Decisions, Orders and Rulings

Decisions

• National Bank of Canada and NBC Asset Trust

• Connor, Clark & Lunn Risk-Managed Energy Fund

• Fédération des Caisses Desjardins du Québec and Desjardins Short-Term Income Fund - MRRS Decision

• Desjardins Global Asset Management Inc. - MRRS Decision

• BW Founders Holdco Inc.

• Provident Investment Counsel, LLC

• XTM eXchange Split Corp.

• Penn West Energy Trust et al. - MRRS Decision

• BetaPro Management Inc. and the Investments Funds Listed in Schedule "A"

• JovFunds Management Inc. and Jov Canadian Equity Class

• Galileo Funds Inc. et al.

• Barclays PLC

Orders

• Dahlman Rose & Company, LLC - s. 147 of the Act and s. 6.1 of OSC Rule 13-502 Fees

• Shallow Oil & Gas Inc. et al. - ss. 127(1), 127(5), 127(8)

• Rodney International et al. - s. 127(7)

• Prime Rate Capital Management LLP - s. 218 of the Regulation

• American Resource Corporation Limited - s. 144

• Franchise Services Of North America Inc. - s. 144

• Aon Securities Corporation - s. 147 of the Act and s. 6.1 of OSC Rule 13-502 Fees

• Stanton De Freitas - ss. 127(1), 127(5), 127(8)

• David Watson et al. - ss. 127(1), 127(5), 127(8)

Chapter 3 - Reasons: Decisions, Orders and Rulings

OSC Decisions, Orders and Rulings

• Roger D. Rowan et al. - s. 127

• Anil Kumar Jain

Chapter 4 - Cease Trading Orders

• Temporary, Permanent & Rescinding Issuer Cease Trading Orders

• Temporary, Permanent & Rescinding Management Cease Trading Orders

• Outstanding Management & Insider Cease Trading Orders

Chapter 5 - Rules and Policies

• Amendments to NI 51-102 Continuous Disclosure Obligations, Form 51-102F3 Material Change Report, Companion Policy 51-102CP Continuous Disclosure Obligations, NI 52-108 Auditor Oversight, Companion Policy 52-110CP to NI 52-110 Audit Committees and NI 81-106 Investment Fund Continuous Disclosure

Chapter 8 - Notice of Exempt Financings

• Reports of Trades Submitted on Forms 45-106F1 and 45-501F1

Chapter 11 - IPOs, New Issues and Secondary Financings

Chapter 12 - Registrations

• Registrants

Chapter 13 - SRO Notices and Disciplinary Proceedings

• MFDA Commences Hearing on the Merits in the Matter of Calogero Arcuri

• MFDA Hearing Panel Approves Settlement Agreement with Portfolio Strategies Corporation

• MFDA Issues Notice of Hearing Regarding Domenic Fanelli and Michele Torchia

• Proposed Amendments to MFDA Rule 1.2.1(d) (Salespersons -- Dual Occupations)

• MFDA Issues Notice of Hearing Regarding Marlene Legare

• Notice and Request for Comment -- Material Amendments to CDS Rules Relating to Dormant Participants

• CDS Rule Amendment Revised Notice -- Technical Amendments to CDS Procedures -- Pledge: Changes to RMS 171 and 172 Security Loan Item Reports

• CDS Rule Amendment Revised Notice -- Technical Amendments to CDS Procedures -- Pledge: Remove Loan Items; Pledge: Update Loan Item for Stock Splits and Stock Distribution Type Events

• CDS Rule Amendment Revised Notice -- Technical Amendments to CDS Procedures -- ITP Stats: Supplement Trade Details

• CDS Rule Amendment Revised Notice -- Technical Amendments to CDS Procedures -- Reg SHO Procedure Change

• CDS Rule Amendment Revised Notice -- Technical Amendments to CDS Procedures -- IRS Section 302 Regulation

Chapter 25 - Other Information

Consents

• High American Gold Inc. - s. 4(b) of the Regulation

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Chapter 1 -- Notices / News Releases

Current Proceedings Before The Ontario Securities Commission

JUNE 27, 2008

CURRENT PROCEEDINGS

BEFORE

ONTARIO SECURITIES COMMISSION

Unless otherwise indicated in the date column, all hearings will take place at the following location:

The Harry S. Bray Hearing Room

Ontario Securities Commission

Cadillac Fairview Tower

Suite 1700, Box 55

20 Queen Street West

Toronto, Ontario

M5H 3S8

Late Mail depository on the 19^th Floor until 6:00 p.m.

THE COMMISSIONERS

SCHEDULED OSC HEARINGS

ADJOURNED SINE DIE

Global Privacy Management Trust and Robert Cranston

Andrew Keith Lech

S. B. McLaughlin

Livent Inc., Garth H. Drabinsky, Myron I. Gottlieb, Gordon Eckstein, Robert Topol

Portus Alternative Asset Management Inc., Portus Asset Management Inc., Boaz Manor, Michael Mendelson, Michael Labanowich and John Ogg

Maitland Capital Ltd., Allen Grossman, Hanouch Ulfan, Leonard Waddingham, Ron Garner, Gord Valde, Marianne Hyacinthe, Diana Cassidy, Ron Catone, Steven Lanys, Roger McKenzie, Tom Mezinski, William Rouse and Jason Snow

Euston Capital Corporation and George Schwartz

Al-Tar Energy Corp., Alberta Energy Corp., Eric O'Brien, Bill Daniels, Bill Jakes, John Andrews, Julian Sylvester, Michael N. Whale, James S. Lushington, Ian W. Small, Tim Burton and Jim Hennesy

Global Partners Capital, WS Net Solution, Inc., Hau Wai Cheung, Christine Pan, Gurdip Singh Gahunia

Land Banc of Canada Inc., LBC Midland I Corporation, Fresno Securities Inc., Richard Jason Dolan, Marco Lorenti and Stephen Zeff Freedman

Notice of Ministerial Approval of Amendments to NI 51-102 Continuous Disclosure Obligations, Form 51-102F3 Material Change Report, NI 52-108 Auditor Oversight and NI 81-106 Investment Fund Continuous Disclosure

NOTICE OF MINISTERIAL APPROVAL

OF AMENDMENTS TO

NATIONAL INSTRUMENT 51-102 CONTINUOUS DISCLOSURE OBLIGATIONS,

FORM 51-102F3 MATERIAL CHANGE REPORT,

NATIONAL INSTRUMENT 52-108 AUDITOR OVERSIGHT,

AND

NATIONAL INSTRUMENT 81-106 INVESTMENT FUND CONTINUOUS DISCLOSURE

On May 21, 2008, the Minister of Finance approved, pursuant to section 143.3 of the Securities Act (Ontario), amendments to the following rules and form (the Instruments):

• National Instrument 51-102 Continuous Disclosure Obligations;

• Form 51-102F3 Material Change Report;

• National Instrument 52-108 Auditor Oversight; and

• National Instrument 81-106 Investment Fund Continuous Disclosure.

Previously, materials related to the amendments to the Instruments and amendments to Companion Policy 51-102CP Continuous Disclosure Obligations and Companion Policy 52-110CP to National Instrument 52-110 Audit Committees were published in the Bulletin on April 18, 2008. The amendments to the Instruments and the companion policies will come into force on July 4, 2008.

The amendments to the Instruments and the companion policies are published in Chapter 5 of this Bulletin.

June 27, 2008

OSC Notice 11-753 (Revised) -- Statement of Priorities for the Financial Year to End March 31, 2009

NOTICE OF STATEMENT OF PRIORITIES

FOR FINANCIAL YEAR TO END MARCH 31, 2009

The Securities Act requires the Commission to deliver to the Minister by June 30th of each year a statement of the Commission setting out its priorities for its current financial year in connection with the administration of the Act, the regulations and rules, together with a summary of the reasons for the adoption of the priorities.

In the notice published by the Commission on April 4, 2008 (31 OSCB 3823), the Commission set out its draft Statement of Priorities and invited public input in advance of finalizing and publishing the 2008/2009 Statement of Priorities. Thirteen responses were received. The responses were generally supportive of the direction and goals we have set. Comments were very broadly based and focused on a wide range of issues. There continues to be strong support for our focus on enforcement including support for continued efforts to pursue co-operation across jurisdictions. Support for efforts toward improving harmonization and cooperation both within the securities regulatory framework and with other related regulatory bodies also was noted by a number of respondents. Support for our focus on retail investor issues such as investor education/empowerment, scholarship plans and point-of-sale were noted again this year. A number of the respondents noted issues related to the cost of compliance and the importance of ensuring that our operations are as efficient as possible and that we use a balanced approach to regulation.

In response to the comments, we have made the following changes to our 2008/2009 Statement of Priorities:

• We have added our new Vision statement

• In response to the suggestion that we should take a more proactive approach to communicate issues related to NI 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings and the transition to adopting international financial reporting standards (IFRS), we have clarified this initiative to confirm our intention to take a leadership role in this area.

A number of interesting proposals, although not added as priorities due to the significant number of priorities identified already for 2008/2009, will be strongly considered as we move forward. For example, we will look at ways to incorporate the suggestion to take a more macroprudential approach in our work with other regulators in addressing issues such as international financial reporting standards, asset backed commercial paper and capital requirements. Many useful suggestions focused on specific action steps that could be taken to achieve the identified priorities, while not resulting in changes to the document, will be considered in undertaking the identified initiatives.

The Statement of Priorities will serve as the guide for the Commission's operations. Following delivery of the Statement of Priorities to the Minister, we will also publish on our website www.osc.gov.on.ca a report on our progress against our 2007/2008 priorities.

For further information contact:

June 27, 2008

ONTARIO SECURITIES COMMISSION

STATEMENT OF PRIORITIES

FOR

FISCAL 2008-09

June 2008

Introduction

The Securities Act requires the Ontario Securities Commission (OSC) to publish in its Bulletin and to deliver to the Minister by June 30 of each year a statement by the Chair setting out the proposed priorities for the Commission for the current financial year. The OSC remains committed to delivering its regulatory services in a businesslike manner and to working closely with its colleagues within the Canadian Securities Administrators (CSA) and with market participants to ensure that the regulatory system remains relevant to the changing marketplace.

Our Vision

To be an effective and responsive securities regulator -- fostering a culture of integrity and compliance and instilling investor confidence in the capital markets.

Our Mandate

The OSC's mandate is set by statute:

To provide protection to investors from unfair, improper or fraudulent practices and to foster fair and efficient capital markets and confidence in capital markets.

Our Goals

The Statement of Priorities is an annual document required under the Securities Act. To meet its mandate, the Commission identified, in 2007, four strategic goals over the five-year period ending in 2012. This year's Statement sets out the Commission's strategic goals along with specific initiatives for the 2008-09 fiscal year in support of each of those goals:

1. Identify the important issues and deal with them in a timely way;

2. Deliver fair, vigorous and timely enforcement and compliance programs;

3. Champion investor protection, especially for retail investors; and

4. Support and promote a more flexible, efficient and accountable organization.

Message from the Chair

The vision of the Ontario Securities Commission (OSC) is to be an effective and responsive securities regulator -- fostering a culture of integrity and compliance and instilling investor confidence in the capital markets.

Our vision reflects the OSC's values and aspirations. It articulates what we want to achieve on behalf of market participants, which includes issuers, intermediaries and investors.

The Statement of Priorities for fiscal 2008-09 sets out the OSC's four strategic goals. These goals reflect both the OSC's vision and its statutory mandate. Specific actions are identified in support of each of the four goals: responding to the important issues; delivering effective compliance and enforcement programs; championing investor protection; and supporting organizational efficiency and accountability. Achievement of these goals will be our primary focus over the next four years.

Our Statement of Priorities is intended to describe how the OSC plans to achieve its strategic goals in fiscal 2008-09. By responding to the requirements and challenges of regulating dynamic capital markets, we are serving those investors who put their capital to work in the province of Ontario.

Our Environment

The OSC faces multiple challenges as it works to achieve its mandate of providing protection to investors while fostering fair and efficient capital markets. These challenges include: working within a fragmented and cumbersome structure of provincial securities regulators as well as other financial service sector regulators; establishing clear and measurable enforcement priorities; increasing the level of engagement among investors to understand the risks they are exposed to; understanding the longer term impacts on the markets as they evolve; encouraging a high standard of conduct by registrants; and promoting attention to compliance programs among participants. These challenges persist and require our continued focus to ensure confidence in our markets.

Properly functioning capital markets that inspire a high degree of confidence among investors and market participants, both inside and outside Canada, make a significant contribution to Ontario's economic performance. The capital markets are an essential part of the engine for economic growth in Ontario, and we believe regulatory reform can benefit investors, business and the province as a whole. We recognize the need to intensify cooperation with our regulatory counterparts in the banking, pension and insurance sectors to ensure an integrated view of market impacts and investor protection. In addition, the OSC will continue to co-operate with other provincial, territorial and international regulators to foster a harmonized and modernized regulatory framework, although over the longer term we support efforts to move towards a more efficient and effective, unified securities regulatory structure.

Concerted efforts continue to be made to improve enforcement aimed at capital market misconduct in Canada in terms of acting on recommendations from numerous studies, enhancing jurisdictional cooperation and seeking amendments to the Criminal Code and new investigative powers, to name a few. There remains, however, a wide perception that securities fraud enforcement processes are inadequate. More than ever, we recognize the challenge to establish clear enforcement priorities and the means to assess our performance against measurable targets in order to demonstrate that our system is effective and that investors can rely on the integrity of our markets.

Investors continue to be increasingly reliant on the capital markets for their retirement savings. As our markets become more competitive and investment products evolve both in number and complexity, our role in fostering confidence in the fairness and efficiency of the capital markets continues to increase. Some investors and market participants are actively engaged in understanding potential risks and returns available in the markets; others less so. Our challenge is to increase the level of engagement among investors and market participants so that risks are understood and investment decisions are informed, thereby contributing to confidence in our markets.

Related to the challenge of encouraging investor engagement in the face of increasingly numerous and complex product types is the challenge of ensuring adequate and appropriate disclosure of information by issuers as well as oversight of the various distribution channels employed.

A challenge we face is to better understand evolution in the marketplace and to adopt regulatory approaches that address adverse impacts of change. For example, imperfect information flows, unintended consequences and uncompetitive practices can arise as markets evolve. These potentially adverse impacts need to be addressed without unduly impairing market efficiency through excessive regulation or costs of compliance. We want to protect the rights and interests of investors, while allowing market participants to take reasonable risks and compete effectively both at home and abroad. Technology and product innovation continue to spur competition in the Canadian and Ontario securities markets. Generally, heightened competition is desirable since it leads to increased efficiency in the marketplace and greater choice for investors as well as other market participants. However, competition can, if only temporarily, lead to imbalances in the markets as the implications and potential impacts of market changes are fully appreciated over time.

Potential strains arising due to recent adverse market conditions may distract market participants from a focus on compliance requirements towards other business activities. We must encourage market participants to maintain vigilance in their compliance activities. A reduced focus on core compliance activities could lead to a weakening of investor protection and a greater incidence of non-compliance and even financial crime.

Governance and accountability remain continuing priorities of the OSC. We must ensure that the OSC conducts itself as an efficient, accountable and flexible organization while it serves investors, issuers of securities, intermediaries and other market participants. We will continue to maintain excellent internal controls and promote high staff morale.

GOAL 1 -- Identify the important issues and deal with them in a timely way.

Our goal is to deal with today's concerns, while anticipating tomorrow's challenges. We want to be a strategic leader in fulfilling our mandate to Ontario investors and the Ontario marketplace. We will:

• Consult and collaborate with investors, issuers, intermediaries, other industry participants and professionals;

• Identify trends and emerging issues, and develop solutions to address them in a risk-based framework;

• Work with the Government of Ontario, other securities regulators and market participants to strengthen the Canadian securities regulatory system. We will support efforts to move towards a common securities regulator. We will also continue to further harmonize, streamline and modernize securities laws and ease the regulatory burden on market participants;

• Continue to examine alternative securities regulatory approaches that provide a balanced regulatory approach and adopt best regulatory practices from other Canadian and international jurisdictions to support Ontario markets and investors. We will work to enhance the global competitiveness of our capital markets as well as foster co-operative relationships with other securities regulators;

• Use the full range of tools available to achieve our mandate, and assign priorities to all our work based on our strategic goals; and

• Ensure our priorities are communicated in a timely and effective manner.

Specifically, we plan to:

• Work to strengthen the registration regime by harmonizing, streamlining and modernizing current registration requirements, including:

i) reviewing and responding to comments on National Instrument 31-103 Registration Requirements and related instruments and preparing to implement the new registration regime;

ii) developing interface policies to support passport for registration; and

iii) supporting the Ministry in finalizing legislative amendments that would, if approved, support the new registration regime;

• Improve accountability and enhance the integrity of financial reporting and implement the revised National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings to bring greater transparency to the state of internal control over financial reporting by reporting issuers other than TSX Venture issuers;

• Improve disclosure of executive compensation by amending National Instrument 51-102 Continuous Disclosure Obligations;

• Address evolving market developments by proposing amendments to the Alternative Trading System (ATS) rules (National Instrument 21-101 Marketplace Operation and National Instrument 23-101 Trading Rules);

• Complete an assessment of the policy and operating implications of adopting International Financial Reporting Standards (IFRS) as the basis for financial reporting by reporting issuers and take appropriate steps to facilitate an effective transition, including proposing necessary changes to our rules, policies and notices;

• Publish final amendments to National Instrument 81-106 Investment Fund Continuous Disclosure to provide guidance on fair-value principles;

• Play a leading role with the CSA to review issues and develop a response to the ABCP/credit issues falling within the jurisdiction of securities regulators. The OSC's participation on the International Organization of Securities Commissions (IOSCO) Task Force on Credit Rating Agencies and the IOSCO Subprime Task Force complements and provides insight in support of the work undertaken by the CSA;

• Participate actively as an observer on the committee that will be appointed to review the Securities Act;

• Work with CSA jurisdictions and the U.S. Securities and Exchange Commission to develop a proposed framework for discussions on mutual recognition that would exempt Canadian exchanges and possibly dealers from registration in the U.S. by complying with Canadian securities regulatory requirements;

• Support the government's work to modernize the Commodity Futures Act;

• Chair the IOSCO Task Force on Corporate Governance that is examining the protection of minority shareholders in listed issuers. The Task Force is surveying IOSCO members to compile information about rules and practices in other jurisdictions. A report of the findings will be published in 2008-09;

• Complete a review of the regulation of non-conventional investment funds and begin to develop proposals for a framework for the regulation of all investment funds; specifically, we plan to begin by codifying frequently-granted relief given under National Instrument 81-102 Mutual Funds;

• Ensure OSC priorities are communicated in a timely and effective manner across all communications vehicles, including executive speeches, publications, media releases, website content and investor-related materials; and

• Continue to re-assess the effectiveness of National Instrument 54-101 Communication with Beneficial Owners of Securities of a Reporting Issuer and propose amendments to the rule as appropriate;

GOAL 2 -- Deliver fair, vigorous and timely enforcement and compliance programs.

Timely and appropriate compliance and enforcement are integral to fostering confidence in capital markets and preventing harm to investors. To address this, we will:

• Enhance our focus on compliance reviews of market participants to identify and prevent violations of Ontario securities law and ensure effective coordination among OSC branches in addressing improper market conduct;

• Identify gaps in the enforcement framework and co-operate with other regulators and agencies to find practical solutions;

• Improve the effectiveness of our enforcement work through reduced timelines for completing investigations and bringing regulatory proceedings forward;

• Provide leadership and assistance to improve collaboration among Canadian and international regulatory and criminal law enforcement agencies;

• Foster inter-jurisdictional co-operation to improve the coordination of investigative efforts, enforcement, and legal tools for enforcement; and

• Increase our transparency through timely and effective communications of enforcement actions where warranted.

Specifically, we plan to:

• Continue to articulate and promote a coherent statement of compliance and enforcement priorities;

• Work to better identify those activities seen as posing greatest risk to our investors and their confidence in the capital markets, and focus enforcement resources on those matters;

• Continue to increase use of coordinated inter-Branch compliance field reviews of market participants;

• Focus compliance efforts on new and high-risk market participants;

• Continue to enhance our risk-based approach to compliance oversight to make it more effective and efficient;

• Continue to improve the integration of our investigation and litigation processes;

• Assess all enforcement investigations at the outset and on an ongoing basis to determine whether seeking interim relief (such as a temporary cease trade order, freeze order, etc.) is in the public interest;

• Continue to increase the number of enforcement proceedings commenced within four months of the date of the recommendation to commence litigation, where there have not been settlement discussions, and increase the overall number of proceedings commenced;

• Expand our specialized multi-disciplinary unit dedicated to investigating fraudulent securities transactions such as illegal distributions and unregistered trading in securities in order to increase the effectiveness of the protection provided to investors against frauds and scams by increasing the number of investigations and early interventions. Give specific priority to illegal distributions and other scams which target seniors;

• Continue to work with the IOSCO and other international bodies to enhance global co-operation in enforcement matters;

• Develop a new approach to insider trading investigations, including tools aimed at allowing us to target "recidivist" insider traders who have organized their affairs to improperly use undisclosed material information;

• Implement further improvements to the electronic processing and storage of documentary evidence to permit more efficient and effective access by investigators and counsel and to provide enhanced disclosure of documents by creating a document control unit for the processing and storage of electronic documentary evidence; and

• Work with the CSA Enforcement Committee in communicating enforcement and compliance initiatives through the redevelopment of the CSA Enforcement Report.

GOAL 3 -- Champion investor protection, especially for retail investors.

The interests and needs of investors, particularly retail investors, will continue to be strongly reflected in all the OSC's operations. In addition to our enforcement activities, investor education and awareness and timely access to accurate information are important components of investor protection. We will:

• Continue to reflect investor interests in all that we do;

• Continue to support investor education initiatives;

• Continue to support and grow plain-language initiatives for investors to achieve better communications;

• Work with the self-regulatory organizations (SROs) to improve investor access to timely and affordable means of complaint handling and redress. This includes improving investor awareness of, and access to, existing mechanisms for resolution of complaints and restitution, such as those offered by the Ombudsman for Banking Services and Investments (OBSI);

• Work with the SROs and lead or support initiatives that recognize the importance of the adviser to the retail investor, and strengthen and improve the adviser/retail investor relationship;

• Communicate our commitment to investor protection and the importance of that commitment;

• Increase and enhance targeted outreach efforts to investors; and

• Increase the involvement of other industry groups, such as SROs, through their participation and information exchange.

Specifically, we plan to:

• Work with the Joint Forum of Financial Market Regulators to publish a final framework for point-of-sale disclosure that would require clear, concise and plain-language product and sales fee disclosure for investors in mutual funds and segregated funds;

• Continue to work with the Joint Forum of Financial Market Regulators to enhance the effectiveness of the Financial Services OmbudsNetwork to improve resolution of customer complaints;

• Monitor compliance issues with the new investment funds long form prospectus 41-101 General Prospectus Requirements, adjust prospectus review procedures, and compile issues for possible one-year amendments;

• Develop proposals to modernize securities regulation of scholarship plans;

• Establish a standing committee with the SROs and OBSI to discuss and coordinate work on investor initiatives and engage retail investors in the regulatory process;

• Work with the CSA Investor Education Committee to produce brochures, web materials and other information for investors that are consistent, accurate and timely;

• Maximize the use of communications channels, including the web and partnerships with community organizations, to effectively reach targeted investor groups across Ontario;

• Implement a focussed Investor Assistance section within the Inquiries & Contact Centre to continue to increase our responsiveness to retail investor needs; and

• Continue to explore opportunities for enabling investors to receive, compare and analyze financial information through eXtensible Business Reporting Language (XBRL).

GOAL 4 -- Support and promote a more flexible, efficient and accountable organization.

The OSC's strength is its people. We will make the best use of all our resources, including people, technology, research and financial, to achieve timely and effective execution of all that we do. We expect OSC Commissioners and employees to maintain the highest standards of conduct and personal integrity and to deal openly and fairly with all of our stakeholders. We shall continue to constantly advance our business competence and effectiveness. We will:

• Continuously monitor and improve the efficiency and effectiveness of our operations;

• Be responsive and flexible as an organization and treat all stakeholders with respect and fairness;

• Identify skills requirements and ensure that we attract, retain and motivate staff who possess the required skills, and continue improving and enhancing our succession plans;

• Leverage information technology effectively to support our operations and optimize our electronic interface with our stakeholders;

• Secure the most appropriate resources and justify their acquisition through cost- benefit analyses and similar tools;

• Increase the knowledge management and risk analysis capabilities of the OSC;

• Supplement OSC staff resources with external resources where appropriate; and

• Identify those situations where greater reliance on other jurisdictions or organizations is appropriate.

Specifically, we plan to:

• Develop and adopt an updated conflict of interest policy (Code of Conduct) that would appropriately strengthen the Commission's standards of ethics, integrity and accountability consistent with the new Public Service of Ontario Act, 2006.

i) Submit the policy to the Conflict of Interest Commissioner for approval;

ii) Implement policies and procedures for oversight of the Code of Conduct, employee trading procedures and to manage staff complaints and issues;

• Implement improved internal knowledge-management initiatives across the OSC that will enable us to respond to issues and make decisions that are consistent and reflect current technologies and practices;

• Enhance our service and operational efficiency by increasing and improving the self-service options provided through our website and telephone technology;

• Continue to improve the efficiency and effectiveness of our Inquiries & Contact Centre operations by streamlining the inquiries and complaints-handling processes and providing specialized assistance for people contacting the OSC; and

• Complete a redevelopment of the OSC website to better respond to the needs of our stakeholders and contribute positively to effectiveness, responsiveness, transparency and accountability.

2008-09 Financial Outlook

The coming year is the final year of our three-year cycle for setting fees, which began on April 1, 2006. The budget for 2008-09 is for a deficit of $7.1 million. This is consistent with our plan to reduce our accumulated surplus and return the surplus to market participants by way of fees that are lower than would otherwise be the case.

2009 Budget versus 2008 Actual

(Thousands)	2009	2008	Year over Year
	Budget	Actual	Change
Revenues	$79,064	$78,238	$826	1.1%
Expenses	$86,172	$73,621	$12,551	17.0%
Excess/(Deficiency) of
Revenue over
Expenses	($7,108)	$4,617	($11,725
Expenditures on
premises and
equipment	$5,669	$917	$4,752

The OSC remains committed to ensuring that fees paid by issuers and registrants reflect the projected costs to regulate each group. In 2008, $78.2 million was earned in revenue. In 2009, participation fee revenues are forecast to be similar from issuers and to increase by 3.0% from registrants. As in 2008, these changes would result from market growth, rather than fee increases. The fees will remain at the levels set on April 1, 2006. Total activity fee revenues are projected to increase by 3.4%. Late fees are forecast to decrease by 2.5%. Investment income is forecast to fall by 19.1%, or $651,000, due to expected lower cash balances. The OSC plans to implement a revised fee structure effective April 1, 2009.

The 2008-09 expense budget is $86.2 million, an increase of $12.6 million, or 17.0%, over the actual results for 2007-08. Salaries and benefits are projected to rise 11.7% to $62.1 million, accounting for 51.7% of the total budget increase. This is the only area of expenditure that exceeds 10% of expenses. The increase in salaries and benefits largely reflects cost momentum from prior staffing decisions. Recruiting challenges led to significant delays in hiring the new staff approved in 2007-08. The full cost of these positions will be felt in 2008-09. The increase also reflects a decision to increase approved staffing by 1.7% from 467 to 475. The bulk of this new staffing is in the Enforcement Branch. Other costs, such as occupancy costs of $6.5 million and training of $1.2 million, are correlated with staff numbers. Professional services costs are projected to rise by $3.7 million, or 82.2%, above last year's actual. The proposed increases are primarily related to one-time consulting requirements related to IT infrastructure (which are associated with our IT Strategic Plan and will enhance our operational efficiency), re-design of the OSC website, completing our OSC Stakeholder Survey and funding for the Four Year Review Committee.

Key one-time increases in the capital budget are $3.2 million for leasehold improvements and $2.4 million for IT infrastructure. The leasehold improvements include costs to refurbish certain parts of the existing space to accommodate moves and other operational needs driven by operational reorganization. Significant growth in hearing activity has also generated needs for expanded Hearing Room facilities and additional working space for Commissioners. The key initiatives driving higher IT infrastructure spending are: to improve and increase storage to facilitate current and future document management processes, an OSC-wide document management system and business continuity; for redevelopment and content management of the OSC website; and related to information and data management, information security, access and identity.

CSA Staff Notice 52-321 - Early adoption of International Financial Reporting Standards, use of US GAAP and reference to IFRS-IASB

CSA STAFF NOTICE 52-321

EARLY ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS,

USE OF US GAAP AND REFERENCE TO IFRS-IASB

Purpose

This notice updates the market on CSA staff's views on the issues addressed in CSA Concept Paper 52-402 Possible changes to securities rules relating to International Financial Reporting Standards (the concept paper), published on February 13, 2008, namely:

• use of International Financial Reporting Standards (IFRS) by a domestic issuer{1} before January 1, 2011,

• use of US generally accepted accounting principles (US GAAP) by a domestic issuer that is an SEC issuer, and

• reference to IFRS as issued by the International Accounting Standards Board (IFRS-IASB) instead of Canadian generally accepted accounting principles (Canadian GAAP).

Background

We have reviewed the 42 comment letters and other feedback received in response to the concept paper. Based on that input, staff have further developed their views on the three issues addressed in the paper.

Early adoption of IFRS

Staff recognize that some issuers might want to prepare their financial statements in accordance with IFRS for periods beginning prior to January 1, 2011, the mandatory date for changeover to IFRS for Canadian publicly accountable enterprises{2}. Staff are prepared to recommend exemptive relief on a case by case basis to permit a domestic issuer to prepare its financial statements in accordance with IFRS-IASB for financial periods beginning before January 1, 2011.

We expect an issuer contemplating the possibility of adopting IFRS before 2011 would carefully assess the readiness of its staff, board of directors, audit committee, auditors, investors and other market participants to deal with the change. An issuer should also consider the implications of adopting IFRS before 2011 on its obligations under securities legislation including those relating to CEO and CFO certifications, business acquisition reports, offering documents, and previously released material forward-looking information.

A domestic issuer may have previously filed financial statements prepared in accordance with Canadian GAAP or US GAAP for interim periods in the first year that the issuer proposes to adopt IFRS. In such cases, staff will recommend as a condition of the exemptive relief that the issuer file revised interim financial statements prepared in accordance with IFRS-IASB, revised interim management discussion and analysis, and new interim certificates.

Domestic issuers' use of US GAAP

Staff propose retaining the existing option in NI 52-107 for a domestic issuer that is also an SEC issuer to use US GAAP.

Reference to IFRS-IASB instead of Canadian GAAP

Staff have concluded that it is preferable for securities rules to require a domestic issuer to prepare its financial statements in accordance with IFRS-IASB after the mandatory changeover date, rather than Canadian GAAP, and require an audit report on such annual financial statements to refer to IFRS-IASB. However, we continue to consider issues relating to the availability of an appropriate French translation of IFRS and reference to both IFRS-IASB and Canadian GAAP.

Questions

Please refer your questions to any of the following people:

{1} The term "domestic issuer" in this notice refers to a reporting issuer that is not a "foreign issuer" as defined in NI 52-107. Most domestic issuers are incorporated or organized in a Canadian jurisdiction. Depending on its circumstances, an issuer incorporated or organized in a foreign jurisdiction may not meet the definition of "foreign issuer" and would therefore be considered a "domestic issuer."

{2} Following a period of public consultation, the Canadian Accounting Standards Board (AcSB) has adopted a strategic plan to move financial reporting for Canadian publicly accountable enterprises to IFRS as issued by the IASB. The AcSB recently confirmed January 1, 2011 as the changeover date; publicly accountable enterprises will be required to prepare their financial statements in accordance with IFRS for interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011.

Sulja Bros. Building Supplies, Ltd. et al. - s. 127

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, c.S.5, AS AMENDED

AND

SULJA BROS. BUILDING SUPPLIES, LTD.,

PETAR VUCICEVICH,

KORE INTERNATIONAL MANAGEMENT INC.,

ANDREW DEVRIES, STEVEN SULJA,

PRANAB SHAH, TRACEY BANUMAS, AND

SAM SULJA

NOTICE OF HEARING

(Section 127)

TAKE NOTICE THAT the Ontario Securities Commission (the "Commission") will hold a hearing pursuant to sections 127 and 127.1 of the Securities Act, R.S.O. 1990, c. S.5, as amended (the "Act") at the offices of the Commission, 20 Queen Street West, 17th Floor, Large Hearing Room, commencing on June 23, 2008 at 10:00 a.m. or as soon thereafter as the hearing can be held,

TO CONSIDER whether, it is in the public interest for the Commission:

(a) to make an order pursuant to section 127(1) clause 2 of the Act that trading in securities by the Respondents cease permanently or for such period as specified by the Commission;

(b) to make an order pursuant to section 127(1) clause 2.1 of the Act that acquisition of any securities by the Respondents be prohibited permanently or for such period as is specified by the Commission;

(c) to make an order pursuant to subsection 127(1) clause 3 of the Act that any exemptions in Ontario securities law do not apply to the Respondents permanently or for such period as specified by the Commission;

(d) to make an order pursuant to section 127(1) clause 7 of the Act that the individual Respondents resign any position that the Respondents hold as a director or officer of an issuer;

(e) to make an order pursuant to section 127(1) clause 8 of the Act that the individual Respondents be prohibited from becoming or acting as an officer or director of any issuer permanently or for such period as specified by the Commission;

(f) to make an order pursuant to section 127(1) clause 9 of the Act that the Respondents each pay an administrative penalty of not more than $1 million for each failure by that Respondents to comply with Ontario securities law;

(g) to make an order pursuant to section 127(1) clause 10 of the Act that the Respondents disgorge to the Commission any amounts obtained as a result of a non-compliance with Ontario securities law;

(h) to make an order pursuant to section 127(1) clause 6 of the Act that the individual Respondents be reprimanded;

(i) to make an order pursuant to section 127.1 of the Act that the Respondents, or any of them, pay the costs of Staff's investigation and the costs of, or related to, this proceeding, incurred by or on behalf of the Commission; and

(j) to make such other order or orders as the Commission considers appropriate.

BY REASON of the allegations set out in the Statement of Allegations of Staff and such additional allegations as counsel may advise and the Commission may permit;

AND FURTHER TAKE NOTICE that any party to the proceeding may be represented by counsel if that party attends or submits evidence at the hearing;

AND FURTHER TAKE NOTICE that upon failure of any party to attend at the time and place, the hearing may proceed in the absence of the party and such party is not entitled to any further notice of the proceeding.

DATED at Toronto this 16th day of June, 2008.

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, c.S.5, AS AMENDED

AND

SULJA BROS. BUILDING SUPPLIES, LTD.,

PETAR VUCICEVICH,

KORE INTERNATIONAL MANAGEMENT INC.,

ANDREW DEVRIES, STEVEN SULJA,

PRANAB SHAH, TRACEY BANUMAS, AND

SAM SULJA

STATEMENT OF ALLEGATIONS

OF STAFF OF THE

ONTARIO SECURITIES COMMISSION

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

I. THE RESPONDENTS

1. Sulja Bros. Building Supplies, Ltd. ("Sulja Nevada") is a company incorporated in the State of Nevada, U.S.A., with a registered office at CRA of America, Inc., 3638 N. Ranchero Drive, Suite 6, Las Vegas, Nevada. It was originally incorporated as Loftworks, Inc. on April 19, 2005 and then changed its name to Loftwerks, Inc. ("Loftwerks") on May 4, 2005. It was renamed Sulja Brothers Building Products, Inc. on July 20, 2006 and changed its name to Sulja Bros. Building Supplies, Ltd. on July 21, 2006. Loftwerks was quoted on the Pink Sheets, an over-the-counter quotation system in the United States. It continued that quotation as Sulja Nevada and does not trade on any exchange or trading system in Canada.

2. Petar Vucicevich ("Vucicevich") is a resident of Colchester, Ontario.

3. Kore International Management Inc. ("Kore") is a company incorporated in Ontario with a registered office at 490 Pelissier Street, Windsor, Ontario. Kore was controlled by Vucicevich at all material times.

4. Andrew DeVries ("DeVries") is a resident of Boerne, Texas, U.S.A.

5. Steven Sulja is a resident of Oldcastle, Ontario. He was CEO of Sulja Nevada at various times in the relevant period.

6. Tracey Banumas is resident of Harrow, Ontario. She was an employee of Kore at all material times.

7. Pranab Shah is a resident of Windsor, Ontario. He was an employee of Kore at all material times.

8. Sam Sulja is a resident of McGregor, Ontario.

II. OVERVIEW

9. This case concerns a "pump and dump" scheme, in which Vucicevich and DeVries arranged for the sale of shares of Loftwerks and Sulja Nevada, while promoting them by making inflated claims about their prospects in press releases issued at the same time. Vucicevich and DeVries arranged for the sale of the shares through nominee accounts in the name of employees of Kore and others.

III. ALLEGATIONS

10. Staff make the following specific allegations:

(a) Between February 6, 2006 and January 31, 2007, Vucicevich, Kore, DeVries, Banumus, Shah, and Sam Sulja directly or indirectly, engaged or participated in an act, practice or course of conduct relating to the securities of Sulja Nevada (for greater certainty, in this Part the securities of Sulja Nevada also include the securities of its predecessor companies Loftworks, Loftwerks, and Sulja Bros. Building Products Inc.) that they knew or reasonably ought to have known resulted in or contributed to a misleading appearance of trading activity in, or an artificial price for, the securities of Sulja Nevada contrary to section 126.1(a) of the Act;

(b) Between February 6, 2006 and January 31, 2007, Vucicevich and DeVries traded securities of Sulja Nevada that was a distribution of the securities without a preliminary prospectus and prospectus having been filed and receipts having been issued for them by the Director and without an exemption from the prospectus requirement contrary to section 53(1) of the Act;

(c) Between February 6, 2006 and January 31, 2007, Vucicevich and DeVries traded securities of Sulja Nevada while not registered in accordance with Ontario securities law to trade securities contrary to section 25 of the Act;

(d) Between February 6, 2006 and January 31, 2007, Vucicevich and DeVries, directly or indirectly, engaged in or participated in an act, practice or course of conduct relating to Sulja Nevada securities that they knew or reasonably ought to have known perpetrated a fraud on other persons or companies contrary to section 126.1(b) of the Act;

(e) Between February 6, 2006 and January 31, 2007, Sulja Nevada, Vucicevich, DeVries, and Steven Sulja made statements in the press releases of Sulja Nevada that they knew or reasonably ought to have known in a material respect and at the time and in light of all the circumstances under which they were made, were misleading or untrue or did not state a fact that was required to be stated or that was necessary to make the statement not misleading and would reasonably be expected to have a significant effect on the market price or value of Sulja Nevada securities contrary to section 126.2(1) of the Act;

(f) Between February 6, 2006 and January 31, 2007, Sulja Nevada, Vucicevich, DeVries and Steven Sulja made statements in press releases being documents required to be furnished under Ontario securities law that, in a material respect and at the time and in light of the circumstances under which they were made, were misleading or untrue or did not state a fact that was required to be stated or that was necessary to make the statement not misleading contrary to section 122(1)(b) of the Act; and

(g) Between February 6, 2006, and January 31, 2007, Banumus and Shah traded securities of Sulja Nevada as nominees of Vucicevich and participated in issuing misleading press releases and thereby acted as conduits for illegal activity which was conduct contrary to the public interest.

IV. PARTICULARS

11. Beginning on or about February 6, 2006 and continuing until in or about April 2006, Loftwerks issued press releases claiming it would merge with Sulja Bros. Building Supplies Ltd., ("Sulja Ontario") and with Consultech Management Inc. ("Consultech"), another company controlled by Vucicevich at all material times. The press releases issued during this time claimed that the merging companies were negotiating, and would be entering into, large and profitable urban renewal contracts in the United States. The press releases also described Sulja Ontario as a division of Consultech and Steven Sulja as an employee of Consultech.

12. In fact, Steven Sulja was not an employee of Consultech, Sulja Ontario was not a division of Consultech, and Consultech was not involved with merger discussions with Loftwerks.

13. Vucicevich and DeVries created or caused to be created the press releases for Loftwerks and Sulja Nevada, which were then broadcast to the market.

14. The press releases issued by Loftwerks contained misrepresentations made intentionally or otherwise about the revenue potential of Loftwerks, Consultech and others. They were part of a scheme to sell Loftwerks shares into the market to profit from the misrepresentations about Loftwerks, in breach of ss. 122, 126.1 and 126.2 of the Act.

15. DeVries arranged for shares to be issued from the Loftwerks (and, later, the Sulja Nevada) treasury through its transfer agent, Transfer Online, a transfer agent located in Portland, Oregon. The shares were sent electronically to nominee trading accounts controlled by Vucicevich (the "Nominee Accounts"), but held in the names of Banumas, Shah and Sam Sulja and others (the "Nominee Account Holders").

16. The Nominee Accounts would then sell Loftwerks's shares in the market on Vucicevich's instructions, at prices inflated by the misrepresentations in the press releases. Most of the proceeds from the trading in the Nominee Accounts went to Kore. By using the Nominee Accounts, Vucicevich concealed his involvement in the trading of Loftwerks and , later, Sulja Nevada shares.

17. DeVries also arranged for Loftwerks and, later, Sulja Nevada, shares to be issued to himself and to Kore International Management Inc. ("Kore US") in order to sell them into the market.

18. The Loftwerks shares from Transfer Online came from the Loftwerks treasury and were distributions within the meaning of the Act. The shares were then sold through the Nominee Accounts, with no prospectus qualifying them and no available exemptions from the prospectus requirement, in breach of s.53 of the Act.

19. In directing share trading in the Nominee Accounts, Vucicevich was advising and committing acts in furtherance of trading without being registered, in breach of s. 25 of the Act.

20. In arranging for the Loftwerks and, later, Sulja Nevada, shares to be transferred into the Nominee Accounts, DeVries was committing acts in furtherance of trades in Ontario without being registered to trade, in breach of section 25 of the Act.

21. Vucicevich and DeVries continued to issue press releases throughout February to April, 2006 announcing, among other things, that Steve Sulja was Chief Executive Officer of Sulja Brothers Specialty Building Materials, Ltd., a company which appears never to have been incorporated, and that Loftwerks would merge with variously named Sulja companies, some of which did not exist.

22. In fact, Loftwerks never did merge with Sulja Ontario, or any other Sulja company, but, in the end, it simply changed its name to Sulja Nevada as set out in paragraph one of these Allegations.

23. After Loftwerks changed its name to Sulja Nevada, press releases were issued between April through November, 2006, by Vucicevich and DeVries, which spoke of present and future business opportunities from which Sulja Nevada would earn large revenues. The press releases issued by Sulja Nevada contained misrepresentations made intentionally or otherwise about the revenue potential of Sulja Nevada. They were part of a scheme to sell Sulja Nevada shares into the market to profit from the misrepresentations about Sulja Nevada in breach of ss. 122, 126.1 and 126.2 of the Act.

24. Steven Sulja as CEO ought to have taken sufficient steps to find out whether these press releases were true or false. He did nothing to stop them being issued or to correct them.

25. Many of the press releases issued from May through November, 2006, stated that Sulja Nevada had contracts (the "Contracts") for building materials in the Middle East and that it would earn large revenue from the Contracts. Sulja Nevada had not entered into the Contracts, nor did it ever earn revenue from the Contracts.

26. For example, on September 5, 2006, Vucicevich and DeVries caused Sulja Nevada to issue a press release (the September 5 Press Release) announcing it had signed a contract, the "Cement Contract," to supply cement to Ramada General Contracting in Abu Dhabi, one of the United Arab Emirates. The press release stated that the cement contract would produce yearly revenues of $350,000,000.

27. In fact, the Cement Contract did not exist and Sulja Nevada earned no revenue from it as alleged or at all. Sulja Nevada did not correct the September 5 Press Release until it issued another press release dated December 5, 2006, stating that the "concrete commodities mentioned in that release [the September 5 Press Release] were indeed cancelled and no contract, even if drafted to finality, was consummated."

28. On December 6, 2006, Vucicevich and DeVries caused Sulja Nevada to issue a press release announcing it was pursuing other cement deals in the Middle East. On December 11, 2006, it issued a press release announcing a cement contract, the "Second Cement Contract", totalling 25,300,000 tonnes over three years, paying a commission of $0.90 USD per tonne to Sulja Nevada.

29. In fact, the Second Cement Contract did not exist either, and Sulja Nevada never received the revenue set out.

30. Vucicevich and DeVries also caused Sulja Nevada to issue press releases in which it stated that it was negotiating with KPMG and PWC for those firms to handle all future SEC filings and reporting and that those firms were its auditors.

31. Those press releases were also untrue. Neither KPMG nor PWC had done any work for Sulja Bros. When advised by those firms that its representations were untrue, Sulja Nevada did nothing or did not do enough to advise investors of the true facts or to correct its public disclosure, in breach of ss. 122 and 126.2 of the Act.

32. Vucicevich continued, until October 2006, the practice of selling shares through the Nominee Accounts, over which he had beneficial control.

33. As a result of selling Loftwerks and then Sulja Nevada shares in the Nominee Accounts while promoting them through press releases, Kore received about $3 million (CAN) from trading over the period February 2006 to November 2006.

34. By trading heavily as nominees for Vucicevich at his behest, pursuant to press releases that were highly suspicious and which Banumas and Shah had participated in issuing, Banumus and Shah acted as conduits for illegal conduct and their actions were contrary to the public interest.

35. In addition, Kore received cash from Kore US in the amount of about $2.7 million (CAN) and about $4.7 million (US) from July 2006 to January 2007, which appears to be the results of trading by DeVries or organized by him in Loftwerks and Sulja Nevada shares.

36. On or about December 22, 2006 the Commission issued an order, the "Temporary Order", that trading in Sulja Nevada shares cease and that any exemptions available under Ontario securities law not apply to Sulja Nevada, Sulja Ontario, Vucicevich, DeVries and Kore, The Temporary Order was extended by the Commission from time to time until May 22, 2008.

V. CONDUCT CONTRARY TO THE PUBLIC INTEREST

37. The conduct of the Respondents contravened Ontario securities law and is contrary to the public interest.

38. The Staff seek enforcement orders under section 127 of the Act and costs under s. 127.1 of the Act.

39. Staff reserve the right to make such other allegations as Staff may advise and the Commission may permit.

DATED at Toronto this 16th day of June, 2008.

Betty Leung - ss. 127, 127.1

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, c. S.5, AS AMENDED

AND

IN THE MATTER OF

BETTY LEUNG

NOTICE OF HEARING

(Sections 127 and 127.1)

TAKE NOTICE that the Ontario Securities Commission (the "Commission") will hold a hearing pursuant to sections 127 and 127.1 of the Securities Act, R.S.O. 1990, c. S.5, as amended, at the offices of the Commission, 20 Queen Street West, 17th Floor, Main Hearing Room, Toronto, Ontario, commencing on the 25th day of June, 2008 at 10:00 a.m. or as soon thereafter as the hearing can be held:

TO CONSIDER whether it is in the public interest to approve the settlement of the proceeding entered into between Staff of the Commission ("Staff") and Betty Leung pursuant to sections 127 and 127.1 of the Act;

BY REASON OF the allegations set out in the Statement of Allegations of Staff, and such additional allegations as counsel may advise and the Commission may permit;

AND TAKE FURTHER NOTICE that any party to the proceeding may be represented by counsel at the hearing;

AND TAKE FURTHER NOTICE that upon failure of any party to attend at the time and place aforesaid, the hearing may proceed in the absence of that party, and such party is not entitled to any further notice of the proceeding.

DATED at Toronto this 23rd day of June 2008.

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, c. S.5, AS AMENDED

AND

IN THE MATTER OF

BETTY LEUNG

STATEMENT OF ALLEGATIONS

OF THE ONTARIO SECURITIES COMMISSION

Staff of the Ontario Securities Commission (the "Commission") make the following allegations.

1. Leung is a resident of Toronto. She is 53 years old. She has been a legal secretary in Canada since 1989. At the material time described below, Leung was employed as a legal secretary at the law firm, Bennett Jones LLP, in Toronto. In particular, she worked for a partner whose practice is primarily in relation to merger and acquisition transactions.

2. Leung acquired confidential material information about various potential transactions in her role as a legal secretary through communications with other staff working on the transactions or from review of file materials, including email. Leung was aware that she could not lawfully trade securities of reporting issuers while she possessed undisclosed confidential material information about potential transactions involving those issuers. She acknowledges that she owed a duty of confidentiality to her employer and to the clients of her employer.

3. Pursuant to s.76(5)(c) of the Securities Act (the "Act"), Leung was a person in a special relationship with the reporting issuers involved in the merger and acquisition transactions on which Bennett Jones LLP advised.

4. Over the period from April, 2005 to March, 2008, with knowledge of confidential material facts that Leung became aware of during her employment, Leung bought and sold securities in eight reporting issuers which are listed on the TSX.

5. Leung purchased the securities using two accounts in her own name, one account in the name of her husband and one account in the name of her parents. While she traded frequently, she usually purchased or sold approximately 200-800 shares at a time. The total profit she made from trading the securities of the above-named reporting issuers over the material period was $51,568.61.

6. At the time Leung purchased and sold the securities, the confidential material facts she knew in respect of the reporting issuers related to possible merger and acquisition transactions or other corporate transactions. These material facts had not been generally disclosed to the public.

Conduct Contrary to the Public Interest

7. By engaging in the conduct described above, Leung has breached s.76(1) of the Act and has acted contrary to the public interest.

8. Such additional allegations as Staff may advise and the Commission may permit.

Dated at Toronto this 23rd day of June, 2008.

Sulja Bros. Building Supplies, Ltd. et al.

FOR IMMEDIATE RELEASE

June 19, 2008

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, c. S.5, AS AMENDED

AND

IN THE MATTER OF

SULJA BROS. BUILDING SUPPLIES, LTD.,

PETAR VUCICEVICH,

KORE INTERNATIONAL MANAGEMENT INC.,

ANDREW DEVRIES, STEVEN SULJA,

PRANAB SHAH, TRACEY BANUMAS, AND

SAM SULJA

TORONTO -- The Office of the Secretary issued a Notice of Hearing setting the matter down to be heard on June 23, 2008, at 10:00 a.m. or as soon thereafter as the hearing can be held in the above named matter.

A copy of the Notice of Hearing dated June 16, 2008 and Statement of Allegations of Staff of the Ontario Securities Commission dated June 16, 2008 are available at www.osc.gov.on.ca.

Shallow Oil & Gas Inc. et al.

FOR IMMEDIATE RELEASE

June 19, 2008

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, c. S.5, AS AMENDED

AND

IN THE MATTER OF

SHALLOW OIL & GAS INC., ERIC O'BRIEN,

ABEL DA SILVA, GURDIP SINGH GAHUNIA

ALSO KNOWN AS MICHAEL GAHUNIA,

ABRAHAM HERBERT GROSSMAN

ALSO KNOWN AS ALLEN GROSSMAN,

MARCO DIADAMO, GORD MCQUARRIE,

KEVIN WASH, AND WILLIAM MANKOFSKY

TORONTO -- Following a hearing held on June 18, 2008, the Commission issued an Order in the above noted matter.

A copy of the Order dated June 19, 2008 is available at www.osc.gov.on.ca.

Rodney International et al.

FOR IMMEDIATE RELEASE

June 20, 2008

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, c. S.5, AS AMENDED

AND

IN THE MATTER OF

RODNEY INTERNATIONAL,

CHOEUN CHHEAN (ALSO KNOWN AS

PAULETTE C. CHHEAN)

AND

MICHAEL A. GITTENS (ALSO KNOWN AS

ALEXANDER M. GITTENS)

TORONTO -- The Commission issued an Order which provides that the Temporary Order is continued until August 6, 2008 and the hearing of this matter is adjourned to August 5, 2008 at 2:30 p.m.

A copy of the Order dated June 17, 2008 is available at www.osc.gov.on.ca.

Roger D. Rowan et al.

FOR IMMEDIATE RELEASE

June 20, 2008

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, c. S.5, AS AMENDED

AND

IN THE MATTER OF

ROGER D. ROWAN, WATT CARMICHAEL INC.,

HARRY J. CARMICHAEL AND

G. MICHAEL McKENNEY

TORONTO -- The Commission issued its Reasons and Decision in the above noted matter today.

A copy of the Reasons and Decision dated June 20, 2008 is available at www.osc.gov.on.ca.

Betty Leung

FOR IMMEDIATE RELEASE

June 24, 2008

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, c. S.5, AS AMENDED

AND

IN THE MATTER OF

BETTY LEUNG

TORONTO -- The Office of the Secretary issued a Notice of Hearing for a hearing to consider whether it is in the public interest to approve a settlement agreement entered into by Staff of the Commission and Betty Leung. The hearing will be held on June 25, 2008 at 10:00 a.m. in the Large Hearing Room on the 17th floor of the Commission's offices located at 20 Queen Street West, Toronto.

A copy of the Notice of Hearing dated June 23, 2008 and Statement of Allegations of Staff of the Ontario Securities Commission dated June 23, 2008 are available at www.osc.gov.on.ca.

Stanton De Freitas

FOR IMMEDIATE RELEASE

June 25, 2008

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, c. S.5, AS AMENDED

AND

IN THE MATTER OF

STANTON DE FREITAS

TORONTO -- Following a hearing held on June 24, 2008 in the above noted matter, the Commission ordered that:

1. the hearing to extend the Temporary Order, as modified, is adjourned until September 9, 2008 at 1:00 p.m.; and

2. pursuant to subsection 127(8) of the Act, the Temporary Order, as modified, is extended until September 10, 2008 or until further order of the Commission.

A copy of the Order dated June 24, 2008 is available at www.osc.gov.on.ca.

David Watson et al.

FOR IMMEDIATE RELEASE

June 25, 2008

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, c. S.5, AS AMENDED

AND

IN THE MATTER OF

DAVID WATSON, NATHAN ROGERS, AMY GILES,

JOHN SPARROW, LEASESMART, INC.,

ADVANCED GROWING SYSTEMS, INC.

(a Florida corporation), PHARM CONTROL LTD.,

THE BIGHUB.COM, INC.,

UNIVERSAL SEISMIC ASSOCIATES INC.,

POCKETOP CORPORATION, ASIA TELECOM LTD.,

INTERNATIONAL ENERGY LTD.,

CAMBRIDGE RESOURCES CORPORATION,

NUTRIONE CORPORATION AND

SELECT AMERICAN TRANSFER CO.

TORONTO -- Following a hearing held on June 24, 2008 in the above noted matter, the Commission ordered that:

1. the hearing to extend the Temporary Orders, as modified, is adjourned until September 9, 2008 at 1:00 p.m.; and

2. pursuant to subsection 127(8) of the Act, the Temporary Orders, as modified, are extended until September 10, 2008 or until further order of the Commission.

A copy of the Order dated June 24, 2008 is available at www.osc.gov.on.ca.

Chapter 2 -- Decisions, Orders and Rulings

National Bank of Canada and NBC Asset Trust

Headnote

National Policy 11-203 Process For Exemptive Relief Applications in Multiple Jurisdictions - Trust permitted to issue trust capital securities using a short form prospectus -- Relief granted from certain eligibility requirements enabling an issuer to file a short form prospectus, subject to certain conditions -- Relief granted from earnings coverage disclosure requirements and certain requirements relating to documents incorporated by reference.

Confidentiality of application and decision document granted for limited period of time.

Applicable National Instrument

National Instrument 41-101 - Short Form Prospectus Distributions.

June 10, 2008

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

QUÉBEC AND ONTARIO

(the "Jurisdictions")

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

NATIONAL BANK OF CANADA (the "Bank") AND

NBC ASSET TRUST (the "Trust" and,

together with the Bank, the "Filers")

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (the "Decision Maker") has received an application from the Filers for a decision under the securities legislation of the Jurisdictions (the "Legislation") exempting the Trust (the "Exemption Sought") from the following requirements in connection with offerings by the Trust from time to time of Trust Capital Securities (as defined herein) in the form of a short form prospectus:

(a) the requirements of Section 2.2 of Regulation 44-101 respecting Short Form Prospectus Distributions, (elsewhere National Instrument 44-101 Short Form Prospectus Distributions ("Regulation 44-101")), which set forth the eligibility requirements to enable an issuer to file a prospectus in the form of a short form prospectus; and

(b) the disclosure requirements in Item 6 (Earnings Coverage Ratios) and Item 11 (Documents Incorporated by Reference), with the exception of Item 11.1(1)(5), of Form 44-101F1 of Regulation 44-101 ("Form 44-101F1") in respect of the Trust.

The Filers request that the application and the decision be held in confidence by the Decision Makers, subject to certain conditions.

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):

(a) the Autorité des marchés financiers is the principal regulator for this application;

(b) the Filers have provided notice that section 4.7(1) of Regulation 11-102 respecting Passport System, elsewhere Multilateral Instrument 11-102 Passport System ("Regulation 11-102") is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Northwest Territories, Nunavut and Yukon; and

(c) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.

Interpretation

The terms defined in Regulation 14-101 respecting Definitions, (elsewhere National Instrument 14-101 Definitions) and Regulation 11-102 have the same meaning if used in this decision, unless otherwise defined.

"Automatic Exchange" means that the NBC CapS II -- Series 2 will be automatically exchanged, without the consent of the holder, for a new series of newly issued First Preferred Shares of the Bank (the "New Series of Bank Preferred Shares") upon the occurrence of a Loss Absorption Event.

"Loss Absorption Event" means the occurrence of any one of the following events: (i) an application for a winding-up order in respect of the Bank pursuant to the Winding-Up and Restructuring Act (Canada) (the "Winding-Up Act") is filed by the Attorney General of Canada or a winding-up order in respect of the Bank pursuant to the Winding-Up Act is granted by a court; (ii) the Superintendent advises the Bank in writing that the Superintendent has taken control of the Bank or its assets pursuant to the Bank Act (Canada); (iii) the Superintendent advises the Bank in writing that the Superintendent is of the opinion that the Bank has a risk-based Tier 1 Capital Ratio of less than 5.0% or a risk-based Total Capital Ratio of less than 8.0%; (iv) the board of directors of the Bank advises the Superintendent in writing that the Bank has a risk-based Tier 1 Capital Ratio of less than 5.0% or a risk-based Total Capital Ratio of less than 8.0%; or (v) the Superintendent directs the Bank, pursuant to the Bank Act (Canada), to increase its capital or provide additional liquidity and the Bank elects to cause the Automatic Exchange as a consequence of the issuance of such direction or the Bank does not comply with such direction to the satisfaction of the Superintendent within the time specified.

"Superintendent" means the Superintendent of Financial Institutions (Canada).

"SEDAR" means the System for Electronic Document analysis Retrieval.

Representations

This decision is based on the following facts represented by the Filers:

The Bank

1. The Bank is a Schedule I chartered bank subject to the provisions of the Bank Act (Canada). The head and registered office of the Bank is located in Montreal, Quebec.

2. The authorized share capital of the Bank consists of: (i) an unlimited number of common shares ("Bank Common Shares"), without par value; (ii) an unlimited number of First Preferred Shares, without par value, issuable for a maximum aggregate consideration of $5 billion or the equivalent thereof in foreign currencies; and (iii) 15 million Second Preferred Shares, without par value, issuable for a maximum aggregate consideration of $300 million or the equivalent thereof in foreign currencies.

3. The Bank Common Shares are listed on the Toronto Stock Exchange.

4. The Bank is a reporting issuer in each province of Canada where such concept exists and is not in default of any requirement of the securities legislation in such provinces.

5. The Bank is qualified to use the short form prospectus system provided under Regulation 44-101.

The Trust

6. The Trust is a trust established under the laws of Ontario pursuant to a declaration of trust dated as of December 17, 2007, as amended and restated and supplemented from time to time. The capital of the Trust consists of an unlimited number of special trust securities (the "Special Trust Securities") all of which are held by the Bank, and an unlimited number of trust capital securities (the "Trust Capital Securities" and collectively with the Special Trust Securities the "Trust Securities") issuable in series.

7. The Trust completed a public offerings of $400,000,000 of Trust Capital Securities-- Series 1 (the "NBC CapS II -- Series 1") pursuant to the prospectus dated January 16, 2008 (the "Previous Offering"). The Trust is proposing to issue a new series of Trust Capital Securities to the public in each province of Canada pursuant to a short form prospectus (the "Offering"). It is currently anticipated that the new series of Trust Capital Securities will be designated Trust Capital Securities -- Series 2 ("NBC CapS II -- Series 2"). The NBC CapS II -- Series 1 are not listed and it is not expected that the NBC CapS II -- Series 2 will be listed on any stock exchange.

8. The objective of the Trust is to acquire (with the proceeds of offerings of its securities) and hold assets ("Trust Assets") primarily from the Bank or its affiliates, generally on a fully-serviced basis, which may consist of: (a) undivided co-ownership interests in one or more pools of Canada Mortgage and Housing Corporation ("CMHC") insured first mortgages on residential property situated in Canada; (b) certain mortgage-backed securities; (c) CMHC -- insured first mortgage on residential property; and (d) to the extent that the proceeds of the assets of the Trust are not invested in the assets referred to above in (a), (b) or (c), money and certain debt obligations that are qualified investments under the Income Tax Act (Canada) for trusts governed by certain deferred income plans.

9. The Trust is a reporting issuer in each province of Canada where such concept exists and is not in default of any requirement of the securities legislation in such provinces. The head office of the Trust is located in Montreal, Quebec.

10. The Bank holds all of the Special Trust Securities. The Trust may, from time to time, issue further series of Trust Capital Securities having terms substantially similar to the NBC CapS II -- Series 1 and NBC CapS II -- Series 2.

11. The NBC CapS II -- Series 2 will be non-voting securities of the Trust (except in limited circumstances where holders can vote if changes to the terms of the NBC CapS II -- Series 2 are made). The Special Trust Securities are voting securities of the Trust.

12. The Trust is a single purpose vehicle established for the purpose of effecting offerings of Trust Securities in order to provide the Bank with a cost effective means of raising capital for Canadian financial institutions and regulatory purposes by means of: (i) creating and selling the Trust Securities; and (ii) acquiring and holding Trust Assets, acquired with the proceeds of the offering of the NBC CapS II -- Series 2 and the Previous Offering. The Trust will not carry on any operating activity other than in connection with offerings of Trust Securities and in connection with the Trust Assets.

13. On May 29, 2008 the Canadian securities regulatory authorities in each of the provinces of Canada (except the Prince Edward Island Securities Office of the Attorney General) granted an MRRS Decision Document to the Trust (the "Continuous Disclosure Relief") exempting the Trust from most of the continuous disclosure requirements under the Legislation upon certain conditions, including that the Bank provide its financial statements and management's discussion and analysis of financial condition and operating results to holders of Trust Capital Securities and file its financial statements, management's discussion and analysis of financial condition and operating results, certification of annual and interim filings and annual information form ("AIF") on the Trust's SEDAR profile.

14. On May 27, 2008 the Trust filed a notice declaring its intention to be qualified to file a short form prospectus pursuant to Section 2.8 of Regulation 44-101 and such notice has not been withdrawn.

NBC CapS II -- Series 2

15. Holders of NBC CapS II -- Series 2 will be entitled to receive fixed non-cumulative distribution (the "Indicated Distribution") on the last day of June and December in each year. Each semi-annual payment date for the Indicated Distribution in respect of the NBC CapS II -- Series 2 (a "Distribution Date") will be either a Regular Distribution Date or a Distribution Diversion Date. A Distribution Date will be a "Distribution Diversion Date" with the result that the Indicated Distribution will not be paid in respect of the NBC CapS II -- Series 2 but, instead, the Trust will pay the net distributable funds of the Trust to the Bank as holder of the Special Trust Securities if: (i) the Bank has failed in the period to be described in the short form prospectus for the NBC CapS II -- Series 2 (the "Prospectus") to declare regular dividends on the Bank Preferred Shares of any series; or (ii) if no Bank Preferred Shares are then outstanding, the Bank has failed in the period described in the Prospectus to declare regular dividends on the Bank Common Shares. In all other cases, a Distribution Date will be a Regular Distribution Date, in which case holders of NBC CapS II -- Series 2 will be entitled to receive the Indicated Distribution and the Bank, as holder of the Special Trust Securities, will be entitled to receive the net distributable income, if any, of the Trust remaining after payment of the Indicated Distribution. The Bank Preferred Shares and the Bank Common Shares are hereinafter collectively referred to as the "Bank Dividend Restricted Shares".

16. Under a share exchange agreement to be entered into among the Bank, the Trust and a party acting as exchange trustee (the "Bank Share Exchange Agreement"), the Bank will agree, for the benefit of the holders of NBC CapS II -- Series 2, that in the event that the Trust fails on any Regular Distribution Date to pay the Indicated Distribution on the NBC CapS II -- Series 2 in full, the Bank will not pay dividends on the Bank Dividend Restricted Shares until a specified period of time has elapsed, unless the Trust first pays such Indicated Distribution (or the unpaid portion thereof) to holders of NBC CapS II -- Series 2 (the "Dividend Stopper Undertaking"). Accordingly, it is in the interest of the Bank to ensure, to the extent within its control, that the Trust complies with the obligation to pay the Indicated Distribution on each Regular Distribution Date so as to avoid triggering the Dividend Stopper Undertaking.

17. Pursuant to the Automatic Exchange, the NBC CapS II -- Series 2 will be automatically exchanged, without the consent of the holder, for New Series of Bank Preferred Shares upon the occurrence of a Loss Absorption Event.

18. The Trust may, subject to regulatory approval, on a date to be described in the Prospectus not prior to five years after the date of issue of the NBC CapS II -- Series 2 and on each Distribution Date thereafter, redeem the NBC CapS II -- Series 2. The price payable in respect of any such redemption will include an early redemption compensation component (such price being the "Early Redemption Price") in the event of redemption prior to a date to be specified in the Prospectus (the "Early Redemption Date"). The price payable in all other cases will be an amount equal to the original issue price per NBC CapS II -- Series 2 together with any unpaid Indicated Distribution thereon (the "Redemption Price").

19. Upon the occurrence of certain regulatory or tax events affecting the Bank or the Trust (a "Special Event"), in each case prior to the Early Redemption Date, the Trust may, subject to regulatory approval, redeem all but not less than all of the NBC CapS II -- Series 2 at the Early Redemption Price.

20. The Bank has covenanted that all of the outstanding Special Trust Securities will be held by it at all times.

21. As long as any Trust Capital Securities are outstanding and are held by any person other than the Bank, the Trust may only be terminated with the approval of the Bank as the unique holder of the Special Trust Securities and with the approval of the Superintendent: (i) upon the occurrence of a Special Event prior to a date to be specified in the Prospectus; or (ii) for any reason on a date to be specified in the Prospectus or any Distribution Date thereafter. Holders of each series of outstanding Trust Capital Securities will rank pari passu in the distribution of the property of the Trust in the event of a termination of the Trust after the discharge of any creditor claims. As long as any NBC CapS II -- Series 2 are outstanding and held by any person other than the Bank, the Bank will not approve the termination of the Trust unless the Trust has sufficient funds to pay the Early Redemption Price in the case of a termination prior to the Early Redemption Date, or the Redemption Price in the case of a termination at any other time.

22. Except to the extent that the Indicated Distribution is payable to holders of NBC CapS II -- Series 2, and other than in the event of a termination of the Trust, the NBC CapS II -- Series 2 holders will have no claim or entitlement to the income of the Trust or the Trust Assets.

23. Pursuant to an administrative and advisory agreement entered into between Natcan Trust Company (the "Trustee") and the Bank, the Trustee has delegated to the Bank certain of its obligations in relation to the administration of the Trust. The Bank, as advisor and administrative agent, provides advice and counsel with respect to the management of the Trust Assets and administers the day-to-day operations of the Trust and provides other advice or counsel as may be requested by the Trustee from time to time.

24. Subject to the Superintendent approval, the proceeds of the Offering will be included in the Tier 1 capital of the Bank.

25. It is expected that the NBC CapS II -- Series 2 will receive an approved rating from an approved rating organization, as defined in Regulation 44-101.

26. Because of the terms of the Trust Capital Securities, the Bank Share Exchange Agreement and the various covenants of the Bank, information about the affairs and financial performance of the Bank, as opposed to that of the Trust, is meaningful to holders of Trust Capital Securities.

27. At the time of the filing of any short form prospectus in connection with offerings of Trust Capital Securities (including the Offering):

(a) the Trust Capital Securities will be non convertible except in the context of Automatic Exchange;

(b) the short form prospectus will be prepared in accordance with the short form prospectus requirements of Regulation 44-101, except as varied by this decision or as permitted by the Legislation;

(c) the Trust will comply with all of the filing requirements and procedures set out in Regulation 44-101 except as varied by this decision or as permitted by the Legislation;

(d) the short form prospectus will incorporate by reference the documents of the Bank that would be required to be incorporated by reference under Item 11 of Form 44-101F1 if the Bank were the issuer of such securities;

(e) the short form prospectus disclosure required by Item 11 (other than Item 11.1 (1) (5)) of Form 44-101F1 in respect of the Trust) will be addressed by incorporating by reference the Bank's public disclosure documents referred to in paragraph 27 (d) above;

(f) the Continuous Disclosure Relief, as amended, supplemented or replaced from time to time, is in effect; and

(g) the Bank will satisfy the criteria in section 2.2 of Regulation 44-101.

Decision

Each of the Decision Makers is satisfied that the exemptive relief application meets the test set out in the Legislation for the Decision Maker to make the decision.

The decision of the Decision Makers under the Legislation is that the Exemption Sought is granted provided that:

1. the Trust and the Bank, as applicable, comply with paragraph 27 above;

2. the Bank remains the direct or indirect beneficial owner of all of the outstanding Special Trust Securities;

3. the Bank, as holder of the Special Trust Securities, will not propose changes to the terms and conditions of any outstanding Trust Capital Securities offered and sold pursuant to a short form prospectus of the Trust filed under this decision that would result in such Trust Capital Securities being exchangeable for securities other than New Series of Bank First Preferred Shares;

4. the Trust is not required to, and does not, file its own AIF and annual financial statements in a jurisdiction in which it is a reporting issuer;

5. the Trust has minimal assets, operations, revenues or cash flows other than those related to the issuance, administration and repayment of the Trust Securities;

6. the Trust issues a news release and files a material change report in accordance with Part 7 of Regulation 51-102 respecting Continuous Disclosure Obligations, (elsewhere National Instrument 51-102 Continuous Disclosure Obligations), as amended, supplemented or replaced from time to time, in respect of any material change in the affairs of the Trust that is not also a material change in the affairs of the Bank;

7. if the Trust files a preliminary short form prospectus more than 90 days after the end of the most recently completed financial year end of the Bank, the Bank has filed audited financial statements for that year;

8. the Trust is an electronic filer under Regulation 13-101 respecting the System for Electronic Document Analysis and Retrieval (SEDAR), (elsewhere National Instrument 13-101 System for Electronic Document Analysis and Retrieval (SEDAR));

9. the Trust is a reporting issuer in at least one jurisdiction of Canada;

10. the Trust files with the securities regulatory authority or regulator in each jurisdiction in which it is a reporting issuer all periodic and timely disclosure documents that it is required to have filed in that jurisdiction: (a) under all applicable securities legislation; (b) pursuant to an order issued by the securities regulatory authority or regulator; or (c) pursuant to an undertaking to the securities regulatory authority or regulator; and

11. the securities to be distributed to the public by the Trust: (a) have received an approved rating on a provisional basis; (b) are not the subject of announcement by an approved rating organization, of which the Trust is or ought to reasonably be aware, that the approved rating given by the organization is to be downgraded to a rating category that would not be an approved rating; and (c) have not received a provisional or final rating lower than an approved rating from any approved rating organization.

The further decision of the Decision Makers under the Legislation is that the application and this decision shall be held in confidence by the Decision Makers until the date that the Prospectus is filed in respect of the Offering and at the latest on July 31, 2008.

Connor, Clark & Lunn Risk-Managed Energy Fund

Headnote

National Policy 11-203 Process For Exemptive Relief Applications in Multiple Jurisdictions - Relief granted from NI 81-101, which requires a mutual fund to use a simplified prospectus form, and from prohibition against reimbursement of organizational costs in NI 81-102 - Investment fund that is a mutual fund for purposes of securities legislation issuing units under initial public offering - Expenses of the offering to be borne by the fund - Units not in continuous distribution and not listed for trading on any exchange - Units redeemable at net asset value on any business day - Fund permitted to use long form prospectus and permitted to bear expenses of the offering - National Instrument 81-101 Mutual Fund Prospectus Disclosure - National Instrument 81-102 Mutual Funds.

Applicable Legislative Provisions

National Instrument 81-101 Mutual Fund Prospectus Disclosure, ss. 1.3, 6.1.

National Instrument 81-102 Mutual Funds, ss. 3.3, 19.1.

June 4, 2008

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO

(the "Jurisdiction")

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

CONNOR, CLARK & LUNN RISK-MANAGED

ENERGY FUND

(the "Filer")

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction (the "Legislation") for relief from:

(i) National Instrument 81-101 Mutual Fund Prospectus Disclosure ("NI 81-101"), which requires a mutual fund to use a simplified prospectus (as such term is defined in NI 81-101); and

(ii) Section 3.3 of National Instrument 81-102 Mutual Funds ("NI 81-102"), which prohibits a mutual fund or its securityholders from bearing the costs of incorporation, formation or initial organization of a mutual fund, or of the preparation and filing of any prospectus, (this paragraph (i) together with paragraph (ii) above are collectively referred to in this decision as the "Exemption Sought").

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a) the Ontario Securities Commission is the principal regulator for this application; and

(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System ("MI 11-102") is intended to be relied upon in the jurisdictions of British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Northwest Territories, Yukon Territory and Nunavut.

Interpretation

Defined terms contained in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filer:

1. The Filer is an investment fund (as defined in NI 81-106) to be established under the laws of the Province of Ontario pursuant to a trust agreement. Connor, Clark & Lunn Capital Markets Inc. (the "Manager") is responsible for the management and administration of the Filer. The principal office of the Filer and the Manager is located at Suite 300, 181 University Ave., Toronto, Ontario M5H 3M7.

2. The Filer will make an offering (the "Offering") to the public on a best efforts basis of Class A Units and Class F Units (collectively, the "Units") pursuant to a final long form prospectus (the "Final Prospectus") in respect of which the preliminary long form prospectus (the "Preliminary Prospectus") was filed on May 6, 2008. The costs of formation and initial organization of the Filer, including the preparation and filing of the Preliminary Prospectus and Final Prospectus (collectively, the "Expenses of the Offering"), will be paid out of the proceeds of the Offering and therefore borne by the Filer.

3. The Filer has been created to provide investors with a stable stream of monthly cash distributions and to preserve and enhance the net asset value per Unit of the Filer by investing in energy-related securities and employing a risk management strategy (the "Risk Management Strategy").

4. The net proceeds from the Offering of Units will be invested in a portfolio (the "Energy Portfolio") consisting of the 12 largest issuers by market capitalization included in the S&P/TSX Capped Energy Index (the "Energy Index") on the basis that 10% of the net proceeds of the Offering will be invested in the top six of the 12 largest issuers of the Energy Index, 8% will be invested in the 7th and 8th largest issuers of the Energy Index, 7% will be invested in 9th and 10th largest issuers of the Energy Index and 5% will be invested in the 11th and 12th largest issuers of the Energy Index.

5. The Risk Management Strategy involves purchasing put options and selling call options on the Energy Portfolio and selling call options on the individual securities held in the Energy Portfolio. Under the Risk Management Strategy, the Filer intends to: (i) purchase "out-of-the-money" put options on the Energy Portfolio in order to protect the net asset value of the Filer from a significant decline in value; and (ii) sell "out-of-the-money" call options on the securities held in the Energy Portfolio in order to pay for the put options and to generate additional proceeds above the dividend and distribution income earned from these securities. The Filer will purchase and sell options in compliance with NI 81-102.

6. The Filer does not intend to list the Units on any stock exchange. In order to provide investors with liquidity for their investment, Units of each class may be redeemed on any business day, subject to the Filer's right to suspend redemptions in certain circumstances, for a redemption price equal to the net asset value per Unit of that class of the Filer on that date less any costs of funding the redemption and less, if applicable, the Early Trading Charge (as described in the Preliminary Prospectus).

7. The Filer will be a mutual fund trust for purposes of the Income Tax Act (Canada) and, as a result of the redemption provisions provided, will be a mutual fund for purposes of securities legislation. However, its operation will differ from that of a conventional mutual fund as follows:

(a) The initial public offering of the Filer will be conducted through the full service investment dealer distribution channel, as is the case for listed non-redeemable investment funds.

(b) The Filer does not intend to continuously offer Units once the Filer is out of primary distribution.

(c) The Filer will endeavour to maintain the Energy Portfolio and generally will not otherwise engage in trading.

8. In the absence of being granted the Exemption Sought from NI 81-101, the Filer would be required to file a simplified prospectus in the form of Form 81-101F1 prescribed under NI 81-101. The disclosure requirements of Form 81-101F1 are not intended for investment funds making one-time offerings through a syndicate of full service investment dealers. The use of the simplified prospectus form to sell Units of the Filer in the investment dealer channel may create confusion and may consequently negatively impact the marketing of the Units.

9. Unitholders of the Filer will not be prejudiced as a result of the Filer paying the Expenses of the Offering because, in the case of a one-time fully marketed offering of units where the fund is not in continuous distribution, all unitholders are subject to these same costs at the same time.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that the Exemption Sought is granted to permit the Filer to (i) use a long form prospectus in lieu of a simplified prospectus and (ii) bear the Expenses of the Offering, provided that:

(a) the Filer files a Final Prospectus that is a long form prospectus in the form of Form 41-101F2 prescribed under National Instrument 41-101 General Prospectus Requirements; and

(b) the Expenses of the Offering borne by the Filer do not exceed 1.5% of the gross proceeds of the Offering.

Fédération des Caisses Desjardins du Québec and Desjardins Short-Term Income Fund - MRRS Decision

Headnote

Mutual Reliance Review System for Exemptive Relief Applications -- Relief granted to permit manager, on behalf of a mortgage fund, to purchase and sell mortgages from and to certain affiliates - Relief subject to conditions including IRC approval and valuation in accordance with NP 29.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, ss. 4.2, 19.1.

National Instrument 81-107 Independent Review Committee for Investment Funds, s. 7.2.

June 9, 2008

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN,

MANITOBA, ONTARIO, QUEBEC, NEW BRUNSWICK,

PRINCE EDWARD ISLAND, NOVA SCOTIA,

NEWFOUNDLAND AND LABRADOR, NORTHWEST

TERRITORIES, YUKON and NUNAVUT

(the Jurisdictions)

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

FÉDÉRATION DES CAISSES DESJARDINS

DU QUÉBEC

(the Filer)

AND

IN THE MATTER OF

DESJARDINS SHORT-TERM INCOME FUND

(the Fund)

MRRS DECISION DOCUMENT

Background

The local securities regulatory authority or regulator (Decision Maker) in each of the Jurisdictions received an application from the Filer on behalf of the Fund under section 19.1 of National Instrument 81-102 Mutual Funds (NI 81-102) for relief from the prohibition in Section 4.2 of NI 81-102 in connection with transactions in mortgages between a Related Party (as defined below) and the Fund (the Requested Relief).

Under the Mutual Reliance Review System for Exemptive Relief Applications (MRRS):

(a) the Autorité des marchés financiers (AMF) is the principal regulator for this application; and

(b) this MRRS decision document (Decision) represents the decision of each Decision Maker.

Interpretation

Defined terms contained in National Instrument 14-101 Definitions (NI 14-101) and in NI 81-102 have the same meaning in this Decision unless they are otherwise defined in this Decision. The following additional terms shall have the following meanings:

"NI 81-107" means National Instrument 81-107 Independent Review Committee for Investment Funds;

"Portfolio Adviser" means Desjardins Global Asset Management Inc.; and

"Related Party" means each of Desjardins Trust Inc., the Filer, or an affiliate or associate of one of them, other than the Portfolio Advisor.

Representations

1. Fédération des caisses Desjardins du Québec is a body corporate constituted under the laws of Québec.

2. The Filer is the manager of the Fund and Desjardins Trust Inc. is the trustee of the Fund.

3. The Fund has an investment objective that permits the Fund to invest in mortgages.

4. The Fund is an open-end mutual fund, organized as a trust, and is a reporting issuer under the legislation of each of the Jurisdictions.

5. The Filer has appointed an independent review committee (IRC) under NI 81-107 for the Fund.

6. The Filer has appointed the Portfolio Advisor to provide portfolio management and investment advisory services to the Fund.

7. The Related Party is an associate or affiliate of the Fund's manager, portfolio advisor or trustee. The Fund may purchase the mortgages for its portfolio from the Related Party.

8. Desjardins Trust Inc. and the Filer have agreed to repurchase, or cause to be repurchased, from the Fund any mortgage the Fund has purchased from them that is in default or is not a valid first mortgage.

9. Neither the Related Party, nor any of its directors, officers or employees participates in the formulation of investment decisions made on behalf of, or advice given to, the Fund by the Portfolio Advisor. In all circumstances, the decisions to purchase mortgages for the Fund's portfolio from the Related Party are made based on the judgement of responsible persons uninfluenced by considerations other than the best interests of the Fund.

10. Section 4.2 of NI 81-102 prohibits a mutual fund from purchasing a security from or selling a security to an associate or affiliate of the manager, portfolio adviser or trustee of the mutual fund.

11. The Fund is prohibited by section 4.2 of NI 81-102 from purchasing mortgages from or selling mortgages to the Related Party.

12. The Fund is not able to rely on the exemption contained in paragraph 4.3(1) of NI 81-102 because purchases of mortgages will not be made on an exchange as required by paragraph 4.3(1) of NI 81-102.

13. The Fund is not be able to rely on the exemption contained in paragraph 4.3(2) of NI 81-102 because the mortgages will not be purchased from another mutual fund.

14. The provisions of National Policy Statement No. 29 -- Mutual Funds Investing in Mortgages (NP 29) set out guidelines relating to the acquisition of mortgages by a mutual fund from lending institutions with whom such fund does not deal at arm's length and provide certain protections to the investing public.

15. The IRC of the Fund will consider the policies and procedures of the Filer and will provide its approval on whether the proposed transactions in mortgages achieve a fair and reasonable result for the Fund in accordance with section 5.2(2) of NI-81-107.

16. To the extent that the Fund is purchasing mortgages from, or selling mortgages to, the Related Party, this fact is set out, and will continue to be set out, in the annual information form of the Fund.

Decision

Each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Makers with the jurisdiction to make the decision has been met.

The decision of the Decision Makers is that the Requested Relief is granted on the conditions that:

(a) the purchase or sale is consistent with, or is necessary to meet, the investment objective of the Fund;

(b) the IRC of the Fund has approved the transaction in accordance with section 5.2(2) of NI 81-107;

(c) the Filer, as manager of the Fund, complies with section 5.1 of NI 81-107;

(d) the Filer, as manager of the Fund, and the IRC of the Fund comply with section 5.4 of NI 81-107 for any standing instructions the IRC provides in connection with the transactions;

(e) the Fund keeps the written records required by section 6.1(2)(g) of NI 81-107; and

(f) the mortgages are acquired from the Related Party or sold to the Related Party in accordance with NP 29 (or any successor policy or instrument) and disclosed in accordance with NP29 (or any successor policy or instrument), including disclosure through inclusion in a document incorporated by reference into the prospectus of the Fund.

Desjardins Global Asset Management Inc. - MRRS Decision

Headnote

Mutual Reliance Review System for Exemptive Relief Applications -- Relief granted to permit portfolio managers, on behalf of certain funds, to purchase and sell mortgages from and to affiliates of the portfolio manager -- relief issued on conditions that include IRC approval and valuation in accordance with NP 29.

Applicable Legislative Provisions

Securities Act (Ontario), ss. 118(2)(b), 121(2)(a)(ii).

June 6, 2008

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ALBERTA, BRITISH COLUMBIA, ONTARIO, QUÉBEC,

NEW-BRUNSWICK, NEWFOUNDLAND AND

LABRADOR, NOVA SCOTIA AND SASKATCHEWAN

(the Jurisdictions)

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

DESJARDINS GLOBAL ASSET MANAGEMENT INC.

(the Filer)

MRRS DECISION DOCUMENT

Background

The local securities regulatory authority or regulator (the Decision Maker) in each of the Jurisdictions has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) for an exemption from:

the prohibition contained in the Legislation against a portfolio manager knowingly causing an investment portfolio managed by it to buy or sell securities of any issuer from or to the account of a responsible person, any associate of the responsible person or the portfolio manager in connection with the purchase and sale of mortgages between a Related Party (as defined below) and the Funds (as defined below) (the Requested Relief).

Under the Mutual Reliance Review System for Exemptive Relief Application (MRRS):

(a) the Autorité des marches financiers (AMF) is the principal regulator for this application: and

(b) this MRRS decision document (Decision) represents the decision of each Decision Maker.

Definitions

Defined terms contained in National Instrument 14-101 Definitions (NI 14-101) have the same meaning in this Decision unless they are otherwise defined in this Decision. The following additional terms shall have the following meanings:

"Manager" means Fédération des caisses Desjardins du Québec;

"NI 81-107" means National Instrument 81-107 Independent Review Committee for Investment Funds; and

"Related Party" means Fiducie Desjardins inc., Fédération des Caisses Desjardins du Québec and its affiliates.

Representations

This decision is based on the following facts represented by the Filer.

1. The Filer is the portfolio manager of Desjardins Short-Term Income Fund (the Fund). Fédération des caisses Desjardins du Québec is the manager of the Fund and Desjardins Trust Inc. is the trustee of the Fund.

2. The Fund has an investment objective that permits the Fund to invest in mortgages.

3. The Fund is an open-end mutual fund, organized as a trust, and is a reporting issuer under the Legislation of each of the Jurisdictions.

4. The Filer has appointed an independent review committee (IRC) under NI 81-107 for the Fund.

5. The Fund has appointed the Filer to provide portfolio management and investment advisory services. As portfolio manager of the Fund, the Filer is a "responsible person" as defined in the Legislation.

6. The Related Party is an associate or affiliate of the Fund's manager, portfolio manager and trustee. The Fund may purchase the mortgages for its portfolio from such Related Party.

7. The Related Party and the Manager have agreed to repurchase, or cause to be repurchased, from the Fund any mortgage the Fund has purchased from them that is in default or is not a valid first mortgage.

8. Neither the Related Party, nor any of its directors, officers or employees participates in the formulation of investment decisions made on behalf of, or advice given to, the applicable Fund by the Filer, and in circumstances where the Related Party holds mortgages beneficially on behalf of the Filer, no director, officer or employee actively involved in the formulation of investment decisions for the Fund by the Filer is involved in the mortgage business of the Related Party. In all circumstances, the decisions to purchase mortgages for a Fund's portfolio from a Related Party are made based on the judgement of responsible persons uninfluenced by considerations other than the best interests of the Fund.

9. The Filer and its Related Party are "affiliates" within the meaning of the Legislation and accordingly, the Filer is deemed to own securities beneficially owned by the Related Party.

10. The Filer is prohibited under the Legislation from purchasing or selling on behalf of the Fund, the securities of any issuer from or to its own account. Accordingly, the Fund is prohibited from purchasing mortgages from, or selling mortgages to, the Related Party, as such mortgages are deemed to be beneficially owned by the Filer.

11. NI 81-107 provides an exemption from the inter-fund self-dealing investment prohibitions, as defined under NI 81-107, to permit trades in securities between funds. NI 81-107 does not, however, provide an exemption for principal trading of the type contemplated by the Requested Relief.

12. The provisions of National Policy Statement No. 29 -- Mutual Funds Investing in Mortgages (NP 29) set out guidelines relating to the acquisition of mortgages by a mutual fund from lending institutions with whom such fund does not deal at arm's length and provide certain protections to the investing public. The Filer acquired mortgages from the Related Party on behalf of the Fund in accordance with NP 29. The Filer will only acquire mortgages from the Related Party in accordance with NP 29 under the Requested Relief.

13. The IRC of the Fund will consider the policies and procedures of the Filer and will provide its approval on whether the proposed transactions in mortgages achieve a fair and reasonable result for the Fund in accordance with section 5.2(2) of NI-81-107.

14. To the extent that the Fund is purchasing mortgages from, or selling mortgages to, a Related Party, this fact is set out, and will continue to be set out, in the annual information form of the Fund.

Decision

Each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Makers with the jurisdiction to make the decision has been met.

The decision of the Decision Makers under the Legislation is that the Requested Relief is granted, provided that

(a) the purchase or sale is consistent with, or is necessary to meet, the investment objective of the Fund;

(b) the IRC of the Fund has approved the transaction in accordance with section 5.2(2) of NI 81-107;

(c) the Manager of the Fund, complies with section 5.1 of NI 81-107;

(d) the Manager of the Fund and the IRC of the Fund comply with section 5.4 of NI 81-107 for any standing instructions the IRC provides in connection with the transactions;

(e) the Fund keeps the written records required by section 6.1(2)(g) of NI 81-107;

(f) the mortgage are acquired from the Related Party or sold to the Related Party in accordance with NP 29 (or any successor policy or instrument) and disclosed in accordance with NP 29 (or any successor policy or instrument).

BW Founders Holdco Inc.

Headnote

Multilateral Instrument 11-102 Passport System and National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Exemption from the dealer registration and prospectus requirements for the issue and trade of securities of an issuer to and among employees, executive officers and consultants of a limited partnership and directors of the general partner of the limited partnership -- The issuer's only business is to hold an interest in the limited partnership; purchasers are limited to individuals closely connected to and whose interests are aligned with the business of the limited partnership; information relating to the limited partnership will be provided to purchasers prior to the purchase of the issuer's securities -- Relief granted subject to certain terms and conditions, including the requirement to provide documentation relating to the limited partnership and resale restrictions.

Applicable Legislative Provisions

Securities Act, R.S.O 1990, c.,S.5 as am., ss. 25, 53, 74(1).

May 23, 2008

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

NOVA SCOTIA AND ONTARIO

(the "Jurisdictions")

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

BW FOUNDERS HOLDCO INC.

(the "Filer")

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (the "Decision Maker") has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the "Legislation") that the issue and trade of common shares of the Filer (the "Common Shares") to and among employees, executive officers and consultants of Bluewave Energy Limited Partnership (the "Partnership"), directors of BW GP Inc., the general partner of the Partnership, and permitted assigns thereof, as defined in section 2.22 of National Instrument 45-106 Prospectus and Registration Exemptions (collectively, the "Qualified Persons"), are exempt from the dealer registration requirement and the prospectus requirement (the "Exemption Sought");

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):

(a) the Nova Scotia Securities Commission is the principal regulator for this application;

(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System ("MI 11-102") is intended to be relied upon in Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Prince Edward Island, Saskatchewan, Quebec, the Yukon, Northwest Territories and Nunavut; and

(c) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filer:

1. The Filer is formed under the laws of Ontario and is authorized to issue an unlimited number of Common Shares and an unlimited number of preferred shares.

2. The Filer has its head office located in Nova Scotia.

3. The Filer is not and has no intention of becoming a reporting issuer in any jurisdiction in Canada. The Filer is not in default of securities legislation in any jurisdiction of Canada.

4. The Partnership is formed under the laws of Manitoba and is not a reporting issuer in any jurisdiction of Canada.

5. The Filer is one of six limited partners of the Partnership, which conducts the business of selling and distributing heating fuel and other light oils and related products and services to residential, commercial and industrial customers in locations across Canada (the "Business"). The other five limited partners, and the Partnership's general partner, are controlled by an institutional investor.

6. The securities of the Filer are held by management and employees of the Partnership and a small number of third party investors. The vast majority of the shares of the Filer held by these shareholders were issued prior to the investment by the institutional investor when the Filer was the actual operating business. The remaining small number of shares of the Filer issued since that date are held by shareholders who acquired their shares through private placement exemptions (private issuer and accredited investor).

7. Prior to the organization of the Partnership, the Business was operated by the Filer and the employees of the Business were employed by the Filer. The Business, together with its employees, assets and liabilities, was contributed to the Partnership by the Filer for tax and other structural reasons in connection with a financing of the Business by the institutional investor in which the institutional investor created and acquired control of the Partnership.

8. Following the contribution of the Business to the Partnership, the Filer is now a holding corporation and its only asset is the ownership of an approximately 21% limited partnership interest in the Partnership. The Filer conducts no business activities other than those relating to its ownership of a limited partnership interest in the Partnership.

9. Following the contribution of the Business to the Partnership by the Filer, the employees and executive officers of the Filer became employees and executive officers of the Partnership. The Filer and the Partnership wish to provide the employees, executive officers and consultants of the Partnership with the opportunity to make an indirect investment in the Partnership through their ownership of Common Shares (the employees, executive officers and consultants of the Partnership, collectively with the directors of BW GP Inc., the "Employees"). Through the Common Shares, the Employees will indirectly hold an interest in the Business and the Partnership, their employer.

10. It would be a condition of any issuance of Common Shares to Employees or their permitted assigns that the entire gross proceeds received by the Filer in consideration for the Common Shares be invested by the Filer in an equal number of Class A Units of the Partnership, thereby ensuring a direct relationship between the investment by the Employees in Common Shares and the underlying business of the Partnership.

11. The purchase price of the Common Shares will be determined by the board of directors of the Filer and the Partnership in their reasonable judgment. The price will be disclosed to all Employees by way of an internal communication prior to any purchase. All purchases will be at this same price.

12. Purchasers of Common Shares will be provided with copies of the Unanimous Shareholders' Agreement ("the "Shareholders' Agreement") and Voting Trust Agreement of the Filer to which they will become party upon acquiring Common Shares, as well as a copy of the limited partnership agreement of the Partnership (collectively, the "Documents"). On an on-going basis, holders of Common Shares will receive an update regarding the Partnership's financial performance on a quarterly basis and copies of the Partnership's audited annual financial statements (excluding notes) and the Filer's unaudited annual financial statements on an annual basis. The Filer does not prepare its own audited financial statements as its sole assets and activity is holding the Class A Units of the Partnership. In addition, the Filer and the Partnership will provide holders of Common Shares with a semi-annual determination of the fair market value (as determined in their reasonable judgment) of the Common Shares.

13. The Filer's tax advisers have advised that the participation of Employees through the Filer was structured to achieve a few tax-related objectives including the following:

(a) An employer that is a limited partnership is not able to provide employees with stock-based compensation that benefits from the favourable tax treatment afforded employee stock options (only corporations and mutual fund trusts are able to satisfy the conditions imposed under the Income Tax Act). Accordingly, employee participation through the Filer was intended to facilitate the design of tax-efficient compensation plans for certain employees;

(b) Capital gains realized on the sale of limited partnership interests do not qualify for the lifetime capital gains exemption of $750,000 provided to Canadian-resident individuals. However, capital gains realized on the sale of Canadian-controlled private corporations that carry on their business activities through a limited partnership may qualify for the exemption, depending on the circumstances. Accordingly, the interposition of the Filer better positions the Employees to benefit from this exemption; and

(c) The limited partnership agreement of the Partnership provides that the partners will be paid cash distributions to enable the payment of tax liabilities, calculated using corporate income tax rates. Because the rate of tax applicable to income earned by individuals is frequently higher than the corporate income tax rate, Employees who were directly partners in the Partnership could be liable to pay income tax that is greater than the cash distributions paid to them by the Partnership. The direct participation by Employees in the Partnership could, depending on an Employee's circumstances, create economic hardship;

14. The Employees are currently located only in the provinces where the Partnership operates. These provinces, and the number of Employees currently located in each of these provinces, are set out below:

Alberta:	39
New Brunswick:	6
Nova Scotia:	156
Ontario:	106
PEI:	13
Quebec:	1

15. The decision to invest in Common Shares by a permitted assign of an Employee will be made by the Employee who is related to that permitted assign.

16. The directors of BW GP Inc. are, and future directors of BW GP Inc. will be, highly skilled individuals with experience and expertise in the Business who, at the time of their investment in the Common Shares:

(a) spend a significant amount of time and devote significant attention to the business and affairs of the Partnership;

(b) are knowledgeable about the business and affairs of, and the investments made by, the Partnership; and

(c) are capable of evaluating the merits and risks of an investment in the Partnership through the Filer;

17. Investment in the Common Shares by each Employee is voluntary. No Employee will be induced to invest in the Common Shares by expectation of employment or continued employment of the Employee with the Partnership or BW GP Inc.

18. Under the terms of the Shareholders' Agreement, the Common Shares may not be transferred, except under certain specified conditions, including a transfer to another Qualified Person at such times and on such terms as are established by the board of directors of the Filer and the Partnership; provided that all Common Shares transferred during the same period shall be transferred at the same price per Common Share (which price shall equal the fair market value of a Common Share then in effect as determined by the board of directors of the Filer and the Partnership in their reasonable judgment).

19. There is currently no market for the Common Shares and, other than with respect to any sales and purchases between Qualified Persons as contemplated herein, no such market is expected to develop.

20. The Shareholders' Agreement provides that the business of the Filer shall be restricted to owning the Partnership's units and exercising its rights and complying with its obligations as a limited partner of the Partnership. The Filer is closely related to the Partnership and many of the current shareholders of the Filer would qualify as an Employee under this decision.

21. The Filer provides a mechanism to incentivize Employees who are critical to the success of the Business and the Partnership and to enable them to benefit from their efforts in building and adding value to the Business.

Decision

Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.

The decision of the Decision Makers under the Legislation is that the Exemption Sought is granted provided that:

(a) the Employee is not induced to purchase the Common Shares by expectation of employment or continued employment of the Employee with the Partnership or BW GP Inc.;

(b) there is compliance with paragraph 10 of this decision;

(c) the sole business of the Filer is restricted to owning units of the Partnership and exercising its rights and complying with its obligations as a limited partner of the Partnership;

(d) prior to the issuance of or trade in any Common Shares to a Qualified Person, the Filer will deliver to the Qualified Person:

(i) a copy of this decision; and

(ii) a copy of the Documents;

(e) the Filer is not a reporting issuer in any jurisdiction of Canada;

(f) the price of the Common Shares is established by a generally applicable formula contained in the Shareholders' Agreement to which the transferee is or will become a party; and

(g) the first trade in any Common Shares by a person or company who acquires the Common Shares under this decision in a jurisdiction of Canada shall be deemed to be a distribution or a primary distribution to the public under the securities legislation of the jurisdiction.

Provident Investment Counsel, LLC

Applicant registered as an international adviser is exempted from the electronic funds transfer requirement pursuant to subsection 6.1(1) of National Instrument 31-102 National Registration Database and activity fees contemplated under section 4.1 of Ontario Securities Commission Rule 13-502 Fees is waived in respect of this discretionary relief, subject to certain conditions. Applicant has provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport System is intended to be relied upon in Manitoba.

Rules Cited

Multilateral Instrument 11-102 Passport System (2008) 31 OSCB 1019, s. 4.7(1).

National Instrument 31-102 -- National Registration Database (2007) 30 OSCB 5430, s. 6.1.

Ontario Securities Commission Rule 13-502 -- Fees (2003) 26 OSCB 867, ss. 4.1, 6.1.

June 19, 2008

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO

(the Jurisdiction)

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

PROVIDENT INVESTMENT COUNSEL, LLC

(the Filer)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of Ontario (the Legislation), for relief pursuant to the subsection 6.1(1) of National Instrument 31-102 National Registration Database (NI 31-102) granting the Filer relief from the electronic funds transfer requirement contemplated under NI 31-102 (the EFT Requirement) and for relief from the fee requirement contemplated under the securities legislation of each of the Jurisdictions in respect of this discretionary relief (the Exemption Sought).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a) the Ontario Securities Commission is the principal regulator for this application; and

(b) the Filer has provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in Manitoba.

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filer:

1. The Filer is incorporated under the laws of Massachusetts in the United States of America. The Filer is not a reporting issuer. The head office of the Filer is located in Pasadena, California, United States of America.

2. The connecting factor(s) used to identify Ontario as the principal regulator are: (1) location of clients, and (2) location of Canadian counsel.

3. The Filer is registered as an investment adviser with the United States Securities and Exchange Commission, and is authorised with the Irish Financial Services Regulatory Authority.

4. The Filer is registered under the Legislation as an adviser in the category of international adviser.

5. The Filer is not in default of securities legislation in any jurisdiction.

6. NI 31-102 requires that all registrants in Canada enrol with CDS Inc. (CDS) and use the national registration database (NRD) to complete certain registration filings. As part of the enrolment process, registrants are required to open an account with a member of the Canadian Payments Association from which fees may be paid with respect to NRD by electronic pre-authorized debit to satisfy the EFT Requirement.

7. The Filer anticipates encountering difficulties in setting up a Canadian based bank account for purposes of fulfilling the EFT Requirement.

8. The Filer confirms that it is not registered in, and does not intend to register in, another category to which the EFT Requirement applies and that it has applied for relief from the EFT Requirement in each jurisdiction in which is registered.

9. Staff of the Canadian Securities Administrators has indicated that, with respect to applications from international dealers and international advisers (or applicants in equivalent categories of registration) for relief from the EFT Requirement, it is prepared to recommend waiving the fee normally required to accompany applications for discretionary relief (the Application Fee).

10. For Ontario registrants, the requirement for payment of the Application Fee is set out in section 4.1 of Rule 13-502.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that the Exemption Sought is granted provided that:

1. the Filer makes acceptable alternative arrangements with CDS for the payment of NRD fees and makes such payment within ten (10) business days of the date of the NRD filing or payment due date;

2. the Filer pays its participation fee for each jurisdiction to the appropriate regulators by cheque, draft, money order or other acceptable means at the time of filing its application for annual renewal, which shall be no later than the first day of December in each year;

3. the Filer pays any applicable activity fees, or other fees that the legislation of each jurisdiction requires it to pay to the appropriate regulators, by cheque, draft, money order or other acceptable means at the appropriate time;

4. the Filer is not registered in any other Canadian jurisdiction in another category to which the EFT Requirement applies, or has received an exemption from the EFT Requirement in each jurisdiction to which the EFT Requirement applies; and

5. the Filer submits a similar application in any other Canadian jurisdiction where it becomes registered as an international dealer or international adviser or in an equivalent registration category.

It is the further decision of the principal regulator that the Application Fee will be waived in respect of the application for this Decision.

XTM eXchange Split Corp.

Headnote

NP 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- exemption from National Instrument 81-106 Investment Fund Continuous Disclosure granted to permit a fund that uses specified derivatives to calculate its NAV twice a month subject to certain conditions -- relief needed from the requirement that an investment fund that uses specified derivatives must calculate its NAV daily.

Applicable Legislative Provisions

National Instrument 81-106 Investment Fund Continuous Disclosure, s. 14.2(3)(b).

June 5, 2008

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO

(the Jurisdiction)

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

XTM EXCHANGE SPLIT CORP.

(the Filer)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for an exemption from the requirements contained in Section 14.2(3)(b) of National Instrument 81-106 -- Investment Fund Continuous Disclosure (NI 81-106) to calculate net asset value at least once every business day (the Exemption Sought).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a) the Ontario Securities Commission is the principal regulator for this application, and

(b) the Filer has provided notice that Section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in Alberta, British Columbia, Quebec, Nova Scotia, New Brunswick, Saskatchewan, Newfoundland and Labrador, Manitoba, Prince Edward Island, Yukon Territory, Northwest Territories and Nunavut.

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filer:

At the time of this decision, the Filer is not in default of securities legislation in any of the jurisdictions of Canada.

The Filer

1. The Filer is a mutual fund corporation established under the laws of the Province of Ontario on April 29, 2008 and was created to provide exposure to the common shares of TMX Group Inc. (TMX), which is the company that resulted from the combination effective May 1, 2008 of TSX Group Inc. and Montréal Exchange Inc., through two classes of securities. The Filer's manager is Quadravest Inc. (the Manager), and its portfolio adviser is Quadravest Capital Management Inc. (the Investment Manager). The Manager's head office is located in Toronto, Ontario.

The Offering

2. The Filer will make an offering (the Offering) to the public, on a best efforts basis, of priority equity shares (Priority Equity Shares) at a price of $10.00 per Priority Equity Share and class A shares (Class A Shares) at a price of $10.00 per Class A Share, in each of the provinces of Canada. The Priority Equity Shares and the Class A Shares are offered separately, but will be issued only on the basis that there will be an equal number of Priority Equity Shares and Class A Shares (together, a Unit) issued.

3. A preliminary prospectus for the Filer dated April 30, 2008 (the Preliminary Prospectus) has been filed with the securities regulatory authority in each of the Provinces of Canada under SEDAR Project No. 1259638.

4. The Priority Equity Shares and Class A Shares are expected to be listed and posted for trading on the Toronto Stock Exchange (the TSX). An application for conditional listing approval has been made by the Filer to the TSX.

5. The Filer's investment objective is to seek capital appreciation by investing the net proceeds of the Offering directly or through XTM eXchange Holding Partnership in the common shares of TMX.

The Priority Equity Shares and Class A Shares

6. Priority Equity Shares and Class A Shares may be surrendered at any time for retraction and will be retracted on a monthly basis on the last business day of each month (each such day a Retraction Date) provided that such Priority Equity Shares and Class A Shares are surrendered for retraction not less than 20 business days prior to the Retraction Date. Payment for any Priority Equity Shares or Class A Shares so retracted will be made within 15 days of the applicable Retraction Date (Retraction Payment Date). If a holder of Priority Equity Shares or Class A Shares makes such surrender after 5:00 p.m. (Eastern Standard Time) on the 20th business day immediately preceding a Retraction Date, the Priority Equity Shares and Class A Shares will be retracted on the Retraction Date in the following month and the holder will receive payment for the retracted shares as of the Retraction Payment Date in respect of the Retraction Date in the following month.

7. Commencing in 2009, shareholders who concurrently retract a Priority Equity Share and a Class A Share on the Retraction Date in the month of July in each year will be entitled to receive an amount equal to the net asset value per Unit calculated as of that date.

8. Holders of Priority Equity Shares whose shares are surrendered for retraction will be entitled to receive a price per share equal to the lesser of (i) $10.00; and (ii) 96% of the net asset value per Unit determined as of the Retraction Date less the cost to the Filer of the purchase of a Class A Share in the market for cancellation. Holders of Class A Shares whose shares are surrendered for retraction will be entitled to receive a retraction price per share equal to 96% of the net asset value per Unit determined as of the Retraction Date less the cost to the Filer of the purchase of a Priority Equity Share in the market for cancellation.

Calculation of Net Asset Value

9. Under Section 14.2(3)(b) of NI 81-106, an investment fund that is a reporting issuer is generally required to calculate the net asset value per security of the fund on at least a weekly basis. Furthermore, an investment fund that uses or holds specified derivatives, such as the Filer intends to do, must calculate its net asset value per security on a daily basis.

10. The Filer will calculate its net asset value as of each Retraction Date and as of the fifteenth day of each month or if the fifteenth day of each month is not a business day, then the immediately preceding business day (each, a Valuation Date) by subtracting the aggregate amount of the Filer's liabilities from its total assets.

11. The net asset value per Unit is the amount obtained by dividing the net asset value of the Filer as of a particular Valuation Date by the total number of Units outstanding on that date.

12. The Preliminary Prospectus discloses, and the final prospectus will disclose, that the basic net asset value per Unit will be made available to shareholders by the Filer on the Filer's website at www.XTMeXchange.com and will be available to shareholders upon request.

13. Holders of Priority Equity Shares and Class A Shares will have the opportunity to trade their shares on the TSX and as such do not have to rely on the redemption features to provide liquidity for their shares.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that the Exemption Sought is granted for so long as:

(a) the Priority Equity Shares and Class A Shares are listed on the TSX; and

(b) the Filer calculates its net asset value per Unit as of each Retraction Date and as of the fifteenth day of each month or if the fifteenth day of each month is not a business day, then the immediately preceding business day.

Penn West Energy Trust et al. - MRRS Decision

Headnote

Mutual Reliance Review System for Exemptive Relief Applications -- Application for exemptive relief to permit issuer and underwriter, acting as agent, to make "at-the-market" prospectus distributions (ATM distributions) to purchasers through facilities of Toronto Stock Exchange (TSX) -- issuer proposing to enter into equity distribution agreement with agent and U.S. agent relating to ATM distributions through TSX and through a U.S. exchange -- ATM distributions to be made pursuant to shelf prospectus procedures in Part 9 of NI 44-102 Shelf Distributions -- issuer will issue a press release and file agreement on SEDAR -- issuer will file in connection with ATM distribution (i) a shelf prospectus in the jurisdictions, (ii) a registration statement on Form F-10 with the SEC under the multijurisdictional disclosure system, and (iii) a prospectus supplement describing terms of equity distribution agreement -- prospectus qualifies distribution of securities by issuer to purchasers who purchase securities from the issuer pursuant to an ATM distribution -- application made in all jurisdictions as equity distribution agreement may result in sales by issuer to purchasers resident in all jurisdictions -- application for relief from prospectus delivery requirement in subsection 71(1) of the Securities Act (Ontario) (the Act) and relief from certain prospectus form requirements (including requirements which prescribe language describing purchasers' statutory rights) -- delivery of prospectus not practicable in circumstances of an ATM distribution as agent will generally be unaware of identity of purchasers -- ATM distribution model premised on concept of "constructive delivery" (access equals delivery) of prospectus to purchasers as a result of filing of prospectus on SEDAR -- relief from prospectus delivery requirement has effect of removing two-day right of withdrawal in subsection 71(2) of the Act and remedies of rescission or damages for non-delivery of the prospectus in 133 of the Act -- remedies a purchaser of securities may have against issuer or agent for rescission or damages if prospectus contains a misrepresentation remain unaffected by non-delivery of prospectus and the MRRS decision -- relief granted on certain terms and conditions including:

• issuer may issue and sell securities in an amount not to exceed 10% of aggregate market value of outstanding securities in accordance with restrictions contained in Part 9 of NI 44-102;

• number of securities sold on TSX pursuant to ATM distribution on any trading day may not exceed 25 per cent of the trading volume of the securities on the TSX on that day;

• prospectus certificate language modified to ensure that, at the time of each sale of securities pursuant to an ATM distribution, prospectus will contain full, true and plain disclosure of all material facts relating to the issuer and securities being distributed;

• agent is registered as an investment dealer in all jurisdictions and will sign prospectus certificate;

• issuer will file on SEDAR a report disclosing number and average price of securities distributed over TSX by issuer pursuant to the prospectus filed in connection with ATM distribution as well as gross proceeds, commission and net proceeds within seven calendar days after end of month with respect to sales during prior month;

• issuer will also disclose number and average price of securities sold under the ATM distribution as well as gross proceeds, commission and net proceeds in the ordinary course in its annual and interim financial statements and MD&A filed on SEDAR;

• prospectus will contain language clearly describing impact of decision on purchasers' statutory rights; and

• decision will terminate 25 months after the issuance of a receipt for the shelf prospectus.

Applicable Ontario Statutory Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 71(1), 71(2), 133, 147.

Applicable Ontario Rules

National Instrument 44-101 Short Form Prospectus Distributions, Part 8; and Item 20 of Form 44-101F1.

National Instrument 44-102 Shelf Distributions, Part 9; and s. 1.1 of Appendix A.

Citation: Penn West Energy Trust, 2008 ABASC 272

May 12, 2008

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ALBERTA, ONTARIO, BRITISH COLUMBIA,

SASKATCHEWAN, MANITOBA, QUÉBEC,

NEW BRUNSWICK, NOVA SCOTIA,

PRINCE EDWARD ISLAND AND

NEWFOUNDLAND AND LABRADOR

(the Jurisdictions)

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

PENN WEST ENERGY TRUST (the Issuer),

FIRSTENERGY CAPITAL CORP. (FCC),

SG AMERICAS SECURITIES, LLC (SGAS)

(together with the Issuer and FCC, the Filers)

MRRS DECISION DOCUMENT

Background

1. The local securities regulatory authority or regulator (the Decision Maker) in each of the Jurisdictions has received an application (the Application):

(a) from FCC for a decision under the securities legislation (the Legislation) in each Jurisdiction that the requirement that a dealer not acting as agent of the purchaser who receives an order or subscription for a security offered in a distribution to which the prospectus requirement applies deliver to the purchaser or its agent the latest prospectus and any amendment to the prospectus (the Prospectus Delivery Requirement), does not apply to FCC or any other Toronto Stock Exchange (TSX) participating organization acting as selling agent for FCC (such other TSX participating organization an FCC Selling Agent) in connection with the at-the-market distribution (the ATM Distribution) as defined in National Instrument 44-102 Shelf Distributions (NI 44-102) made by the Issuer pursuant to the Equity Distribution Agreement (as defined below);

(b) from the Issuer for a decision under the Legislation in each Jurisdiction that the requirement to include in a prospectus:

(i) a certificate of the Issuer in the form specified in section 1.1 of Appendix A to NI 44-102; and

(ii) the statement respecting purchasers' statutory rights of withdrawal and remedies of rescission or damages in the form prescribed by item 20 of Form 44-101F1;

(the Prospectus Form Requirements) do not apply to a prospectus filed in connection with the ATM Distribution; and

(c) from the Filers for a decision under the Legislation in each Jurisdiction that the Application and this decision (the Confidential Material) be kept confidential and not be made public until the earlier of: (i) the date on which the Filers and Penn West Petroleum Ltd. (Penn West) enter into the Equity Distribution Agreement; (ii) the date the Filers advise the Decision Makers that there is no longer any need for the Confidential Material to remain confidential; and (iii) the date that is 90 days after the date of this decision.

2. Under the Mutual Reliance Review System for Exemptive Relief Applications:

(a) the Alberta Securities Commission (the Commission) is the principal regulator for the Application; and

(b) this MRRS decision document evidences the decision of each Decision Maker.

Interpretation

3. Defined terms contained in National Instrument 14-101 Definitions have the same meaning in this decision unless they are defined in this decision.

Representations

The Issuer

4. The Issuer is an open-end unincorporated investment trust established under the laws of the Province of Alberta. The principal office of the Issuer is located in Calgary, Alberta.

5. The Issuer owns, directly or indirectly, all of the outstanding common shares of Penn West, a corporation incorporated under the Business Corporations Act (Alberta).

6. The Issuer is a reporting issuer or the equivalent under the Legislation of the Jurisdictions, other than Nova Scotia, Prince Edward Island and Newfoundland and Labrador, and is in compliance in all material respects with the applicable requirements of the Legislation of such Jurisdictions.

7. Trust units (Units) of the Issuer are listed on the TSX and the New York Stock Exchange (NYSE).

FCC and SGAS

8. FCC is based in Calgary, Alberta and is registered as an investment dealer under the Legislation of all of the Jurisdictions.

9. SGAS, a limited liability company formed under the laws of the State of Delaware, is a broker-dealer registered with the SEC under the 1934 Act and a member of the Financial Industry Regulatory Authority. SGAS is part of the corporate and investment banking arm of Société Générale, a French bank.

Proposed ATM Distribution

10. The Filers and Penn West are proposing to enter into an equity distribution agreement (the Equity Distribution Agreement) relating to an ATM Distribution by the Issuer pursuant to the shelf prospectus procedures prescribed by Part 9 of NI 44-102.

11. Prior to making an ATM Distribution, the Issuer will have filed in connection with the ATM Distribution (i) a shelf prospectus (the Shelf Prospectus) in the Jurisdictions, (ii) a registration statement on Form F-10 with the SEC under the multijurisdictional disclosure system, and (iii) a prospectus supplement describing the terms of the Equity Distribution Agreement (the Prospectus Supplement), both in the Jurisdictions and with the SEC.

12. The Issuer will issue a news release regarding entering into the Equity Distribution Agreement and will file the agreement on SEDAR. The news release will indicate that the Shelf Prospectus and the Prospectus Supplement have been filed on SEDAR and specify where and how purchasers may obtain a copy. A copy of the news release will also be posted on the Issuer's website.

13. Under the proposed Equity Distribution Agreement, the Issuer may issue and sell Units in an amount not to exceed 10% of the aggregate market value of the outstanding Units calculated in accordance with Section 9.2 of NI 44-102.

14. The Issuer will sell Units in Canada through methods constituting an ATM Distribution, including sales made on the TSX through FCC, as underwriter, directly or through an FCC Selling Agent and, in the United States, sales made directly on the NYSE through SGAS, as underwriter.

15. FCC will act as sole underwriter on behalf of the Issuer in connection with the sale of the Units on the TSX and will be the sole entity paid an underwriting fee or commission by the Issuer in connection with such sales. FCC will sign an underwriter's certificate in the Prospectus Supplement filed on SEDAR. FCC will effect the ATM Distributions on the TSX either itself or through an FCC Selling Agent. If the sales are effected through an FCC Selling Agent, the FCC Selling Agent will be paid a seller's commission for effecting the trades on FCC's behalf. A purchaser's rights and remedies under the Legislation against FCC as underwriter of an ATM Distribution through the TSX will not be affected by a decision to effect the sale directly or through an FCC Selling Agent.

16. The number of Units sold on the TSX pursuant to the ATM Distribution on any trading day will not exceed 25% of the trading volume of the Units on the TSX on that day.

17. The Equity Distribution Agreement will provide that, at the time of each sale of Units pursuant to an ATM Distribution, the Issuer will make a representation to the FCC that the prospectus contains full, true and plain disclosure of all material facts relating to the Issuer and the Units being distributed. The Issuer would therefore be unable to proceed with sales pursuant to an ATM Distribution when it is in possession of undisclosed information that would constitute a material fact or a material change in respect of the Units.

18. If, after the Issuer delivers a sell notice to the FCC, the sale of Units specified in the notice, taking into consideration prior sales, would constitute a material fact or material change, the Issuer would have to suspend sales under the Equity Distribution Agreement until either: (i) it had filed a material change report or amended the Shelf Prospectus or Prospectus Supplement; or (ii) circumstances had changed so that the sales would no longer constitute a material fact or material change.

19. In determining whether the sale of the number of Units specified in the sell notice would constitute a material fact or material change, the Issuer will take into account a number of factors, including, without limitation: (i) the parameters of the sell notice including the number of Units proposed to be sold; (ii) the percentage of the outstanding Units of that class that number represents; (iii) trading volume and volatility of Units; (iv) recent developments in the business, affairs and capital structure of the Issuer; and (v) prevailing market conditions generally.

20. FCC will monitor closely the market's reaction to trades made on the TSX under the ATM Distribution in order to evaluate the likely market impact of future trades. FCC has experience and expertise in managing sell orders to limit downward pressure on the Unit price. If FCC has concerns as to whether a particular sell order placed by the Issuer may have a significant effect on the market price of the Units, FCC will recommend against effecting the trade at that time. It is in the interest of both the Issuer and FCC to minimize the market impact of sales under the ATM Distribution.

21. The underwriter's certificate signed by FCC included in the Prospectus Supplement will be in the form prescribed by section 2.2 of Appendix B to NI 44-102.

Prospectus Delivery Requirement

22. Pursuant to the Prospectus Delivery Requirement, a dealer effecting the trade of Units on the TSX on behalf of the Issuer as part of an ATM Distribution is required to deliver a prospectus to all investors who purchase Units on the TSX.

23. The delivery of a prospectus is not practicable in the circumstances of an ATM Distribution as neither FCC nor an FCC Selling Agent effecting the trade will know the identity of the purchasers.

24. A purchaser is deemed to have relied upon a misrepresentation if it was a misrepresentation at the time of purchase.

Withdrawal Right

25. Pursuant to the Legislation, an agreement to purchase securities is not binding on the purchaser if a dealer receives, not later than midnight on the second day exclusive of Saturdays, Sundays and holidays, after receipt by the purchaser of the latest prospectus or any amendment to the prospectus, a notice in writing that the purchaser does not intend to be bound by the agreement of purchase (the Withdrawal Right).

26. The Withdrawal Right is not workable in the context of an ATM Distribution because the prospectus will not be delivered.

Right of Rescission or Damages for Non-Delivery

27. Pursuant to the Legislation, a purchaser of securities has a right of rescission or damages against a dealer for non-delivery of the prospectus (the Right of Action for Non-Delivery).

28. The Right of Action for Non-Delivery is not workable in the context of an ATM Distribution because the prospectus will not be delivered.

Disclosure of Securities Sold in ATM Distribution

29. The Issuer will file on SEDAR a report disclosing the number and average price of Units distributed over the TSX by the Issuer pursuant to the Shelf Prospectus and Prospectus Supplement filed in connection with the ATM Distribution as well as gross proceeds, commission and net proceeds within seven calendar days after the end of the month with respect to sales during the prior month.

30. The Issuer will also disclose the number and average price of Units sold under the ATM Distribution as well as gross proceeds, commission and net proceeds in the ordinary course in its annual and interim financial statements and MD&A filed on SEDAR.

Prospectus Form Requirements

31. Exemptive relief from the Prospectus Form Requirements for the Issuer's forward-looking certificate in the Shelf Prospectus is required to reflect that no pricing supplement will be filed subsequent to the Prospectus Supplement. Accordingly, the certificate prescribed by the Prospectus Form Requirements will be deleted and the following substituted therefore:

This short form prospectus, together with the documents incorporated in this prospectus by reference as of the date of a particular distribution of securities under this prospectus, will, as of that date, constitute full, true and plain disclosure of all material facts relating to the securities offered by this prospectus and the supplement(s) as required by the securities legislation of each Jurisdiction.

32. Exemptive relief from the Prospectus Form Requirements is required to reflect the relief from the Prospectus Delivery Requirement. Accordingly, the language prescribed by the Prospectus Form Requirements will be deleted and the following substituted therefore in the Prospectus Supplement:

Securities legislation in the Jurisdictions provides purchasers with the right to withdraw from an agreement to purchase securities and with remedies for rescission or, in some jurisdictions, revision of the price, or damages if the prospectus, prospectus supplements relating to securities purchased by a purchaser and any amendment are not delivered to the purchaser, provided that the remedies are exercised by the purchaser within the time limit prescribed by securities legislation. However, purchasers of Units under the Issuer's at-the-market distribution will not have any right to withdraw from an agreement to purchase the Units and will not have remedies of rescission or, in some jurisdictions, revision of the price, or damages for non-delivery of the Prospectus because the Prospectus relating to Units purchased by such purchaser will not be delivered as permitted under an MRRS decision document dated •, 2008.

Securities legislation in the Jurisdictions also provides purchasers with remedies for rescission or, in some jurisdictions, revision of the price, or damages if the prospectus, prospectus supplements relating to securities purchased by a purchaser and any amendment contain a misrepresentation, provided that the remedies are exercised by the purchaser within the time limit prescribed by securities legislation. Any remedies under securities legislation in the Jurisdictions that a purchaser of Units under the Issuer's at-the-market distribution may have against the Issuer or FCC for rescission or, in some jurisdictions, revision of the price, or damages if the prospectus, prospectus supplements relating to securities purchased by a purchaser and any amendment contain a misrepresentation remain unaffected by the non-delivery of the Prospectus and the MRRS decision referred to above.

Purchasers should refer to the applicable provisions of the securities legislation and the MRRS decision document referred to above for the particulars of their rights or consult with a legal adviser.

Decision

33. Each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Makers with the jurisdiction to make the decisions has been met.

34. The decision of the Decision Makers under the Legislation is that:

(a) provided that the disclosure described in sections 29, 31 and 32 is made, the Prospectus Form Requirements do not apply under the Legislation of each Jurisdiction to the prospectus of the Issuer filed in connection with the ATM Distribution;

(b) provided that the representations in sections 12, 14, 15 and 16 are complied with, the Prospectus Delivery Requirement under the Legislation of each Jurisdiction does not apply to FCC or any FCC Selling Agent and, as a result, the Withdrawal Right and the Right of Action for Non-Delivery will not apply to the ATM Distribution;

(c) the Confidential Material will be kept confidential and not be made public until the earlier of: (i) the date on which the Filers and Penn West enter into an Equity Distribution Agreement; (ii) the date the Filers advise the Decision Makers that there is no longer any need for the Confidential Material to remain confidential; and (iii) the date that is 90 days after the date of this decision; and

(d) this decision will terminate 25 months after the issuance of a receipt for the Shelf Prospectus by the Jurisdictions.

BetaPro Management Inc. and the Investments Funds Listed in Schedule "A"

Headnote

National Policy 11-203 Process For Exemptive Relief Applications in Multiple Jurisdictions -Approval granted for change of control of manager of investment funds - Current shareholder of manager acquiring additional interest in manager resulting in change of control - No changes to management or affairs of the funds and no changes to investment managers for the funds - National Instrument 81-102 Mutual Funds.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, ss. 5.5(2), 5.7(1)(a).

June 19, 2008

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF \

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

BETAPRO MANAGEMENT INC.

(the "Filer" or the "Manager")

AND

THE INVESTMENT FUNDS LISTED

IN SCHEDULE "A" (the "Funds")

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the "Legislation") for approval pursuant to subsection 5.5(2) of National Instrument 81-102 -- Mutual Funds ("NI 81-102") of a change of control of the Manager (the "Approval Sought").

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a) The Ontario Securities Commission is the principal regulator for this application; and

(b) The Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System ("MI- 11-102") is intended to be relied upon in British Columbia, Alberta, Manitoba, Saskatchewan, Quebec, New Brunswick, Newfoundland and Labrador, Nova Scotia, Prince Edward Island, Nunavut, Northwest Territories and Yukon (together with Ontario, the "Jurisdictions").

Interpretation

Defined terms contained in National Instrument 14-101 Definitions and Multilateral Instrument 11-102 have the same meaning in this decision unless they are otherwise defined in this decision.

Representations

This decision is based on the following facts represented by the Filer:

1. Jovian Asset Management Inc. ("Jovian"), a wholly-owned subsidiary of Jovian Capital Corporation ("JCC"), is incorporated under the laws of the Province of Ontario.

2. JCC is listed on the Toronto Stock Exchange and has its executive offices in Toronto, Ontario. JCC is a management company that invests in companies that operate within two primary market segments: wealth management and asset management. JCC controls the following registered dealers or advisers in Canada: T.E. Investment Counsel Inc., JovInvestment Management Inc., Leon Frazer & Associates Inc., MGI Securities Inc., Rice Financial Group Inc., and JovFunds Inc. and has approximately $15 billion of client assets ($5.8 billion in assets under management and $9.2 billion in assets under administration).

3. JCC currently owns, through Jovian, approximately 45% of the Manager. On April 1, 2008, JCC entered into a binding letter of intent with DGM Bank & Trust Inc. (the "Vendor"), a shareholder of the Manager, to acquire an additional 15% of the Manager (the "Transaction"). As a result, upon completion of the Transaction, control of the Manager will change and JCC will control approximately 60% of the Manager.

4. The Manager is the manager of the Funds. The Funds are reporting issuers, or anticipate becoming reporting issuers prior to the close of the Transaction in each of the Jurisdictions. Each Fund is a trust under the laws of Ontario.

5. No material contract of the Funds will be amended as a result of the Transaction. No officer of the Manager will be changed as a result of the Transaction. It is anticipated that a director of the Manager who is also President of the Vendor will resign from the board of the Manager shortly after the closing of the Transaction. The Transaction will not result in any other changes to the board of the Manager.

6. There will be no changes in the portfolio management of the Funds. JovInvestment Management Inc. ("JovInvestment"), a wholly-owned subsidiary of JCC, acts as the investment manager of the Funds. JovInvestment has in turn retained ProShare Advisors LLC or ProFund Advisors LLC, each being a limited liability company organized under the laws of the State of Maryland, to act as sub-advisor to the Funds. This will not change further to the Transaction.

7. Notice of the change of control was sent out to unitholders of the Funds on April 18, 2008.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that the Approval Sought is granted.

SCHEDULE "A"

JovFunds Management Inc. and Jov Canadian Equity Class

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted to allow mutual funds to short sell up to 20% of net assets, subject to certain conditions -- National Instrument 81-102 Mutual Funds.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, ss. 2.6(a), 2.6(c), 6.1(1), 19.1.

June 23, 2008

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO

(the "Jurisdiction")

and

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

JOVFUNDS MANAGEMENT INC.

(the "Filer")

AND

IN THE MATTER OF

JOV CANADIAN EQUITY CLASS

("Jov Class")

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer, on behalf of Jov Class and each mutual fund hereafter established and managed by the Filer or any of the affiliates of the Filer (the "Future Funds", and together with Jov Class, the "Funds") for a decision under the securities legislation of the Jurisdiction of the principal regulator (the "Legislation") for an exemption from the requirements in subsections 2.6(a), 2.6(c) and 6.1(1) of National Instrument 81-102 Mutual Funds ("NI 81-102") to permit each Fund to sell securities short, provide a security interest over Fund assets in connection with the short sales and deposit Fund assets with dealers as security in connection with such transactions (the "Exemption Sought").

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a) the Ontario Securities Commission is the principal regulator for this application; and

(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System ("MI 11-102") is intended to be relied upon in each of the provinces and territories of Canada (the "Jurisdictions").

Interpretation

Terms defined in NI 81-102, National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filer:

1. The Filer or an affiliate of the Filer is or will be the manager of each Fund. JovInvestment Management Inc. ("JovInvestment"), which is registered under the Securities Act (Ontario) as an advisor in the categories of investment counsel and portfolio manager, is the portfolio advisor of Jov Class. T.I.P. Wealth Manager Inc., which is registered under the Securities Act (Ontario) as an advisor in the categories of investment counsel and portfolio manager, is the sub-advisor of Jov Class and is responsible for providing portfolio management and advisory services for Jov Class.

2. The head office of the Filer is located in Toronto, Ontario.

3. Each Fund is or will be a reporting issuer in each of the provinces and territories of Canada and distributes or will distribute securities under a simplified prospectus and annual information form.

4. The investment practices of each of the Funds will comply in all respects with the requirements of Part 2 of NI 81-102, except to the extent that the Funds have received permission from the applicable securities regulatory authorities or regulators of the Jurisdictions to deviate therefrom.

5. The Filer proposes that each Fund be authorized to engage in a limited, prudent and disciplined amount of short selling. The Filer and JovInvestment are of the view that the Funds could benefit from the implementation and execution of a controlled and limited short selling strategy. This strategy would operate as a complement to the Funds' primary discipline of buying securities with the expectation that they will appreciate in market value.

6. Any short sales will be consistent with each Fund's investment objectives.

7. In order to effect a short sale, a Fund will borrow securities from either its custodian or a dealer (in either case, the "Borrowing Agent"), which Borrowing Agent may be acting either as principal for its own account or as agent for other lenders of securities.

8. The simplified prospectus and annual information form of a Fund will disclose the proposed use of short selling by a Fund and the specific risks related to short selling.

9. Each Fund will implement the following requirements and controls when conducting a short sale:

(a) securities will be sold short for cash, with the Fund assuming the obligation to return to the Borrowing Agent the securities borrowed to effect the short sale;

(b) the short sale will be effected through market facilities through which the securities sold short are normally bought and sold;

(c) the Fund will receive cash for the securities sold short within normal trading settlement periods for the market in which the short sale is effected;

(d) the securities sold short will be liquid securities, and "liquid securities" are securities that satisfy either (i) or (ii) below:

(i) the securities are listed and posted for trading on a stock exchange; and

(A) the issuer of the securities has a market capitalization of not less than CDN $300 million, or the equivalent thereof, at the time the short sale is effected; or

(B) the Fund's portfolio advisor has pre-arranged to borrow the securities for the purpose of such short sale, or

(ii) the securities are bonds, debentures or other evidences of indebtedness of, or guaranteed by, the Government of Canada or any province or territory of Canada or the Government of the United States of America;

(e) at the time securities of a particular issuer are sold short:

(i) the aggregate market value of all securities of that issuer sold short by the Fund will not exceed 5% of the net assets of the Fund; and

(ii) the Fund will place a "stop-loss" order with a dealer to immediately purchase for the Fund an equal number of the same securities if the trading price of the securities exceeds 120% (or such lesser percentage as the Filer may determine) of the price at which the securities were sold short;

(f) the Fund will deposit Fund assets with the Borrowing Agent as security in connection with the short sale transaction;

(g) the Fund will maintain appropriate internal controls regarding short sales prior to conducting any short sales, including written policies and procedures and risk management controls; and

(h) the Fund will keep proper books and records of all short sales and Fund assets deposited with Borrowing Agents as security.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that the Exemption Sought is granted provided that in respect of each Fund:

(a) the aggregate market value of all securities sold short by the Fund does not exceed 20% of the net assets of the Fund on a daily marked-to-market basis;

(b) any short sale made by the Fund is subject to compliance with the investment objectives of the Fund;

(c) the Exemption Sought does not apply to a Fund that is classified as a money market fund or a short term income fund;

(d) the Fund maintains appropriate internal controls regarding its short sales, including written policies and procedures, risk management controls and proper books and records;

(e) the Fund holds "cash cover" (as defined in NI 81-102) in an amount, including the Fund assets deposited with Borrowing Agents as security in connection with short sale transactions, that is at least 150% of the aggregate market value of all securities sold short by the Fund on a daily marked-to-market basis;

(f) no proceeds from short sales by the Fund are used by the Fund to purchase long positions in securities other than cash cover;

(g) for short sale transactions in Canada, every dealer that holds Fund assets as security in connection with short sale transactions by the Fund is a registered dealer in Canada and a member of a self-regulatory organization that is a participating member of the Canadian Investor Protection Fund;

(h) for short sale transactions outside of Canada, every dealer that holds Fund assets as security in connection with short sale transactions by the Fund is:

(i) a member of a stock exchange, and, as a result, subject to a regulatory audit; and

(ii) has a net worth in excess of the equivalent of CDN $50 million determined from its most recent audited financial statements that have been made public;

(i) except where the Borrowing Agent is the Fund's custodian, when the Fund deposits Fund assets with a Borrowing Agent as security in connection with a short sale transaction, the amount of Fund assets deposited with the Borrowing Agent does not, when aggregated with the amount of Fund assets already held by the Borrowing Agent as security for outstanding short sale transactions of the Fund, exceed 10% of the net assets of the Fund, taken at market value as at the time of the deposit;

(j) the security interest provided by the Fund over any of its assets required to enable the Fund to effect short sale transactions is made in accordance with industry practice for that type of transaction and relates only to obligations arising under such short sale transactions;

(k) prior to conducting any short sales, the Fund discloses in its simplified prospectus a description of: (i) short selling, (ii) how the Fund intends to engage in short selling, (iii) the risks associated with short selling, and (iv) in the Investment Strategy section of the simplified prospectus, the Fund's strategy and this exemptive relief;

(l) prior to conducting any short sales, the Fund discloses in its annual information form the following information:

(i) that there are written policies and procedures in place that set out the objectives and goals for short selling and risk management procedures applicable to short selling;

(ii) who is responsible for setting and reviewing the policies and procedures referred to in the preceding item (i), how often the policies and procedures are reviewed, and the extent and nature of the involvement of the board of directors or trustees of the Fund or the board of directors of the Filer (as applicable) in the risk management process;

(iii) the trading limits or other controls on short selling in place and who is responsible for authorizing the trading and placing limits or other controls on the trading;

(iv) whether there are individuals or groups that monitor the risks independent of those who trade; and

(v) whether risk measurement procedures or simulations are used to test the portfolio under stress conditions; and

(m) prior to conducting any short sales, the Fund has provided to its securityholders not less than 60 days' written notice that discloses the Fund's intent to begin short selling transactions and made the disclosure required in the Fund's simplified prospectus and annual information form as outlined in paragraphs (k) and (l) of this decision, or the Fund's initial simplified prospectus and annual information form and each renewal thereof has included such disclosure.

The Exemption Sought shall terminate upon the coming into force of any legislation or rule of the principal regulator dealing with the matters referred to in subsections 2.6(a), 2.6(c) and 6.1(1) of NI 81-102.

Galileo Funds Inc. et al.

Headnote

National Policy 11-203 Process For Exemptive Relief Applications in Multiple Jurisdictions - MRRS exemption granted from paragraph 2.5(2)(a) of National Instrument 81-102 Mutual funds to permit a top fund to invest up to 10% of its net assets in aggregate in commodity pools, that use financial instruments that correlate to the performance of an Underlying Index, and that are not subject to National Instrument 81-101 Mutual Fund Prospectus Disclosure. The commodity pools are qualified under a long form prospectus.

Applicable Legislative Provisions

National Instrument 81-101 Mutual Funds, ss. 2.5(2)(a), 19.1.

June 20, 2008

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO

(the Ontario Jurisdiction)

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

GALILEO FUNDS INC.,

BLUMONT CAPITAL CORPORATION,

TDK FUND MANAGEMENT INC.,

WEBB ASSET MANAGEMENT CANADA, INC.,

JOVFUNDS MANAGEMENT INC. AND

T.E. INVESTMENT COUNSEL INC.

(EACH A MANAGER)

AND

IN THE MATTER OF

THE FUNDS REFERENCED IN SCHEDULE A

(EACH AN EXISTING FUND)

AND

IN THE MATTER OF

BETAPRO MANAGEMENT INC.

(BETAPRO)

DECISION

Background

The principal regulator in the Ontario Jurisdiction has received an application from the Managers with respect to the Existing Funds, which are all subject to National Instrument 81-102 Mutual Funds (NI 81-102), and such other mutual funds subject to NI 81-102 as the Managers or an affiliate of the Managers may establish in the future and/or become the manager of in the future (each a Future Fund and together with the Existing Funds, individually, a Fund and, collectively, the Funds), and BetaPro, the manager and trustee of the Horizons BetaPro Pools set out in Schedule B and any similar funds established and/or managed by BetaPro in the future (each a HBP Pool), for a decision under the securities legislation of the Ontario Jurisdiction of the principal regulator (the Legislation) exempting the Funds from paragraph 2.5(2)(a) of NI 81-102 to permit each Fund to invest in the HBP Pools (the Exemption Sought).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions:

(i) the Ontario Securities Commission (the OSC) is the principal regulator for this application; and

(ii) the Managers on behalf of the Funds have provided notice that subsection 4.7(2) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in each of the other Provinces and Territories of Canada (together with Ontario, the Jurisdictions, and individually a Jurisdiction).

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Managers on behalf of the Funds and by BetaPro on behalf of the HBP Pools:

Previous Decision

1. The Exemption Sought supersedes and replaces the relief previously granted to JovFunds Management Inc. on March 4, 2008 by the OSC and certain of the other Canadian securities regulatory authorities, which is substantially the same as the Exemption Sought, except that, unlike the Exemption Sought, such relief did not apply in Québec.

Managers

2. Each Manager, or an affiliate of the Manager, acts, or will act, as the manager of each Fund that forms part of its mutual fund complex. The head office of each Manager is located in Toronto, Ontario.

3. Neither the Managers, nor the Existing Funds, are in default of the securities legislation in any of the Jurisdictions.

4. Each Fund is, and will be, a mutual fund organized under the laws of Canada or a Jurisdiction and is, and will be, a reporting issuer under the laws of one or more of the Jurisdictions.

5. Securities of each Fund are, and will be, distributed pursuant to a prospectus that has been filed with and receipted by some or all of the securities regulatory authorities in the Jurisdictions.

BetaPro

6. BetaPro, a corporation incorporated under the laws of Canada, acts, or will act as, the trustee and manager of each HBP Pool. The head office of BetaPro is located in Toronto, Ontario.

7. Neither BetaPro, nor the HBP Pools listed in Schedule B, are in default of the securities legislation in any of the Jurisdictions.

HBP ETFs

8. Each Horizons BetaPro exchange traded fund set out in Schedule B, including any similar exchange traded funds established and/or managed by BetaPro in the future, (each an HBP ETF) is, and will be, a mutual fund organized under the laws of Ontario and is, or will be, a reporting issuer under the laws of some or all of the Jurisdictions.

9. Securities of each HBP ETF are, or will be, listed on the Toronto Stock Exchange (the TSX). BetaPro will not file a final prospectus for an HBP ETF unless the TSX has conditionally approved the listing of securities of the HBP ETF.

10. Each HBP ETF is, or will be, a commodity pool, as such term is defined in section 1.1(1) of National Instrument 81-104 Commodity Pools (NI 81-104), in that each HBP ETF has adopted, or will adopt, fundamental investment objectives that permit that HBP ETF to use or invest in financial instruments in a manner that is not permitted under NI 81-102.

11. Each HBP ETF's investment objective will be to provide daily results, before fees, expenses, distributions, brokerage commissions and other transaction costs, that endeavour to correspond to a multiple or the inverse (opposite) multiple of the daily performance of a "permitted index" as defined in NI 81-102 (the Underlying Index).

12. In order to achieve its investment objective, each HBP ETF will invest in equity securities and/or other financial instruments, including derivatives.

13. Each bull HBP ETF uses, or will use, financial instruments to track its Underlying Index by +200% on a daily basis. Each bear HBP ETF uses, or will use, financial instruments to track its Underlying Index by -200% on a daily basis.

14. Each bull HBP ETF will be rebalanced daily to ensure that its exposure and performance will be +200% of its Underlying Index on each day on which it is valued and each bear HBP ETF will be rebalanced daily to ensure that its exposure and performance will be -200% of its Underlying Index on each day on which it is valued.

HBP Funds

15. Each Horizons BetaPro Fund set out in Schedule B, including any similar funds established and/or managed by BetaPro in the future, (each a HBP Fund) is, or will be, a mutual fund trust organized under the laws of Ontario and is, or will be, a reporting issuer under the laws of some or all of the Jurisdictions.

16. Securities of each HBP Fund are, and will be, distributed pursuant to a prospectus that has been filed with and receipted by the securities regulatory authorities in the applicable Jurisdictions.

17. Each HBP Fund is, or will be, a commodity pool, as such term is defined in section 1.1(1) of NI 81-104, in that each HBP Fund has adopted, or will adopt, fundamental investment objectives that permit that HBP Fund to use or invest in financial instruments in a manner that is not permitted under NI 81-102.

18. Each HBP Fund's investment objective will be to provide daily results, before fees, expenses, distributions, brokerage commissions and other transaction costs, that endeavour to correspond to a multiple or the inverse (opposite) multiple of the daily performance of its Underlying Index.

19. In order to achieve its investment objective, each HBP Fund will invest in equity securities and/or other financial instruments, including derivatives.

20. Each bull HBP Fund uses, or will use, financial instruments to track its Underlying Index by +200% on a daily basis. Each bear HBP Fund uses, or will use, financial instruments to track its Underlying Index by -200% on a daily basis.

HBP Pools

21. The maximum exposure of an investment by an investor in a HBP Pool will be the amount invested by the investor in securities of the HBP Pool.

22. The HBP Pools are attractive investments for the Funds as they provide an efficient and cost effective means of achieving diversification and exposure that would not otherwise be possible.

23. An investment by a Fund in units of a HBP Pool will represent the business judgment of responsible persons uninfluenced by considerations other than the best interests of the Fund.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that the Exemption Sought is granted in those Jurisdictions in which a Fund is a reporting issuer provided that:

(a) no more than 10% of the Fund's net assets, in the aggregate at the time of purchase, may be invested in securities of the HBP Pools;

(b) if the Fund has obtained relief to use short selling it may invest up to, but no more than, 20% of its net assets in aggregate at the time of purchase in securities of the HBP Pools and the shorting of securities;

(c) the investment by the Fund in securities of a HBP Pool is in accordance with the fundamental investment objective of the Fund;

(d) the prospectus of the Fund discloses, or will disclose the next time it is renewed after the date hereof, that the Fund may invest in commodity pools that use financial instruments that correlate to the performance of an Underlying Index and, to the extent applicable, the risks associated with such an investment; and

(e) the Fund will not invest in an HBP Pool with an Underlying Index based on:

i. a physical commodity other than gold, or

ii. a specified derivative of which the underlying interest is a physical commodity other than gold.

Schedule A

List of Existing Funds

Galileo Funds

BluMont Funds

TDK Fund

Webb Funds

JovFunds Management Inc.

T.E. Investment Counsel Inc.

Schedule B

List of HBP Pools

HBP ETFs

HBP Funds

Barclays PLC

Headnote

Multilateral Instrument 11-02 -- Passport System -- relief from registration and prospectus requirements to permit issuance of ordinary shares and American Depositary Shares by a U.K. issuer to a de minimis number of its current Canadian shareholders -- rights offering registration exemption technically not available.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 25, 53, 74(1).

National Instrument 41-101 -- Rights Offering.

June 17, 2008

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO

(THE JURISDICTION)

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

BARCLAYS PLC

(THE FILER)

DECISION

Background

The principal regulator in the Jurisdiction has received an application (the Application) from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) that (the Exemption Sought):

(a) Subsection 25(1)(a) (the Dealer Registration Requirement) of the Securities Act (Ontario) (the Act) does not apply to the Filer when it trades in its own New Ordinary Shares (as defined below) and New ADSs (as defined below) with Qualifying Shareholders (as defined below) under the Open Offer; and

(b) Section 53 (the Prospectus Requirement) of the Act does not apply to the distribution of New Ordinary Shares and New ADSs to Qualifying Shareholders under the Open Offer.

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a) the Ontario Securities Commission (the OSC) is the principal regulator for this application, and

(b) the Filer has provided notice that Section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Québec, Nova Scotia, New Brunswick, Prince Edward Island, Newfoundland and Labrador, Northwest Territories, Nunavut and Yukon.

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filer:

The Filer and its Affiliates

1. The Filer is a public limited company registered in England and Wales and is the ultimate holding company of the Barclays group of companies. The Filer is domiciled in the United Kingdom and its registered and head office is located at 1 Churchill Place, London, England E14 5HP. The Filer is a major global financial services provider engaged in retail and commercial banking, credit cards, investment banking, wealth management and investment management. Operating in over 50 countries and employing 135,000 people, the Filer moves, lends, invests and protects money for over 30 million customers and clients worldwide.

2. Under the Memorandum and Articles of Association, the authorized share capital of the Filer is £2,540,000,000, US$77,500,000, €40,000,000 and ¥4,000,000,000, consisting of (i) 9,996,000,000 ordinary shares (Ordinary Shares), (ii) 1,000,000 staff shares of £1 each, (iii) 400,000 sterling preference shares of £100 each, (iv) 400,000 dollar preference shares of US$100 each, (v) 150,000,000 dollar preference shares of US$0.25 each, (vi) 400,000 euro preference shares of €100 each and (vii) 400,000 yen preference shares of ¥10,000 each. As at May 27, 2008 there were 6,567,915,680 Ordinary Shares, no staff shares and no preference shares outstanding.

3. The principal trading market for Ordinary Shares is the London Stock Exchange (the LSE). Ordinary Shares are also listed on the New York Stock Exchange (the NYSE) in the form of American Depositary Shares (ADSs) and on the Tokyo Stock Exchange (the TSE). Each ADS of the Filer represents four Ordinary Shares and is represented by an American Depository Receipt (ADR). On May 21, 2008 the Filer gave its notice to de-list to the Tokyo Stock Exchange. The Filer expects such de-listing to become effective on or around June 28, 2008.

4. The Filer is a "foreign private issuer" as defined in Rule 3b-4(c) under the 1934 Act, and the Ordinary Shares are registered under Section 12(b) of the 1934 Act.

5. The Filer is current with all required filings with the LSE and the NYSE and under the 1934 Act.

6. The Filer is not a reporting issuer, or its equivalent, in any province or territory of Canada, and is not registered as a dealer or adviser under the securities legislation of any province or territory of Canada. Ordinary Shares are not listed or quoted for trading on any Canadian stock exchange or market.

7. Barclays Bank PLC (Barclays Bank) is a direct, wholly owned subsidiary of the Filer and is the principal bank of the Barclays group. Barclays Bank is a public limited company registered in England and Wales and its registered and head office is located at the same address as the Filer's registered and head office. Barclays Bank operates through branches in many countries and has numerous direct and indirect subsidiaries. Barclays Bank is a "foreign private issuer" as defined in Rule 3b-4(c) under the 1934 Act and its various debt and equity securities are registered under Section 12(b) of the 1934 Act.

8. Barclays Bank is a reporting issuer in each of the provinces of Canada, whose principal regulator is the OSC, and is not in default of any of its obligations as a reporting issuer under any applicable securities legislation in any of the jurisdictions of Canada.

9. The Filer and Barclays Bank jointly file many of their reports under the 1934 Act, including their annual report on Form 20-F. Since Barclays Bank is a reporting issuer in each of the provinces of Canada, shareholders of the Filer in Canada have access to such joint reports without charge at the SEDAR website (www.sedar.com), including French versions thereof where required by applicable legislation.

The Global Open Offer

10. The Filer expects to announce a conditional offer (the Open Offer) to holders (Shareholders) of its Ordinary Shares and ADSs to subscribe for newly issued Ordinary Shares (the New Ordinary Shares) or New Ordinary Shares in the form of ADSs (the New ADSs), as applicable. Shareholders as of the close of business on a date to be specified in the UK Prospectus (as defined below) and the US Prospectus (as defined below) (the Record Date) will be qualified to participate in the Open Offer (the Qualifying Shareholders).

11. Qualifying Shareholders will be given the opportunity to subscribe for New Ordinary Shares or New ADSs, as applicable, at a fixed issue price (in the case of Ordinary Shares, the Ordinary Share Issue Price or, in the case of ADSs, the ADS Issue Price) up to a maximum of their pro rata entitlement, which shall be calculated based on the number of Ordinary Shares or ADSs, as applicable, outstanding on the Record Date (in the case of Ordinary Shares, the Existing Ordinary Shares or, in the case of ADSs, the Existing ADSs). The Ordinary Share Issue Price per New Ordinary Share will represent a discount to the closing mid-market price for Ordinary Shares on the LSE on the last practicable date prior to the announcement of the Open Offer. The Filer currently expects that the ADS Issue Price per New ADS will represent a discount to the closing price for ADSs on the NYSE on the last practicable date prior to the announcement of the Open Offer.

12. Fractions of New Ordinary Shares or New ADSs, as applicable, will not be allotted to Qualifying Shareholders in the Open Offer and entitlements under the Open Offer will be rounded down to the nearest whole number of New Ordinary Shares or New ADSs, as applicable. Accordingly, Qualifying Shareholders with less than a minimum number of Existing Ordinary Shares or Existing ADSs, as applicable, will not be entitled to subscribe for any New Ordinary Shares or New ADSs, as applicable. The fractional entitlements will be aggregated and taken up in the Conditional Placing (as defined below) for the benefit of the Filer. Additionally, it is currently expected that any New Ordinary Shares, including Ordinary Shares underlying New ADSs, not subscribed for will not be sold in the market or placed for the benefit of the Qualifying Shareholders who do not subscribe under the Open Offer, but will be placed under the Conditional Placing for the benefit of the Filer.

13. The New Ordinary Shares, when issued and fully paid, will be identical to and in all respects will rank pari passu with the Existing Ordinary Shares. The New ADSs, when issued and fully paid, will rank pari passu with the Existing ADSs.

14. The Filer currently expects that the Open Offer will be open for acceptance for a minimum of 15 business days following announcement, subject to any alterations as required by or agreed with securities regulators in applicable jurisdictions or as required by the depositary bank of the ADS facility to administer the Open Offer. Generally, the Open Offer is expected to be made worldwide, as public offers in the United Kingdom and the United States, as exempt private placements in certain jurisdictions and as offers made pursuant to grants of discretionary relief in other jurisdictions, including Canada. A few jurisdictions are expected to be excluded from the Open Offer.

15. Pursuant to one or more placing agreements (each a Conditional Placing Agreement), each to be entered into by the Filer and an investor as specified in the UK Prospectus (the Conditional Placees), any New Ordinary Shares, including Ordinary Shares underlying New ADSs, not subscribed for under the Open Offer will be issued to the Conditional Placees at the Issue Price, subject to the terms and conditions of the Conditional Placing Agreements, with the proceeds retained for the benefit of the Filer (the Conditional Placing). The Open Offer is conditional on the New Ordinary Shares being admitted to the official list of the UK Listing Authority and admitted to trading on the LSE.

16. It is expected that the New Ordinary Shares that are issued to the Conditional Placees pursuant to the Conditional Placing Agreement will be distributed outside Canada. However, if such New Ordinary Shares are distributed within Canada, they will be distributed in accordance with an exemption from the prospectus filing requirement of applicable securities legislation.

17. Pursuant to the authority granted at the Filer's 2008 annual general meeting, the Filer is permitted to issue New Ordinary Shares, including Ordinary Shares underlying New ADSs, representing up to one-third of the Filer's issued and outstanding share capital as of February 27, 2008 in the Conditional Placing and Open Offer. Qualifying Shareholders who subscribe for their full pro rata entitlement under the Open Offer will not suffer any dilution of their shareholdings (except for any diminution due to the loss of fractional shares in the calculation of entitlements).

18. In accordance with United Kingdom securities laws, including the Financial Services and Markets Act (2000) (FSMA) and applicable Financial Services Authority (FSA) rules under the FSMA, the Filer submitted a draft prospectus to the FSA relating to the New Ordinary Shares (the UK Prospectus) on May 22, 2008.

19. In accordance with the 1933 Act, the Filer will file with the US Securities and Exchange Commission (the SEC) a registration statement on Form F-3 (the Registration Statement), containing the final US prospectus (the US Prospectus), to register the New Ordinary Shares and the New ADSs. Copies of the US Prospectus, once available, and application forms setting out individual maximum pro rata entitlements (the Application Forms) will be disseminated to registered Qualifying Shareholders with addresses in the United States. Copies of the US Prospectus will be available without charge at the SEC's website (www.sec.gov) and at the Filer's website (www.barclays.com) once the Registration Statement is filed with the SEC.

20. The Registration Statement will contain, or incorporate by reference, disclosure of information with respect to, among other things: (i) the Filer as the offeror; (ii) reasons for the Conditional Placing and Open Offer; (iii) particulars of the New Ordinary Shares and New ADSs; (vi) financial statements of the Filer; (iv) procedures for subscribing for the New Ordinary Shares and New ADSs; and (v) other material information. Registered Qualifying Shareholders with addresses in the United States will complete and submit their Application Form pursuant to the instructions to be set forth in the US Prospectus. Qualifying Shareholders with addresses in the United States who hold their Ordinary Shares or ADRs through an intermediary or nominee will subscribe for New Ordinary Shares or New ADSs in accordance with the instructions provided by such intermediary or nominee.

21. There were 838 ADR holders and 1,434 registered holders of Ordinary Shares with US addresses at December 31, 2007, whose shareholdings represented approximately 3.94% of total outstanding Ordinary Shares on that date.

22. The requisite applications will be made to list the New Ordinary Shares on the LSE and the NYSE (including the Filer's ADSs).

The Canadian Open Offer

23. The Filer exercised reasonable efforts in attempting to ascertain the number of direct or indirect securityholders of its outstanding securities that are resident in Canada.

24. The Filer requested information regarding the number of holders of Ordinary Shares resident in Canada from the registrar for the Ordinary Shares. The registrar provided the Filer with information regarding the number of registered holders and the number of Ordinary Shares held by such holders. However, information regarding the number of beneficial holders of Ordinary Shares or their shareholdings could not be obtained from the registrar. In addition, the Filer requested information on the number of registered and beneficial holders of ADSs of, and the number of ADSs held by, residents of Canada from The Bank of New York, the depositary for the ADSs.

25. Based on such inquiries, Barclays has determined that, at May 28, 2008, there were 15 registered ADR holders and 292 registered holders of Ordinary Shares with Canadian addresses, who collectively held 650,327 Ordinary Shares and in total represented approximately 0.09% of the Shareholders and held approximately 0.01% of the total outstanding Ordinary Shares on that date, and that, at March 19, 2008, there were 8,466 beneficial holders of ADSs with Canadian addresses, who collectively held 20,899,912 ADSs, or approximately 1.27% of the total outstanding Ordinary Shares on that date.

26. Section 1.15 of Companion Policy 45-102CP -- To National Instrument 45-102 Resale of Securities provides that, in determining the percentage of outstanding securities owned directly or indirectly by residents of Canada and the number of such owners resident in Canada, if, after reasonable inquiry, information on residence of a customer is unavailable, a non-reporting issuer such as the Filer may assume that a customer is a resident of the foreign jurisdiction in which the nominee has it principal place of business. In accordance with such policy, the Filer has assumed that, other than the Shareholders identified in the preceding paragraph, all of its Shareholders are resident outside of Canada.

27. To the knowledge of the Filer after reasonable inquiry, as of the date hereof,

(a) the number of beneficial holders of Ordinary Shares resident in Canada does not constitute 10 percent or more of all holders of Ordinary Shares;

(b) the number of Ordinary Shares beneficially held by securityholders resident in Canada does not constitute, in the aggregate, 10 percent or more of the outstanding Ordinary Shares;

(c) the number of beneficial holders of Ordinary Shares resident in any Province, Territory or jurisdiction of Canada does not constitute five percent or more of all holders of Ordinary Shares; and

(d) the number of Ordinary Shares beneficially held by securityholders resident in any Province, Territory or jurisdiction of Canada does not constitute, in the aggregate, five percent or more of the outstanding Ordinary Shares.

28. If relief is granted pursuant to this Application, upon announcement of the Open Offer, copies of the US Prospectus, a wrapper with additional Canada specific disclosure in English and in French, and Application Forms will be disseminated to the OSC, each other securities regulatory authority in Canada and to each Qualifying Shareholder whose last address is in Canada. The Canadian wrapper will include, among other things, disclosure regarding the presentation of financial statements and the resale restrictions applicable to Qualifying Shareholders in Canada.

29. In addition, any other material relating to the Open Offer that is disseminated by or on behalf of the Filer to the Qualifying Shareholders in the United States will concurrently be disseminated to the OSC and each Qualifying Shareholder in Canada.

30. All Qualifying Shareholders in Canada will be entitled to participate in the Open Offer on terms at least as favourable as the terms that apply to the Qualifying Shareholders with an address in the United States.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that the Exemption Sought is granted, provided that:

1. the Open Offer is made to Qualifying Shareholders in Canada on terms no less favourable than the Open Offer to the Qualifying Shareholders in the United States;

2. the US Prospectus and related offering materials disseminated in the United States are concurrently sent to the OSC, each other securities regulatory authority in Canada and to each Qualifying Shareholder resident in Canada, together with a wrapper with additional Canada specific disclosure in English and in French (that will include, among other things, disclosure regarding the presentation of financial statements and the resale restrictions applicable to Qualifying Shareholders in Canada);

3. to the knowledge of the Filer after reasonable inquiry, as of the date hereof:

(a) the number of beneficial holders of Ordinary Shares resident in Canada does not constitute 10 percent or more of all holders of Ordinary Shares;

(b) the number of Ordinary Shares beneficially held by securityholders resident in Canada does not constitute, in the aggregate, 10 percent or more of the outstanding Ordinary Shares;

(c) the number of beneficial holders of Ordinary Shares resident in any Province, Territory or jurisdiction of Canada does not constitute five percent or more of all holders of Ordinary Shares; and

(d) the number of Ordinary Shares beneficially held by securityholders resident in any Province, Territory or jurisdiction of Canada does not constitute, in the aggregate, five percent or more of the outstanding Ordinary Shares; and

4. the first trade in the New Ordinary Shares and New ADSs shall be a distribution under the Legislation unless the conditions set out in Subsection 2.14(1) of National Instrument 45-102 -- Resale of Securities are satisfied at the time of such first trade.

The further decision of the principal regulator under the legislation is that the Application and this decision shall be held in confidence by the principal regulator until the earlier of (i) the date of the announcement of the Open Offer and the dissemination of the material related to the Open Offer to the Qualifying Shareholders (which is expected to occur on or about June 19, 2008), and (ii) July 19, 2008.

Dahlman Rose & Company, LLC - s. 147 of the Act and s. 6.1 of OSC Rule 13-502 Fees

Headnote

Relief from section 6.5 of OSC Rule 45-501 Ontario Prospectus Exemptions - Relief granted to applicant dealer from s. 6.5 for forward-looking information in offering memoranda provided to accredited investors in connection with private placements by foreign issuer - such private placements are generally small part of larger distributions of securities by foreign issuers outside Canada pursuant to foreign offering documents - relief subject to conditions - Relief also granted from section 4.1 of OSC Rule 13-502 Fees.

Applicable Legislative Provisions

Securities Act (Ontario), s. 147.

OSC Rule 13-502 Fees, s. 4.1.

OSC Rule 45-501 Ontario Prospectus Exemptions, s. 6.5.

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, c.S.5, AS AMENDED

AND

IN THE MATTER OF

DAHLMAN ROSE & COMPANY, LLC

ORDER

(Section 147 of the Act

and

Section 6.1 of Rule 13-502 Fees)

WHEREAS effective December 31, 2007 Ontario Securities Commission Rule 45-501 Ontario Prospectus Exemptions ("Rule 45-501") was amended to, among other things, require that an offering memorandum used in Ontario which contains forward-looking information comply with certain new provisions of National Instrument 51-102 Continuous Disclosure Obligations ("NI 51-102");

AND UPON the application (the "Application") of Dahlman Rose & Company, LLC (the "Applicant") to the Ontario Securities Commission (the "Commission") for an order pursuant to Section 147 of the Securities Act, R.S.O. 1990, c. S.5, as amended (the "Act") to provide that Section 6.5 of Rule 45-501 shall not be applicable to an offering memorandum of a non-Canadian issuer that is not a reporting issuer in Ontario (each, a "Foreign Issuer") provided to a prospective purchaser in Ontario by the Applicant.

AND UPON the Application of the Applicant to the Director for an exemption pursuant to Section 6.1 of OSC Rule 13-502 Fees ("Rule 13-502") to provide that Section 4.1 of Rule 13-502 shall not be applicable to the Applicant;

AND UPON the Applicant having represented to the Commission that:

1. The Applicant is incorporated under the laws of the State of Delaware and is registered in the United States as a broker-dealer with the Securities and Exchange Commission.

2. The Applicant is registered with the OSC as a dealer in the category of "international dealer".

3. The Applicant offers and sells securities of Foreign Issuers on a private placement basis to purchasers in Ontario who are "designated institutions" relying on the "accredited investor" prospectus exemption under Section 2.3 of National Instrument 45-106 Prospectus and Registration Exemptions.

4. The offerings by private placement of securities of a Foreign Issuer (each, a "Foreign Issuer Private Placement") in Ontario are part of a distribution of securities of a Foreign Issuer offered primarily outside of Canada pursuant to a prospectus, offering memorandum or other offering document (each, a "Foreign Offering Document") prepared in accordance with the requirements of the United States or other non-Canadian jurisdictions.

5. In a Foreign Issuer Private Placement, a Foreign Offering Document is generally accompanied by a "wrapper" or is otherwise supplemented with disclosure prescribed by Ontario securities law and with disclosure of certain additional information for the benefit of Ontario investors and provided by the Applicant to Ontario prospective purchasers as a Foreign Issuer's offering memorandum within the meaning of Section 1(1) of the Act.

6. In a Foreign Issuer Private Placement, a Foreign Issuer that intends to rely on the civil liability safe harbour with respect to forward-looking statements provided by Section 21.E of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") or Section 27A of the U.S. Securities Act of 1933, as amended (the "U.S. Securities Act"), will generally include in its Foreign Offering Document disclosure with respect to "forward-looking statements" within the meaning of Section 21E of the Exchange Act and Section 27A of the U.S. Securities Act to enable the Foreign Issuer to rely on the civil liability safe harbour provided with respect to forward-looking statements.

7. Other Foreign Issuers conducting a Foreign Issuer Private Placement that include forward looking information in their Foreign Offering Document will generally include disclosure of related material risk factors potentially affecting the forward looking information.

8. The disclosure with respect to forward looking information contained in a Foreign Offering Document used in a Foreign Issuer Private Placement in Ontario may, but will not necessarily, include all of the disclosure prescribed for offering memoranda by section 6.5 of Rule 45-501.

AND UPON considering the Application and the recommendation of the staff of the Commission;

AND UPON the Commission being satisfied that it would not be prejudicial to the public interest to make this Order;

IT IS ORDERED, pursuant to section 147 of the Act, that offering memoranda delivered by or on behalf of the Applicant to prospective purchasers that are accredited investors in connection with Foreign Issuer Private Placements shall not be subject to Section 6.5 of Rule 45-501, provided that a Foreign Offering Document contains or is accompanied by either:

(a) the disclosure required in order for an issuer to rely on the safe harbour provided by Section 21E of the Exchange Act or by Section 27A of the U.S. Securities Act with respect to forward looking information, whether or not such safe harbour is applicable; or

(b) a statement that "This offering is being made by a non-Canadian issuer using disclosure documents prepared in accordance with non-Canadian securities laws. Prospective purchasers should be aware that these requirements may differ significantly from those of Ontario. The forward looking information included or incorporated by reference herein may not be accompanied by the disclosure and explanations that would be required of a Canadian issuer under Ontario securities law."

DATED at Toronto, this 5th day of June, 2008.

AND UPON the Director being satisfied that it would not be prejudicial to the public interest to make this Order.

IT IS ORDERED, pursuant to Section 6.1 of Rule 13-502, that the Application shall not be subject to Section 4.1 of Rule 13-502.

DATED at Toronto, this 5th day of June, 2008.

Shallow Oil & Gas Inc. et al. - ss. 127(1), 127(5), 127(8)

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, c. S.5, AS AMENDED

AND

IN THE MATTER OF

SHALLOW OIL & GAS INC., ERIC O'BRIEN,

ABEL DA SILVA, GURDIP SINGH GAHUNIA

ALSO KNOWN AS MICHAEL GAHUNIA,

ABRAHAM HERBERT GROSSMAN

ALSO KNOWN AS ALLEN GROSSMAN,

MARCO DIADAMO, GORD MCQUARRIE,

KEVIN WASH, AND WILLIAM MANKOFSKY

ORDER

(Subsections 127(1), 127(5) & 127(8))

WHEREAS on January 16, 2008 the Ontario Securities Commission ("the Commission") issued a Temporary Order pursuant to subsections 127(1) and (5) of the Securities Act, R.S.O. 1990, c. S.5, as amended (the "Act") that: (i) all trading in securities by Shallow Oil & Gas Inc. ("Shallow Oil") shall cease and that all trading in Shallow Oil securities shall cease; and (ii) Eric O'Brien ("O'Brien"), Abel Da Silva ("Da Silva"), Gurdip Singh Gahunia, also known as Michael Gahunia ("Gahunia"), and Abraham Herbert Grossman, also known as Allen Grossman ("Grossman"), cease trading in all securities (the "Temporary Order");

AND WHEREAS on January 16, 2008, the Commission ordered that the Temporary Order shall expire on the 15th day after its making unless extended by order of the Commission;

AND WHEREAS on January 18, 2008 the Commission issued a Notice of Hearing to consider, among other things, the extension of the Temporary Order, such hearing to be held on January 30, 2008 commencing at 2:00 p.m.;

AND WHEREAS Staff of the Commission ("Staff") served all of the respondents with copies of the Temporary Order and the Notice of Hearing as evidenced by the two Affidavits of Wayne Vanderlaan sworn on January 24 and 29, 2008, and the two Affidavits of Diana Page both sworn on January 21, 2008, and filed with the Commission;

AND WHEREAS a hearing to extend the Temporary Order was held on January 30, 2008 commencing at 2:00 p.m. before Vice-Chair Turner, and Staff and Grossman appeared;

AND WHEREAS Shallow Oil, O'Brien, Da Silva, and Gahunia did not appear;

AND WHEREAS Grossman contested the extension of the Temporary Order;

AND WHEREAS the hearing to consider the extension of the Temporary Order was adjourned to January 31, 2008 at 10:00 a.m. to be heard before a panel of the Commission;

AND WHEREAS on January 31, 2008, a panel of the Commission ordered pursuant to subsection 127(8) of the Act that the Temporary Order be extended to March 31, 2008; and that the hearing be adjourned to Monday, March 31, 2008, at 2:00 p.m.;

AND WHEREAS a hearing to consider extending the Temporary Order was held on March 31, 2008 commencing at 2:00 p.m. and Staff and Grossman appeared, presented evidence and made submissions;

AND WHEREAS on March 31, 2008, the panel of the Commission considered the evidence and submissions made to it;

AND WHEREAS on March 31, 2008, the panel of the Commission concluded that satisfactory information had not been provided to the Commission by Grossman, as contemplated by subsection 127(8) of the Act;

AND WHEREAS on March 31, 2008, the panel extended the Temporary Order until June 18, 2008;

AND WHEREAS on June 10, 2008, Staff issued a Statement of Allegations in this matter with respect to the respondents Shallow Oil, O'Brien, Da Silva, Gahunia, Grossman, Marco Diadamo ("Diadamo"), Gord McQuarrie ("McQuarrie"), Kevin Wash ("Wash"), and William Mankofsky ("Mankofsky");

AND WHEREAS on June 11, 2008, the Commission issued a Notice of Hearing for June 18, 2008 to consider, among other things:

(a) the issuance of a temporary cease trade order against Diadamo, McQuarrie, Wash, and Mankofsky; and

(b) the extension of the original Temporary Order dated January 16, 2008.

AND WHEREAS Staff served all respondents with copies of the Notice of Hearing for June 18, 2008 as evidenced by the Affidavits of Wayne Vanderlaan and Diana Page sworn on June 16, 2008, and filed with the Commission;

AND WHEREAS on June 18, 2008 a hearing was held commencing at 10:00 a.m. and Staff and Grossman appeared, presented evidence and made submissions, and Diadamo, McQuarrie, and Mankofsky appeared before the panel of the Commission and made submissions as to the issuance of a temporary cease trade order against them;

AND WHEREAS on June 18, 2008, Shallow Oil, O'Brien, Da Silva, and Wash did not appear;

AND WHEREAS on June 18, 2008, Gahunia did not appear, but Staff informed the Commission that Gahunia did not oppose an extension of the Temporary Order until November 25, 2008;

AND WHEREAS on June 18, 2008, the panel of the Commission considered the evidence and submissions of Staff and Grossman, and the submissions of Diadamo, McQuarrie, and Mankofsky;

AND WHEREAS on June 18, 2008, the panel of the Commission concluded that satisfactory information had not been provided to the Commission by any of the respondents in this matter, as contemplated by subsection 127(8) of the Act;

AND WHEREAS the panel of the Commission is of the opinion that it is in the public interest to make this order;

IT IS HEREBY ORDERED pursuant to subsection 127(8) of the Act that the Temporary Order is extended as against Shallow Oil, O'Brien, Da Silva, and Grossman until the conclusion of the hearing on the merits in this matter;

IT IS HEREBY ORDERED pursuant to subsection 127(8) of the Act that the Temporary Order is extended against Gahunia until November 26, 2008;

IT IS HEREBY ORDERED pursuant to subsection 127(5) of the Act that Diadamo, McQuarrie, Wash, and Mankofsky cease trading in any securities until November 26, 2008, with the following exception:

Diadamo shall be permitted to trade in securities that are listed on a public exchange recognized by the Commission and only through his two existing personal trading accounts. Furthermore, any such trading by Diadamo shall be for his sole benefit and only through a dealer registered with the Commission.

IT IS FURTHER ORDERED that the hearing with respect to the Temporary Orders against Gahunia, Diadamo, McQuarrie, Wash, and Mankofsky in this matter is adjourned to November 25th, 2008, at 2:30 p.m.

DATED at Toronto this 19th day of June, 2008.

"David L. Knight"

"Carol S. Perry"

Rodney International et al. - s. 127(7)

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, c. S.5, AS AMENDED

AND

IN THE MATTER OF

RODNEY INTERNATIONAL,

CHOEUN CHHEAN (ALSO KNOWN AS

PAULETTE C. CHHEAN) AND

MICHAEL A. GITTENS (ALSO KNOWN AS

ALEXANDER M. GITTENS)

ORDER

(Section 127(7) of the Securities Act)

WHEREAS on June 4, 2008, the Ontario Securities Commission (the "Commission") made an order pursuant to sections 127(1) and (5) of the Securities Act, R.S.O. 1990, c. S.5, as amended, in respect of Rodney International ("Rodney"), Choeun Chhean (also known as Paulette C. Chhean) ("Chhean") and Michael A. Gittens (also known as Alexander M. Gittens) ("Gittens") (collectively, the "Respondents") that all trading by the Respondents shall cease and that the exemptions contained in Ontario securities law do not apply to the Respondents (the "Temporary Order");

AND WHEREAS on June 5, 2008, the Commission issued a Notice of Hearing to consider, amongst other things, the extension of the Temporary Order to be held on June 17, 2008 at 2:00 p.m.;

AND WHEREAS Staff of the Commission ("Staff") attended before the Commission on June 17, 2008 and made submissions, no one appearing for the Respondents;

AND WHEREAS Staff made reasonable effort to serve Gittens with a certified copy of the Temporary Order and the Notice of Hearing at his last known address;

AND WHEREAS Staff delivered a copy of the certified copy of the Temporary Order and the Notice of Hearing to the mailing address of Rodney, thereby effecting service on Rodney and Chhean;

AND WHEREAS the Commission is of the opinion that it is in the public interest to continue the Temporary Order;

IT IS ORDERED that:

1. the Temporary Order is continued until August 6, 2008; and

2. the hearing of this matter is adjourned to August 5, 2008 at 2:30 p.m.

DATED at Toronto this 17th day of June, 2008

"Wendell Wigle"

"Suresh Thakrar"

Prime Rate Capital Management LLP - s. 218 of the Regulation

Application for an order, pursuant to section 218 of the Regulation, exempting the Applicant from the requirement in section 213 of the Regulation that the Applicant be incorporated, or otherwise formed or created, under the laws of Canada or a province or territory of Canada, for the Applicant to be registered under the Act as a dealer in the category of limited market dealer.

Regulation Cited

R.R.O. 1990, Regulation 1015, am. to O.Reg. 500/06, ss. 213, 218.

IN THE MATTER OF

THE SECURITIES ACT, R.S.O. 1990,

CHAPTER S.5, AS AMENDED (the Act)

AND

IN THE MATTER OF

R.R.O. 1990, REGULATION 1015,

AS AMENDED (the Regulation)

AND

IN THE MATTER OF

PRIME RATE CAPITAL MANAGEMENT LLP

ORDER

(Section 218 of the Regulation)

UPON the application (the Application) of Prime Rate Capital Management LLP (the Applicant) to the Ontario Securities Commission (the Commission) for an order, pursuant to section 218 of the Regulation, exempting the Applicant from the requirement under section 213 of the Regulation that the Applicant be incorporated, or otherwise formed or created, under the laws of Canada or a province or territory of Canada , in order for the Applicant to be registered under the Act as a dealer in the category of limited market dealer (LMD);

AND UPON considering the Application and the recommendation of staff of the Commission;

AND UPON the Applicant having represented to the Commission that:

1. The Applicant is a partnership organized under the laws of England and Wales. The Applicant has its principal place of business at One Vine Street, London, UK W1J 0AH.

2. The Applicant is the manager of a number of AAA-rated liquidity investment funds sold to corporate and institutional clients. The Applicant is authorized and registered by the Financial Services Authority in the United Kingdom (the FSA).

3. The Applicant is applying to the Commission for registration as a non-resident LMD under the Act.

4. The Applicant is applying for registration as a limited market dealer in order to engage in the sales/marketing activities for units of certain UK investment funds.

5. Section 213 of the Regulation provides that a registered dealer that is not an individual must be a company incorporated, or a person formed or created, under the laws of Canada or a province or territory of Canada.

6. The Applicant is not resident in Canada and does not require a separate Canadian company in order to carry out its proposed limited market dealer activities in Ontario. It is more efficient and cost-effective to carry out those activities through the existing company.

7. Without the relief requested the Applicant would not meet the requirements of the Regulation for registration as a dealer in the category of limited market dealer as it is not a company incorporated, or a person formed or created, under the laws of Canada or a province or territory of Canada.

AND UPON being satisfied that to do so would not be prejudicial to the public interest;

IT IS ORDERED, pursuant to section 218 of the Regulation, and in connection with the registration of the Applicant as a dealer under the Act in the category of a LMD, section 213 of the Regulation shall not apply to the Applicant, provided that:

1. The Applicant appoints an agent for service of process in Ontario.

2. The Applicant shall provide to each client resident in Ontario a statement in writing disclosing the non-resident status of the Applicant, the Applicant's jurisdiction of residence, the name and address of the agent for service of process of the Applicant in Ontario, and the nature of risks to clients that legal rights may not be enforceable.

3. The Applicant will not change its agent for service of process in Ontario without giving the Commission 30 days' prior notice of such change by filing a new Submission to Jurisdiction and Appointment of Agent for Service of Process.

4. The Applicant and each of its registered directors or officers irrevocably and unconditionally submit to the non-exclusive jurisdiction of the judicial, quasi-judicial, and administrative tribunals of Ontario and any administrative proceedings in Ontario, in any proceedings arising out of or related to or concerning its registration under the Act or its activities in Ontario as a registrant.

5. The Applicant will not have custody of, or maintain customer accounts in relation to, securities, funds, and other assets of clients resident in Ontario.

6. The Applicant will inform the Director immediately upon it becoming aware:

(a) that it has ceased to be authorized and regulated by the FSA;

(b) of its registration in any other jurisdiction not being renewed or being suspended or revoked;

(c) that it is the subject of a regulatory proceeding or disciplinary action by any financial services or securities regulatory authority or self-regulatory authority;

(d) that the registration of its salespersons, officers or directors who are registered in Ontario have not been renewed or have been suspended or revoked in any Canadian or foreign jurisdiction; or

(e) that any of its salespersons, officers or directors who are registered in Ontario are the subject of a regulatory proceeding or disciplinary action by any financial services or securities regulatory authority or self-regulatory authority in any Canadian or foreign jurisdiction.

7. The Applicant will pay the increased compliance and case assessment costs of the Commission due to its location outside Ontario, including the cost of hiring a third party to perform a compliance review on behalf of the Commission.

8. The Applicant will make its books and records outside Ontario, including electronic records, readily accessible in Ontario, and will produce physical records for the Commission within a reasonable time if requested.

9. If the laws of the jurisdiction in which the Applicant's books and records are located prohibit production of the books and records in Ontario without the consent of the relevant client, the Applicant shall, upon a request by the Commission:

(a) so advise the Commission; and

(b) use its best efforts to obtain the client's consent to the production of the books and records.

10. The Applicant will, upon the Commission's request, provide a representative to assist the Commission in compliance and enforcement matters.

11. The Applicant and each of its registered directors or officers will comply, at the Applicant's expense, with requests under the Commission's investigation powers and orders under the Act in relation to the Applicant's dealings with Ontario clients, including producing documents and witnesses in Ontario, submitting to audit or search and seizure process or consenting to an asset freeze, to the extent such powers would be enforceable against the Applicant if the Applicant were resident in Ontario.

12. If the laws of the Applicant's jurisdiction of residence that are otherwise applicable to the giving of evidence or production of documents prohibit the Applicant or the witnesses from giving the evidence without the consent or leave of the relevant client or any third party, including a court of competent jurisdiction, the Applicant shall:

(a) so advise the Commission; and

(b) use its best efforts to obtain the client's consent to the giving of the evidence.

13. The Applicant will maintain appropriate registration and regulatory organization membership, in the jurisdiction of its principal operations, and if required, in its jurisdiction of residence.

June 20, 2008

American Resource Corporation Limited - s. 144

Headnote

Application by an issuer for an order revoking a cease trade order made by the Commission - Cease trade order issued as a result of the issuer's failure to file certain continuous disclosure documents required by Ontario securities law - Defaults subsequently remedied by bringing continuous disclosure filings up-to-date - Cease trade order revoked.

Statutes Cited

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 127, 144.

June 18, 2008

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, C. S.5, AS AMENDED

(the "Act")

AND

IN THE MATTER OF

AMERICAN RESOURCE CORPORATION LIMITED

ORDER

(Section 144)

WHEREAS the securities of American Resource Corporation Limited (the Company) are subject to a temporary cease trade order dated May 26, 2004 made by the Ontario Securities Commission (the Commission) pursuant to paragraph 2 of subsection 127(1) and subsection 127(5) of the Act, as extended by a cease trade order dated June 7, 2004 made by the Commission pursuant to paragraph 2 of subsection 127(1) and subsection 127(8) of the Act (collectively, the Cease Trade Order), directing that all trading in the securities of the Company cease until the Cease Trade Order is revoked;

AND WHEREAS the Company has applied to the Commission pursuant to section 144 of the Act for an order revoking the Cease Trade Order;

AND UPON the Company having represented to the Commission that:

1. The Company is a corporation incorporated by memorandum of association on August 27, 1981 and is governed by the Companies Act 1981 (Bermuda). Its registered office is at Canon's Court, 22 Victoria Street, P.O. Box HM 1179, Hamilton HM EX, Bermuda.

2. The Company is a merchant financing company.

3. The Company is a reporting issuer in each of the provinces of British Columbia, Alberta, Saskatchewan, Ontario and Quebec.

4. The authorized share capital of the Company consists of 20,000 common shares, of which 16,500 are currently outstanding, and 100,000,000 Class A non-voting shares, of which 88,353,500 are currently outstanding.

5. Canadian Express (International) Limited (Canadian Express International), an indirect wholly-owned subsidiary of Brookfield Asset Management Inc., currently owns 16,500 common shares in the capital of the Company, representing 100% of the total number of issued and outstanding common shares. Canadian Express International also currently owns 87,439,616 Class A non-voting shares in the capital of the Company, representing approximately 99% of the Class A non-voting shares.

6. No securities of the Company are traded on a stock exchange anywhere in the world.

7. The Cease Trade Order was issued due to the failure of the Company to file audited annual financial statements for its fiscal year ended December 31, 2003.

8. Securities of the Company are currently also subject to cease trade orders issued by the securities regulatory authorities in the provinces of British Columbia, Alberta and Quebec (collectively, the Other Cease Trade Orders). The British Columbia cease trade order was issued due to the failure of the Company to file comparative financial statements for its fiscal year ended December 31, 1996 and interim financial statements for the three month period ended March 31, 1997. The Alberta and Quebec cease trade orders were issued due to the failure of the Company to file audited annual financial statements for its fiscal year ended December 31, 2003 and interim financial statements for the period ended March 31, 2004. Concurrently with the Company's application for an order revoking the Cease Trade Order, the Company applied on March 27, 2008 for revocation of the Other Cease Trade Orders.

9. The comparative financial statements and management's discussion and analysis (MD&A) for the fiscal year ended December 31, 1996 were filed on SEDAR on December 5, 1997. The interim financial statements for the three month period ended March 31, 1997 were filed on SEDAR on December 18, 1997. The audited annual financial statements, MD&A and certificates relating thereto for the year ended December 31, 2003, and the interim financial statements and certificates relating thereto for the period ended March 31, 2004, were filed on SEDAR on August 11, 2004. The interim MD&A for the period ended March 31, 2004 was filed on SEDAR on October 20, 2004.

10. Certain continuous disclosure documents required to be filed under applicable securities laws subsequent to the Cease Trade Order were not filed in a timely manner.

11. The Company has now filed all continuous disclosure documents required to be filed with the relevant securities regulatory authorities.

12. The Company is not in default of any of its obligations as a reporting issuer under the Act or the rules and regulations made pursuant thereto.

13. The Company has paid all outstanding fees to the Commission, including all applicable activity and participation fees and late filing fees.

14. Upon the issuance of this revocation order, the Company will issue and file a news release and a material change report on SEDAR that announces the revocation of the Cease Trade Order and outlines the Company's future plans.

15. Other than the Other Cease Trade Orders, the Company has not previously been subject to another cease trade order issued by a Canadian securities regulatory authority within the 12-month period before the date of the Cease Trade Order.

16. The Company has complied with the annual meeting requirement in applicable legislation.

17. The Company is not considering, nor is it involved in any discussion relating to a reverse take-over, merger, amalgamation or other form of combination or transaction similar to any of the foregoing.

18. The Company has no securities, including debt securities, outstanding, other than the common shares and Class A non-voting shares.

19. The Company's SEDAR and SEDI profiles are up to date.

AND UPON considering the Application and the recommendation of the staff of the Commission;

AND UPON the Commission being satisfied that to do so would not be prejudicial to the public interest;

IT IS ORDERED, pursuant to section 144 of the Act that the Cease Trade Order is revoked.

Franchise Services Of North America Inc. - s. 144

Headnote

Section 144 -- full revocation of cease trade order upon remedying of defaults.

Statutes Cited

Securities Act, R.S.O., c. S.5, as am., ss. 127, 144.

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, CHAPTER S.5, AS AMENDED

(the "Act")

AND

IN THE MATTER OF

FRANCHISE SERVICES OF NORTH AMERICA INC.

ORDER

(Section 144)

WHEREAS the securities of Franchise Services of North America Inc. (the "Filer") are subject to a temporary cease trade order made by the Director on February 7, 2008 under paragraph 2.1 of subsection 127(1) and subsection 127(5) of the Act, as extended by an order made by the Director on February 19, 2008 under paragraph 2 and paragraph 2.1 of subsection 127(1) of the Act (together "the Cease Trade Order"), directing that all trading in and acquisitions of the securities of the Filer, whether direct or indirect, cease until the Ontario Cease Trade Order is revoked by the Director;

AND WHEREAS the Filer has applied to the Ontario Securities Commission (the "Commission") pursuant to section 144 of the Act (the "Application") for a revocation of the Ontario Cease Trade Order;

AND UPON the Filer has represented to the Commission that:

1. The Filer was incorporated under the Canadian Business Corporations Act on August 27, 1998.

2. The Filer is a reporting issuer under the securities legislation of the provinces of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario and Nova Scotia.

3. The Filer's authorized capital consists of an unlimited number of common shares (the "Common Shares"), and an unlimited number of preferred shares, of which 62,820,426 Common Shares were issued and outstanding as at February 25, 2008.

4. The Cease Trade Order was issued due to the failure of the Filer to file with the Commission annual audited financial statements for the year ended September 30, 2007 by January 28, 2008 as required under the Act.

5. The Filer is also subject to a cease trade orders issued by the British Columbia Securities Commission (BCSC), and the Manitoba Securities Commission (MSC). The Alberta Securities Commission issued an order revoking the Alberta cease trade order on June 19, 2008. The Filer has concurrently applied to the BCSC and MSC for revocations of the cease trade orders.

6. On February 25, 2008, the Filer filed through SEDAR its audited financial statements for the year ended September 30, 2007 together with management's discussion and analysis and certificates relating thereto. The Filer has now brought its continuous disclosure filings up to date, has paid all outstanding filing fees and has complied with National Instrument 51-102 Continuous Disclosure Obligations.

7. Other than the Cease Trade Orders, the Filer has not previously been subject to a cease trade order.

8. The Common Shares of the Filer are listed on the TSX Venture Exchange under the symbol "FSN".

AND WHEREAS considering the Application and the recommendation of the staff of the Commission;

AND WHEREAS the Director being satisfied that it would not be prejudicial to the public interest to revoke the Ontario Cease Trade Order;

IT IS ORDERED, pursuant to section 144 of the Act, that the Ontario Cease Trade Order is revoked.

DATED this 23rd day of June, 2008.

Aon Securities Corporation - s. 147 of the Act and s. 6.1 of OSC Rule 13-502 Fees

Headnote

Relief from section 6.5 of OSC Rule 45-501 Ontario Prospectus Exemptions - Relief granted to applicant dealer from s. 6.5 for forward-looking information in offering memoranda provided to accredited investors in connection with private placements by foreign issuer - such private placements are generally small part of larger distributions of securities by foreign issuers outside Canada pursuant to foreign offering documents - relief subject to conditions - Relief also granted from section 4.1 of OSC Rule 13-502 Fees.

Applicable Legislative Provisions

Securities Act (Ontario), s. 147.

OSC Rule 13-502 Fees, s. 4.1.

OSC Rule 45-501 Ontario Prospectus Exemptions, s. 6.5.

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, c. S.5, AS AMENDED

AND

IN THE MATTER OF

AON SECURITIES CORPORATION

ORDER

(Section 147 of the Act

and

Section 6.1 of Rule 13-502 Fees)

WHEREAS effective December 31, 2007 Ontario Securities Commission Rule 45-501 Ontario Prospectus Exemptions ("Rule 45-501") was amended to, among other things, require that an offering memorandum used in Ontario which contains forward-looking information comply with certain new provisions of National Instrument 51-102 Continuous Disclosure Obligations ("NI 51-102");

AND UPON the application (the "Application") of Aon Securities Corporation (the "Applicant") to the Ontario Securities Commission (the "Commission") for an order pursuant to Section 147 of the Securities Act, R.S.O. 1990, c. S.5, as amended (the "Act") to provide that Section 6.5 of Rule 45-501 shall not be applicable to an offering memorandum of a non-Canadian issuer that is not a reporting issuer in Ontario (each, a "Foreign Issuer") provided to a prospective purchaser in Ontario by the Applicant.

AND UPON the Application of the Applicant to the Director for an exemption pursuant to Section 6.1 of OSC Rule 13-502 Fees ("Rule 13-502") to provide that Section 4.1 of Rule 13-502 shall not be applicable to the Applicant;

AND UPON the Applicant having represented to the Commission that:

1. The Applicant is incorporated under the laws of the State of New York and is registered in the United States as a broker-dealer with the Securities and Exchange Commission and in fifty (50) states of the United States and the District of Columbia.

2. The Applicant is registered with the OSC as a dealer in the category of "international dealer".

3. The Applicant offers and sells securities of Foreign Issuers on a private placement basis to purchasers in Ontario who are "designated institutions" relying on the "accredited investor" prospectus exemption under Section 2.3 of National Instrument 45-106 Prospectus and Registration Exemptions.

4. The offerings by private placement of securities of a Foreign Issuer (each, a "Foreign Issuer Private Placement") in Ontario are part of a distribution of securities of a Foreign Issuer offered primarily outside of Canada pursuant to a prospectus, offering memorandum or other offering document (each, a "Foreign Offering Document") prepared in accordance with the requirements of the United States or other non-Canadian jurisdictions.

5. In a Foreign Issuer Private Placement, a Foreign Offering Document is generally accompanied by a "wrapper" or is otherwise supplemented with disclosure prescribed by Ontario securities law and with disclosure of certain additional information for the benefit of Ontario investors and provided by the Applicant to Ontario prospective purchasers as a Foreign Issuer's offering memorandum within the meaning of Section 1(1) of the Act.

6. In a Foreign Issuer Private Placement, a Foreign Issuer that intends to rely on the civil liability safe harbour with respect to forward-looking statements provided by Section 21.E of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") or Section 27A of the U.S. Securities Act of 1933, as amended (the "U.S. Securities Act"), will generally include in its Foreign Offering Document disclosure with respect to "forward-looking statements" within the meaning of Section 21E of the Exchange Act and Section 27A of the U.S. Securities Act to enable the Foreign Issuer to rely on the civil liability safe harbour provided with respect to forward-looking statements.

7. Other Foreign Issuers conducting a Foreign Issuer Private Placement that include forward looking information in their Foreign Offering Document will generally include disclosure of related material risk factors potentially affecting the forward looking information.

8. The disclosure with respect to forward looking information contained in a Foreign Offering Document used in a Foreign Issuer Private Placement in Ontario may, but will not necessarily, include all of the disclosure prescribed for offering memoranda by section 6.5 of Rule 45-501.

AND UPON considering the Application and the recommendation of the staff of the Commission;

AND UPON the Commission being satisfied that it would not be prejudicial to the public interest to make this Order;

IT IS ORDERED, pursuant to section 147 of the Act, that offering memoranda delivered by or on behalf of the Applicant to prospective purchasers that are accredited investors in connection with Foreign Issuer Private Placements shall not be subject to Section 6.5 of Rule 45-501, provided that a Foreign Offering Document contains or is accompanied by either:

a. the disclosure required in order for an issuer to rely on the safe harbour provided by Section 21E of the Exchange Act or by Section 27A of the U.S. Securities Act with respect to forward looking information, whether or not such safe harbour is applicable; or

b. a statement that "This offering is being made by a non-Canadian issuer using disclosure documents prepared in accordance with non-Canadian securities laws. Prospective purchasers should be aware that these requirements may differ significantly from those of Ontario. The forward looking information included or incorporated by reference herein may not be accompanied by the disclosure and explanations that would be required of a Canadian issuer under Ontario securities law."

DATED at Toronto, this 5th day of June, 2008.

AND UPON the Director being satisfied that it would not be prejudicial to the public interest to make this Order.

IT IS ORDERED, pursuant to Section 6.1 of Rule 13-502, that the Application shall not be subject to Section 4.1 of Rule 13-502.

DATED at Toronto, this 5th day of June, 2008.

Stanton De Freitas - ss. 127(1), 127(5), 127(8)

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, c. S.5, AS AMENDED

AND

IN THE MATTER OF

STANTON DE FREITAS

TEMPORARY ORDER

(Sections 127(1), (5) and (8))

WHEREAS on May 30, 2007, the Commission made a temporary order, pursuant to subsections 127(1) and (5) of the Securities Act, R.S.O. 1990, c. S.5., as amended (the "Act"), that trading in any securities by Stanton De Freitas ("De Freitas") shall cease and that any exemptions contained in Ontario securities law do not apply to him (the "Temporary Order");

WHEREAS the Temporary Order has been modified and extended from time to time by order of the Commission;

AND WHEREAS the hearing to extend the Temporary Order, as modified and extended by the Commission, was heard by the Commission on June 24, 2008;

AND UPON HEARING submissions from counsel for Staff and counsel for De Freitas, and with the consent of De Freitas;

AND WHEREAS the Commission is of the opinion that it is in the public interest to make this order;

IT IS ORDERED THAT:

1. the hearing to extend the Temporary Order, as modified, is adjourned until September 9, 2008 at 1:00 p.m.; and

2. pursuant to subsection 127(8) of the Act, the Temporary Order, as modified, is extended until September 10, 2008 or until further order of the Commission.

DATED at Toronto this 24th day of June, 2008.

"James Turner"

"Suresh Thakrar"

David Watson et al. - ss. 127(1), 127(5), 127(8)

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, c. S.5, AS AMENDED

AND

IN THE MATTER OF

DAVID WATSON, NATHAN ROGERS, AMY GILES,

JOHN SPARROW, LEASESMART, INC.,

ADVANCED GROWING SYSTEMS, INC.

(a Florida corporation), PHARM CONTROL LTD.,

THE BIGHUB.COM, INC.,

UNIVERSAL SEISMIC ASSOCIATES INC.,

POCKETOP CORPORATION, ASIA TELECOM LTD.,

INTERNATIONAL ENERGY LTD.,

CAMBRIDGE RESOURCES CORPORATION,

NUTRIONE CORPORATION AND

SELECT AMERICAN TRANSFER CO.

TEMPORARY ORDER

(Sections 127(1), (5) and (8))

WHEREAS, on May 18, 2007, the Ontario Securities Commission (the "Commission") made an order, pursuant to subsections 127(1) and (5) of the Securities Act, R.S.O. 1990, c. S.5., as amended (the "Act"), that:

i) trading in the securities of the following companies shall cease and that any exemptions contained in Ontario securities law do not apply to them: The Bighub.Com, Inc. ("Bighub.Com"); Advanced Growing Systems, Inc. (a Florida corporation) ("Advanced Growing Systems"); LeaseSmart, Inc. ("LeaseSmart"); Cambridge Resources Corporation ("Cambridge Resources"); NutriOne Corporation ("NutriOne"); International Energy Ltd. ("International Energy"); Universal Seismic Associates Inc. ("Universal Seismic"); Pocketop Corporation ("Pocketop"); Asia Telecom Ltd. ("Asia Telecom"); and Pharm Control Ltd. ("Pharm Control"); and

ii) all trading in any securities by Jason Wong, David Watson, Nathan Rogers, Amy Giles, John Sparrow and Kervin Findlay shall cease;

AND WHEREAS on May 22, 2007, by further order of the Commission made pursuant to subsections 127(1) and (5) of the Act, it was ordered that trading in any securities by Select American Transfer Co. ("Select American") shall cease and that any exemptions contained in Ontario securities law do not apply to it;

AND WHEREAS the temporary orders dated May 18 and May 22, 2007 (the "Temporary Orders") have been modified and extended from time to time by the Commission;

AND WHEREAS the hearing to extend the Temporary Orders, as modified and extended by the Commission, was heard by the Commission on June 24, 2008;

AND UPON HEARING submissions from counsel for Staff of the Commission and with the consent of NutriOne and the consent of Pharm Control, with no one appearing for David Watson, Nathan Rogers, Amy Giles, John Sparrow, LeaseSmart, Cambridge Resources, Advanced Growing Systems, The Bighub.Com, Universal Seismic, Pocketop, International Energy, Select American and Asia Telecom;

AND WHEREAS the Commission is of the opinion that it is in the public interest to make this order;

IT IS ORDERED THAT:

1. the hearing to extend the Temporary Orders, as modified, is adjourned until September 9, 2008 at 1:00 p.m.; and

2. pursuant to subsection 127(8) of the Act, the Temporary Orders, as modified, are extended until September 10, 2008 or until further order of the Commission.

DATED at Toronto this 24th day of June, 2008.

"James Turner"

"Suresh Thakrar"

Chapter 3 -- Reasons: Decisions, Orders and Rulings

Roger D. Rowan et al. - s. 127

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, CHAPTER S.5, AS AMENDED

AND

IN THE MATTER OF

ROGER D. ROWAN, WATT CARMICHAEL INC.,

HARRY J. CARMICHAEL, AND

G. MICHAEL McKENNEY

REASONS AND DECISION

(Section 127 of the Securities Act)

REASONS AND DECISION

I. OVERVIEW

A. Background to the Proceeding

[1] This was a hearing before the Ontario Securities Commission (the "Commission") pursuant to sections 127 and 127.1 of the Securities Act, R.S.O. 1990, c. S.5, as amended (the "Act") to consider whether it is in the public interest to make an order against the respondents Roger D. Rowan ("Rowan"), Watt Carmichael Inc. ("Watt Carmichael"), Harry J. Carmichael ("Carmichael") and G. Michael McKenney ("McKenney") (collectively, the "Respondents").

[2] This matter arose out of a Notice of Hearing issued by the Commission on July 28, 2006 in relation to a Statement of Allegations issued by Staff of the Commission ("Staff") on that date with respect to the Respondents and Eugene N. Melnyk ("Melnyk").

[3] On June 5, 2007, an Amended Statement of Allegations was issued by Staff in which the allegations against Melnyk were withdrawn. The reason for the withdrawal was that, on May 18, 2007, the Commission approved a Settlement Agreement between Staff and Melnyk, who had originally been named as a respondent in this proceeding (the "Melnyk Settlement Agreement").

B. Respondents

i) Roger D. Rowan

[4] Rowan was a director of Biovail Corporation ("Biovail") from 1997 until his resignation in 2005, and thus, was an insider of Biovail during that time. He also served as a member of the Audit Committee of Biovail (the "Audit Committee") during his appointment as a director of Biovail.

[5] Rowan is, and was at all material times, the President and Chief Operating Officer ("COO") of Watt Carmichael. He owned approximately 29% of Watt Carmichael as at December 31, 2005. At all material times, Rowan was the registered representative at Watt Carmichael for the Conset, Congor and Southridge Accounts, described in paragraph 20 below.

ii) Watt Carmichael Inc.

[6] Watt Carmichael is, and was at all material times, a broker and investment dealer registered under the Act.

[7] Watt Carmichael is also a participating organization of the Toronto Stock Exchange (the "TSX") and is a member of the Investment Dealers Association (the "IDA").

iii) Harry J. Carmichael

[8] Carmichael is, and was at all material times, the Chairman and Chief Executive Officer ("CEO") of Watt Carmichael and a registered portfolio manager. As at December 31, 2005, Carmichael owned approximately 44% of Watt Carmichael. He also holds the position of Ultimate Designated Person ("UDP") for Watt Carmichael.

iv) G. Michael McKenney

[9] McKenney is, and was at all material times, the Chief Financial Officer ("CFO") and the Chief Compliance Officer ("CCO") of Watt Carmichael.

C. The Allegations

[10] Staff alleges that the Respondents compromised the integrity of the capital markets through their activities in relation to the trading of Biovail securities held by certain trusts in 2002, 2003 and 2004. The specific allegations against the Respondents are as follows:

(a) While an insider of Biovail, Rowan executed numerous trades in Biovail Securities in the Congor, Conset and Southridge Accounts in 2002, 2003, and 2004 and failed to file any insider reports in respect of these trades contrary to subsection 107(2) of the Act;

(b) Contrary to the public interest and contrary to Ontario securities law, Rowan failed to provide complete and accurate information to Biovail concerning the number of Biovail common shares over which he exercised control or direction. As a result, the disclosure contained in Biovail's management proxy circulars in 2002, 2003 and 2004 was misleading or untrue or did not state facts that were required to be stated or that were necessary to make the statements in the circulars not misleading;

(c) Contrary to the public interest, Rowan engaged in discretionary trading of Biovail securities in the Conset, Congor and Southridge Accounts in 2002 and 2003 during each of the Biovail blackout periods;

(d) Rowan traded Biovail securities held in the Congor, Conset and Southridge Accounts at times when he had knowledge of material undisclosed information contained in Biovail management reports contrary to subsection 76(1) of the Act;

(e) Rowan purported to exercise discretionary trading authority in the Southridge Account when he did not have such discretionary authority, contrary to the Know Your Client requirements set out in subsection 1.5(1) of OSC Rule 31-505 -- Conditions of Registration, (1999), 22 O.S.C.B. 731 and (2003) 26 O.S.C.B. 7170, referred to as the "Know Your Client" ("KYC") rule ("OSC Rule 31-505"), and contrary to the public interest;

(f) Contrary to the public interest, Rowan and Watt Carmichael provided responses to the IDA's request for information as to the identity of the beneficiaries of the Congor and Conset Trusts which they knew or ought to have known were misleading or untrue or did not state facts that were required to be stated to make their statements not misleading;

(g) Contrary to the public interest, Rowan made statements to Staff as to the identity of the beneficiaries of the Conset Trust which he knew or ought to have known were misleading or untrue or did not state facts that were required to be stated to make his statements not misleading; and

(h) Contrary to the public interest, Watt Carmichael did not adequately supervise Rowan's trading in Biovail securities in the Congor, Conset and Southridge Accounts. Contrary to the public interest, Carmichael, in his capacity as Chairman and CEO, and McKenney, in his capacity as Chief Compliance Officer, failed to adequately supervise trading by Rowan and to address conflicts of interest despite indications that supervision was required.

II. AGREED FACTS

[11] The following paragraphs 12 to 34, inclusive, are taken from the Statement of Agreed Facts that was entered into evidence at the outset of the hearing, except for paragraphs 15, 16, 19, 33 and 34, which were not disputed by the Respondents.

A. Eugene N. Melnyk

[12] Melnyk was a director of Biovail from 1994 until 2007. Melnyk was CEO and Chairman of the Board of Biovail from December 2001 until October 2004. On June 30, 2007, Melnyk resigned as a director of Biovail for one year pursuant to the Melnyk Settlement Agreement. Melnyk was, at all material times, an insider of Biovail.

B. Biovail Corporation

[13] Biovail is, and was at all material times, a reporting issuer in Ontario within the meaning of the Act. Biovail's securities are listed on the TSX and on the New York Stock Exchange.

C. The Cayman Trusts

[14] In 1996, four trusts were established by Melnyk in the Cayman Islands. They are: the Conset Trust, the Congor Trust, the Southridge Trust (collectively, the "Trusts") and the Archer Trust.

[15] Melnyk was the settlor of the Trusts. Melnyk was also a beneficiary of the Conset, Congor and Southridge Trusts, along with certain family members and others.

[16] On July 24, 2000, Melnyk revocably disclaimed his interest in the Conset and Congor Trusts.

[17] The trustees for the Trusts were institutional trust administrators in the Cayman Islands (the "Trustees").

[18] Certain assets of the Trusts were held by investment companies and consisted, for the most part, of Biovail securities. The investment companies were: Conset Investments Limited ("Conset"), Congor Investments Limited ("Congor"), Southridge Management Limited ("Southridge") and Archer Investments Limited (collectively, the "Investment Companies"). The Investment Companies were incorporated under the laws of the Cayman Islands.

[19] In 1996, Melnyk caused the transfer of approximately 4,900,000 Biovail shares to the Investment Companies. These shares represented about 19% of the outstanding shares of Biovail on the market at that time.

D. The Trust Accounts

[20] In 1996, trading accounts were opened at Watt Carmichael for Congor (the "Congor Account"), Conset (the "Conset Account"), Southridge (the "Southridge Account") and Archer (the "Archer Account"). The Archer Account was later transferred to BMO Nesbit Burns, and has no relevance to these proceedings.

[21] The Congor, Conset and Southridge Accounts at Watt Carmichael are referred to collectively as the "Trust Accounts".

[22] Rowan was the registered representative for the Trust Accounts at Watt Carmichael. He was also the registered representative for the personal trading accounts of Melnyk and his wife at Watt Carmichael.

[23] At all material times, Rowan was an insider of Biovail.

[24] The Congor and Conset Accounts were documented as discretionary trading accounts. The Southridge Account was not documented as a discretionary trading account, although Southridge corporate resolutions granted discretionary authority.

[25] Biovail repurchased its own shares during its 2002 normal course issuer bid through a brokerage account held at Watt Carmichael. Rowan was the registered representative for Biovail's account at Watt Carmichael.

E. Trades from the Trust Accounts

[26] During 2002, the following trades occurred in Biovail securities in the Trust Accounts:

(a) acquisitions of approximately 4,800,000 Biovail common shares at a cost of approximately U.S. $170,000,000, and dispositions of approximately 4,800,000 Biovail common shares for proceeds of approximately U.S. $160,000,000 in the Conset Account;

(b) acquisitions of 9,000 Biovail call options (in respect of common shares of Biovail) at a cost of approximately U.S. $4,000,000 in the Conset Account;

(c) acquisitions of approximately 1,700,000 Biovail common shares at a cost of approximately U.S. $70,000,000, and dispositions of approximately 1,500,000 Biovail common shares for proceeds of approximately U.S. $60,000,000 in the Congor Account;

(d) acquisitions of approximately 600,000 Biovail common shares at a cost of approximately U.S. $25,000,000, and dispositions of approximately 700,000 Biovail common shares for proceeds of approximately U.S. $30,000,000 in the Southridge Account; and

(e) acquisitions of approximately 3,500 Biovail call options (in respect of common shares of Biovail) at a cost of approximately U.S. $2,000,000 in the Southridge Account.

[27] During 2003, the following trades occurred in Biovail securities in the Trust Accounts:

(a) acquisitions of approximately 7,800,000 Biovail common shares at a cost of approximately U.S. $265,000,000, and dispositions of approximately 8,800,000 Biovail common shares for proceeds of approximately U.S. $290,000,000 in the Conset Account;

(b) acquisitions of approximately 12,000 Biovail call options (in respect of Biovail common shares) at a cost of approximately U.S. $4,000,000 in the Conset Account;

(c) the exercise of Biovail call options to purchase 900,000 Biovail common shares at a cost of approximately U.S. $25,000,000 in the Conset Account;

(d) acquisitions of approximately 25,000 Biovail common shares at a cost of approximately U.S. $1,000,000, and dispositions of approximately 650,000 Biovail common shares for proceeds of approximately U.S. $25,000,000 in the Congor Account; and

(e) acquisitions of approximately 800,000 Biovail common shares at a cost of approximately U.S. $25,000,000, and dispositions of approximately 800,000 Biovail common shares for proceeds of approximately U.S. $25,000,000 in the Southridge Account.

[28] During 2004, the following trades occurred in Biovail securities in the Trust Accounts:

(a) acquisitions of approximately 150,000 Biovail common shares at a cost of approximately U.S. $2,000,000, and dispositions of approximately 350,000 Biovail common shares for proceeds of approximately U.S. $6,000,000 in the Conset Account;

(b) dispositions of 1,700 Biovail common shares for proceeds of approximately U.S. $30,000 in the Congor Account; and

(c) dispositions of approximately 375,000 Biovail common shares for proceeds of approximately U.S. $8,000,000 in the Southridge Account.

F. Commissions From Trading in the Trust Accounts

[29] During 2002, trading in the Trust Accounts generated approximately $900,000 in commissions for Watt Carmichael.

[30] In 2003, trading in the Trust Accounts generated approximately $1,400,000 in commissions for Watt Carmichael.

[31] In 2004, trading in the Trust Accounts generated approximately $50,000 in commissions for Watt Carmichael.

G. Insider Trading Reports

[32] Rowan did not file any insider trading reports under section 107 of the Act relating to the trading of Biovail securities in the Congor, Conset, or Southridge Accounts. He did, however, file reports under section 107 of the Act in relation to trades of his personal holdings in Biovail.

H. Biovail Management Information Circulars

[33] Biovail prepared Management Information Circulars in connection with the solicitation of proxies for its annual general meetings of shareholders ("Management Information Circulars"). The following table shows:

(a) the number of Biovail common shares disclosed in such circulars for 2002, 2003 and 2004 as being beneficially owned directly or indirectly by Rowan or over which he exercised direction and control; and

(b) the additional Biovail common shares held in the Trust Accounts for which Rowan was the registered representative which were not disclosed in the Management Information Circulars.

[34] The Biovail holdings disclosed in the 2002, 2003 and 2004 Management Information Circulars included securities held in the Conset Account but not securities held in the Congor or Southridge Accounts.

III. ISSUES

[35] The matter before us raises the following issues:

(a) Whether Rowan breached section 107 of the Act by failing to file insider reports relating to his trades in Biovail securities in the Trust Accounts;

(b) Whether Rowan engaged in conduct contrary to the public interest and contrary to Ontario securities law by failing to provide complete and accurate information to Biovail concerning the number of Biovail securities over which he exercised control or direction;

(c) Whether Rowan engaged in conduct contrary to the public interest by engaging in discretionary trading in Biovail securities in the Trust Accounts during Biovail's blackout periods?

(d) Whether Rowan breached section 76 of the Act by trading in Biovail securities in the Trust Accounts while he was in possession of material undisclosed information concerning Biovail;

(e) Whether Rowan engaged in unauthorized discretionary trading in the Southridge Account, contrary to OSC Rule 31-505 and contrary to the public interest;

(f) Whether Rowan and Watt Carmichael acted contrary to the public interest by misleading the IDA in responding to inquiries regarding the identity of the beneficiaries of the Conset and Congor Accounts;

(g) Whether Rowan acted contrary to the public interest by misleading Staff in response to its inquiries as to the beneficiaries of the Conset Trust;

(h) Whether Watt Carmichael, McKenney and Carmichael failed to adequately supervise Rowan's trading in Biovail securities in the Trust Accounts, contrary to OSC Rule 31-505, IDA Regulation 1300.2 and IDA Policy No. 2; and

(i) Whether the conduct of the Respondents was contrary to the public interest.

IV. WITNESSES

[36] Staff called ten witnesses to testify at the hearing.

[37] John Miszuk ("Miszuk"), the Vice-President, Controller and Assistant Secretary of Biovail, was the lead contact person for the Audit Committee, providing materials to the Audit Committee in 2002 and 2003 and preparing minutes of Audit Committee meetings.

[38] Arlene Fong ("Fong"), is Vice-President Finance of Biovail Laboratories International ("Biovail Laboratories"), which is a wholly owned subsidiary of Biovail located in Barbados. She was a controller at Biovail Laboratories at all material times.

[39] Michael Peter Foley ("Foley"), is currently a professional trader in Barbados for Trimel Investments, a holding company that belongs to Melnyk. From 1999 until 2004, he was a senior trader at Watt Carmichael, supervising twelve sales people and a second trader. He placed most of Rowan's trades.

[40] Michelle Garraway ("Garraway") was the corporate law clerk for Biovail responsible for compliance for insider trading, working on management information circulars and for completing other securities compliance and filings.

[41] Kathie Johnston, a sales compliance officer at the IDA, and Chris Dimitropoulos ("Dimitropoulos"), a manager in the sales compliance department at the IDA, participated in the IDA's sales compliance review of Watt Carmichael in 1999.

[42] Ken Cancellara ("Cancellara"), was the corporate secretary and a senior vice-president of Biovail, and Biovail's General Counsel (later Chief Legal Officer) during the material period.

[43] Guenther Kleberg has acted as Chief Compliance Officer for Merrill Lynch Canada, Wood Gundy, CIBC Securities Inc. and CIBC Investment Services Inc. He was qualified as an expert to give opinion evidence on brokerage practices to meet industry standards in the area of compliance.

[44] Fred Fitzsimmons ("Fitzsimmons") was the lead investigator for Staff.

[45] Rose De Francesca ("De Francesca") was Rowan's assistant from 1999 to 2001.

[46] The Respondents Rowan, Carmichael and McKenney testified, and two other witnesses were also called on behalf of the Respondents.

[47] Shabbir Jeraj ("Jeraj") was a section manager in the credit risk department of the National Bank Correspondent Network ("NBCN"), which succeeded First Marathon Securities ("First Marathon") as Watt Carmichael's carrying broker.

[48] Mark Thompson ("Thompson") joined Biovail in 2001 as associate general counsel, corporate affairs.

V. ANALYSIS

A. Introduction

[49] The following are the unanimous reasons and decision of the Panel, except that Commissioner Thakrar dissents with respect to Part H (Did Rowan conduct unauthorized discretionary trading in the Southridge Account?), Part I (Did Rowan and Watt Carmichael mislead the IDA in providing an incomplete response to inquiries regarding Melnyk's interest in the Trust Accounts?), and Part J (Did Rowan mislead the Commission?).

B. Overall Objectives of the Act

[50] When considering the issues arising from this proceeding, the Panel must consider carefully the purposes of securities regulation. As set out in section 1.1 of the Act, the Commission's mandate is to ensure the protection of the public interest to achieve the following goals:

(a) to provide protection to investors from unfair, improper or fraudulent practices; and

(b) to foster fair and efficient capital markets and confidence in capital markets.

[51] In pursuing these goals, the Commission must consider fundamental principles as stated in s. 2.1 of the Act, the relevant parts of which are as follows:

2.1 In pursuing the purposes of this Act, the Commission shall have regard to the following fundamental principles:

(a) Balancing the importance to be given to each of the purposes of this Act may be required in specific cases.

(b) The primary means for achieving the purposes of this Act are,

i. requirements for timely, accurate and efficient disclosure of information,

ii. restrictions on fraudulent and unfair market practices and procedures, and

iii. requirements for the maintenance of high standards of fitness and business conduct to ensure honest and responsible conduct by market participants.

[52] The preamble to subsection 127(1) of the Act states:

The Commission may make one or more of the following orders if in its opinion it is in the public interest to make the order or orders.

[53] This gives the Commission authority to intervene in Ontario's capital markets when it is in the public interest to do so. The legislature clearly intended that the Commission have a very wide discretion in such matters, as the permissive language of subsection 127(1) allows the Commission to determine whether and how to intervene in a particular case.

[54] In Committee for the Equal Treatment of Asbestos Minority Shareholders v. Ontario (Securities Commission) ("Asbestos"), the Supreme Court of Canada observed that the breadth of the Commission's discretion is "evident in the range and potential seriousness of the sanctions it can impose under section 127(1) of the Act" (at para. 39). The Court described the Commission's public interest jurisdiction as follows (at para. 36):

The purpose of the commission's public interest jurisdiction is neither remedial nor punitive; it is protective and preventive, intended to be exercised to prevent likely future harm to Ontario's capital markets. The past conduct of offending market participants is relevant but only to assessing whether their future conduct is likely to harm the integrity of the capital markets.

(Committee for the Equal Treatment of Asbestos Minority Shareholders v. Ontario (Securities Commission) (2001), 199 D.L.R. (4th) 577 (S.C.C.), at para. 39 and 36).

[55] In Pezim v. British Columbia (Superintendent of Brokers), the Supreme Court stated:

In reading these powerful provisions, it is clear that it was the legislature's intention to give the Commission a very broad discretion to determine what is in the public's interest. To me, this is an additional basis for judicial deference.

(Pezim v. British Columbia (Superintendent of Brokers), (1994), 114 D.L.R. (4th) 385 (S.C.C.) at para. 71.

[56] Further, the Commission has discretion under section 127 of the Act to make an order against a respondent, even where no specific breach of the Act is established (Re Canadian Tire Corp. (1987), 10 O.S.C.B. 858 at 930-931; aff'd (1987), 59 O.R. (2d), 79 (Div. Ct.)).

[57] It is the function and duty of the Commission to form an opinion as to the public interest according to the circumstances of the case before it. The Commission has a particularly broad latitude to form an opinion as to the public interest when assessing the conduct of a registrant (Gordon Capital Corp. v. Ontario Securities Commission), [1991] O.J. No. 934 (Div. Ct) at 7-8; Re Gordon Capital Corp. (1990), 13 O.S.C.B. 2035).

[58] Having set out the purposes of the Act, the Commission's mandate and the Commission's jurisdiction under section 127 of the Act, we now turn to our analysis of the alleged breaches of the Act and conduct contrary to the public interest.

C. The Standard of Proof

[59] In this proceeding, Staff makes serious allegations against the Respondents such as insider trading and misleading the IDA and the Commission. Accordingly, we recognize that while the standard of proof is the civil standard of balance of probabilities, the degree of proof required is at the high end of the spectrum of regulatory proceedings.

[60] The degree of proof required in this proceeding is clear and convincing proof based on cogent evidence as articulated in Investment Dealers Association of Canada v. Boulieris:

The degree of proof required in disciplinary proceedings involving a registrant is such that before a tribunal reaches a conclusion of fact, the tribunal must be reasonably satisfied that the fact occurred; and whether the tribunal is so satisfied depends on the totality of the circumstances including the nature and consequences of the facts to be proved, the seriousness of an allegation made, and the gravity of the consequences that will flow from a particular finding. See Bernstein v. College of Physicians & Surgeons (Ontario) (1977), 15 O.R. (2d) 447 (Ont. Div. Ct.), at 470; and Coates v. Ontario (Registrar of Motor Vehicle, Dealers & Salesman) (1988), 65 O.R. (2d) 526 (Ont. Div. Ct.), at 536.

Bernstein stands for the proposition that grave charges against a person cannot be established to the reasonable satisfaction of a discipline committee by fragile or suspect testimony. The evidence to establish the charges have [sic] to be of such quality and quantity as to lead a discipline committee acting with care and caution to the fair and reasonable conclusion that the person is guilty of those charges. The degree of proof required must be nothing short of clear and convincing and based upon cogent evidence which is accepted by the tribunal. See Bernstein at 485 and Coates at 536.

(Footnotes omitted, Investment Dealers Association of Canada v. Boulieris (2004), 27 O.S.C.B. 1597 at paras. 33 and 34; aff'd [2005] O.J. No. 1984 (Div. Ct.))

[61] This standard of proof was also applied in Re ATI Technologies Inc., an insider trading case.:

While the standard of proof in administrative proceedings is the civil standard of the balance of probabilities, Staff conceded that, this being an alleged breach of subsection 76(1) of the Act, it could only discharge its burden by clear and convincing proof based on cogent evidence.

This standard of proof was recently affirmed in Investment Dealers Assn. of Canada v. Boulieris (2004), 27 O.S.C.B. 1597 (Ont. Securities Comm.) at paras. 33 and 34, affirmed Investment Dealers Assn. of Canada v. Boulieris, [2005] O.J. No. 1984 (Ont. Div. Ct.) where the Commission considered the standard required for proving a serious complaint against a person. The Commission noted in that case that the standard of proof and the nature of the evidence which is required to meet that standard, are integral to the duty of administrative tribunals to provide a fair hearing.

We accept, as a matter of a fundamental fairness, that reliable and persuasive evidence is required to make adverse findings where those findings will have serious consequences for a respondent.

(Footnotes omitted, ATI Technologies Inc., Re, 2005 CarswellOnt 5054, 28 O.S.C.B. 8558, at paras. 13-15.)

D. Did Rowan breach section 107 of the Act by failing to file insider reports relating to his trades in Biovail securities in the Trust Accounts?

i) Submissions

Staff

[62] Staff alleges that Rowan, as an insider of Biovail, was required to file insider trading reports with regard to trades in Biovail securities held in accounts for which he had discretionary trading authority, though he was not the beneficial owner of the securities.

[63] There is no suggestion in this case that Rowan had direct or indirect legal or beneficial ownership of the securities in issue. According to Staff, an insider can have control or direction over securities of which the insider is not the beneficial owner if the insider has voting power or investment power. Because the Conset and Congor Accounts were discretionary accounts and Rowan engaged in discretionary trading in the Southridge Account, Staff submits that Rowan had investment power, and, therefore, control or direction, over the Biovail securities held in the Trust Accounts.

[64] Staff submits that Rowan's insider status at Biovail and his control or direction over the Biovail securities in the Trust Accounts gave rise to a reporting obligation under subsection 107(2) of the Act. Staff submits that Rowan was required to file insider reports in respect of trades executed in 2002, 2003 and 2004 in the Trust Accounts. As a result of his failure to do so, Rowan has allegedly breached Ontario securities law.

The Respondents

[65] The Respondents submit that Rowan had no obligation to file insider reports for trades he executed in the Trust Accounts as a registered representative, as such a legal requirement does not exist under securities law in Canada.

[66] The Respondents also submit that the evidence establishes that many of the trades for which it is alleged that Rowan should have filed insider reports were not made pursuant to any discretion on his part. Rather, they submit that many trades were executed on the instructions of the account holders, who retained control or direction, within the meaning of the law, over the Accounts. The Respondents submit that, in discretionary accounts, clients do not give up their authority to make investment decisions.

[67] The Respondents further argue that, in any event, it is the brokerage firm, Watt Carmichael, not the registered representative, as alleged by Staff, that exercises the discretionary authority pursuant to an agreement with the client. Watt Carmichael was not an insider of Biovail and the Respondents submit that its discretionary authority was materially restricted by significant macro-level (in terms of the overall account mandate) and micro-level (in terms of day-to-day trading) restrictions.

[68] The Respondents submit that, at the "macro" level, Watt Carmichael had specific instructions from the holders of the Accounts to maintain a core holding of Biovail securities, and subject to that restriction, to undertake a trading strategy in shares and options of Biovail with the objective of exploiting volatility in the trading price of Biovail securities to achieve capital gains. Accordingly, the Respondents argue that, while Watt Carmichael had authority to buy and sell shares from time to time, it was always subject to the overriding mandate applying to Biovail holdings.

[69] The Respondents submit that, at the "micro" level, Watt Carmichael's discretion over the Accounts was limited by the overall account mandate, specific buy/sell directions including directions to reduce margin, and margin requirements imposed by NBCN. Further, the limited discretion left with the brokerage firm does not amount to control or direction over the Biovail securities in the Accounts. The Respondents submit that the limited discretion that was retained by Watt Carmichael did not, and cannot reasonably, constitute "control or direction" within the meaning of section 107 of the Act.

[70] The Respondents argue that Staff's position has unsettling consequences that are ultimately inconsistent with the underlying objective of the Act, which is to foster timely, accurate and effective reporting. The Respondents submit that, when a registered representative at a brokerage firm receives an instruction to sell shares of an issuer of which he is an insider (as Rowan did for example on May 20, 2003), he is not exercising control or direction, but rather executing client instructions (i.e. giving effect to the client's control or direction). It is unreasonable for section 107 of the Act to apply to the registered representative in those circumstances, in the Respondents' submission.

[71] Further, the Respondents submit that one of the primary indicators of control or direction over shares is voting control. Neither Watt Carmichael nor Rowan had authority to vote the Biovail securities in the Accounts. The absence of this feature of control or direction weighs against a finding that Rowan exercised control or direction within the ambit of section 107 of the Act.

[72] The Respondents submit that it would be unreasonable to require reporting for unsolicited trades but not for trades that were solicited by the client in discretionary accounts. Such a system of reporting would be confusing and of no assistance to the investing public because it would lead to confusion as to whether a reporting obligation existed for any particular trade. The result would run counter to the Act, which aims to achieve its purposes through "timely, accurate and efficient disclosure of information." (Section 2.1 of the Act.)

[73] The Respondents submit that Rowan's trading in Biovail shares held in the Trust Accounts was known to the TSX, IDA, Biovail's legal department and NBCN, none of which raised any concern about it before Staff brought its allegations.

[74] Finally, the Respondents note that, pursuant to the Melnyk Settlement Agreement, Melnyk agreed to file insider reports for Biovail securities traded by the Trusts. They submit there is no concept of a shared reporting obligation in the Act and it would be unreasonable to establish one. In this matter the policy interest sought under the Act has been met by having insider reports filed by Melnyk only.

ii) The Law

Insider Reporting

[75] During the material period, the term "insider" was defined in subsection 1(1) of the Act to include a director or senior officer of a reporting issuer, as well as any person who beneficially owns, directly or indirectly, or exercises control or direction over more than 10% of the voting securities of the reporting issuer.

[76] There is no dispute that Rowan was an insider of Biovail by virtue of his role as a director of Biovail from 1997 until his resignation in 2005.

[77] The relevant parts of section 107 of the Act provide as follows:

(a) A person or company who becomes an insider of a reporting issuer other than a mutual fund, shall, within 10 days from the day that he, she or it becomes an insider, or such shorter period as may be prescribed by the regulations, file a report as of the day on which he, she or it became an insider disclosing any direct or indirect beneficial ownership of or control or direction over securities of the reporting issuer as may be required by the regulations.

(b) An insider who has filed or is required to file a report under this section or any predecessor section and whose direct or indirect beneficial ownership of or control or direction over securities of the reporting issuer changes from that shown or required to be shown in the report or in the latest report filed by the person or company under this section or any predecessor section shall, within 10 days from the day on which the change takes place, or such shorter period as may be prescribed by the regulations, file a report of direct or indirect beneficial ownership of or control or direction over securities of the reporting issuer as of the day on which the change took place and the change or changes that occurred, giving any details of each transaction as may be required by the regulations.

[78] The requirement to file insider reports set out in section 107 of the Act serves two purposes:

(a) a deterrent purpose: insiders are less likely to engage in improper trading if such trading is subject to public scrutiny. Insider reporting allows the market and securities regulatory authorities to monitor insider transactions and take action if improper trading is identified; and

(b) a signaling purpose: investors are provided with information concerning the trading activities of insiders, and, by inference, the insiders' views concerning the prospects of the issuer, thereby enhancing market efficiency.

(See, for example, Report of the Attorney General's Committee on Securities Legislation in Ontario (the "Kimber Report"), Toronto: Queen's Printer, 1965), paras. 2.02 -- 2.05)

[79] It is well established that "timely, accurate and efficient disclosure of information" is one of the primary means for achieving the purposes of the Act.

[80] The importance of timely and accurate insider reporting was emphasized in the Hinke decision, where the Commission stated:

... the filing of insider reports serves a very important purpose in our securities regulatory regime. They are designed to foster fair and efficient capital markets and to protect public confidence in our markets.

The filing of insider reports is underscored by principles of disclosure and transparency with respect to trading by insiders.

(Re Hinke (2006), 29 O.S.C.B. 4171 at paras. 16 and 17.)

[81] In Re Robinson, the Commission, discussing the purpose of insider reporting requirements, quoted directly from the Commission's 1994 Notice and Request for Comments regarding proposed legislative changes, including changes to insider reporting requirements:

These requirements are intended to discourage trading with knowledge of material undisclosed information, and enhance investor confidence in the securities market. Additionally, the reports have been of use to market participants as an indicator of perceptions that insiders have about issuers and their prospects.

(Notice and Request for Comments on Proposed Refinement of the Early Warning Regime and the Rules Regarding Insider Reporting, Takeover Bids and Control Block distributions as they Apply to Investors in General, Including Portfolio Managers and Portfolio Clients (1994), 17 O.S.C.B. 4438, quoted in Re Robinson (1996), 19 O.S.C.B. 2643 at para. 252.)

"Control or Direction"

[82] In Re Robinson, the Commission also addressed the interpretation of the phrase "control or direction" contained in section 107 of the Act, endorsing the following statement from the same Notice and Request for Comments:

[a] person with "control or direction" over securities includes any person ... who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise has or shares:

(i) voting power which includes the power to vote, or to direct the voting of, such securities and/or

(ii) investment power, which includes the power to acquire or dispose, or to direct the acquisition of such securities.

(Notice and Request for Comments on Proposed Refinement of the Early Warning Regime and the Rules Regarding Insider Reporting, Takeover Bids and Control Block distributions as they Apply to Investors in General, Including Portfolio Managers and Portfolio Clients (1994), 17 O.S.C.B. 4438, at p. 4444, quoted in Re Robinson (1996), 19 O.S.C.B. 2643, at para. 253.)

[83] This legal interpretation of the words "control or direction" is now incorporated in a national notice published by Canadian Securities Administrators ("CSA") Staff. Under the heading, "When do I need to add registered holders and in what circumstances?", the notice states:

You can hold your securities in the following three ways:

(1) You can hold them directly. For example, you can hold the securities in an account with your broker, but the account is in your name.

(2) You can hold them indirectly. For example, you beneficially own common shares in X Co. but the registered owner is another entity such as a holding company, an RRSP, or a family trust.

(3) You can have control or direction over them. You have control or direction over the securities if you, directly or indirectly, through any contract, arrangement, understanding or relationship or otherwise have or share

• voting power, or

• investment power.

This would include having control or direction over the securities through a power of attorney, a grant of limited trading authority, or management agreement. For example, you set up a trust for your children in which Co. X securities are held. Because of your relationship with your children, you need to report your children's holdings, because you could direct your children to purchase or sell those securities. This may also be the case if your spouse owns the securities, but you have control or direction over those securities.

If you choose either 'Indirect" or "Control or Direction', SEDI will prompt you to add the name of a registered holder. The registered holder is the entity through which you beneficially own the securities, such as an RRSP, holding company, family trust, or the person or company that owns the securities you have control or direction over.

(CSA Staff Notice 55-310, section 4.2.9 (April 2003). See also CSA Staff Notice 55-308, "Questions on Insider Reporting", section 3.5 (November 2002).)

[84] These principles have also been applied in a number of decisions. For instance, in Re Borealis Explorations Ltd. ("Borealis"), the Alberta Securities Commission (the "ASC") considered the issue of control or direction over securities. In that matter, the respondent Goldenberg was an insider of a public company, Borealis Explorations Ltd. (Borealis) and a partner in a law firm. Goldenberg maintained accounts over which he had trading authority, including an account held in his name in trust. Goldenberg had signing authority over this account but never exercised it, as all the trading in the account was done by Mr. Cox, Borealis' President. The ASC held that it was clear that Mr. Goldenberg and Mr. Cox had joint direction and control over the shares in the account even though the shares notionally belonged to Borealis's creditors:

With respect to the insider trades outlined in paras. 4 and 5 of the agreed statement of facts, it was suggested that no reporting was required. The Board notes however that s. 147 requires a report when an insider has "direct or indirect beneficial ownership of or control or direction over securities of the reporting issuer". Notwithstanding that the shares in question might have been pledged to certain creditors, or might have notionally belonged to some creditors, it is clear that the respondents Cox and Goldenberg had direction and control over them. Mr. Goldenberg specifically testified that the reason for having them in the Trust Account was to control their release into the market.

With respect to the shares owned by Mr. Goldenberg's law firm, the Board is satisfied that Mr. Goldenberg had direction and control over them. It would seem obvious that when a decision had to be taken as to whether to sell some shares, the partnership would look to Mr. Goldenberg's recommendation. Mr. Goldenberg as an insider had an indirect beneficial ownership as a member of the partnership, and also had direction and control of the shares. Mr. Goldenberg admitted at the hearing that he had a beneficial interest in these shares. The Board is of the view that an insider who has a partial beneficial interest in shares must still report trades under s. 147, even if others with a majority interest in the shares theoretically could overrule the insider's wishes as to whether a trade should take place.

(Re Borealis Exploration Ltd. (1993), 2 C.C.L.S. 72, (A.S.C.) paras. 17 and 18.)

[85] In Re Riley, the Commission considered a similar set of facts and found that the respondent Riley should have filed insider trading reports in respect of transactions in nominee accounts that were in his name in trust for others. The Commission noted that Riley stated that "he believed at the time that he was not required to report these transactions as he was not the beneficial owner, but he conceded that this was a mistaken view and that he should have filed insider reports with respect to these trades". The Commission went on to find that Riley failed to comply with the reporting requirements contained in section 107 of the Act (Re Riley (1999), 22 O.S.C.B. 3549, at para. 19).

iii) Analysis

[86] As stated above, the issue before us is whether, as an insider of Biovail, Rowan was required to file insider trading reports with regard to Biovail securities held in accounts in which he engaged in discretionary trading, even though he was not the beneficial owner of the securities.

[87] There is no dispute that Rowan was an "insider" of Biovail within the definition in subsection 1(1) of the Act. Section 107 of the Act requires an insider to file insider reports in respect of securities of reporting issuers over which the insider has direct or indirect beneficial ownership or "control or direction". Staff submits that Rowan had "control or direction" of the Biovail securities in the Trust Accounts by virtue of his discretionary trading authority.

[88] As stated above, the Respondents argue that the discretionary authority over the Trust Accounts was materially restricted by the account holder, who retained full control or direction at all times. Further, the Respondents submit that while there was authority to buy and sell shares from time to time, it was subject to the overriding mandate to maintain a core Biovail holding.

[89] In our view, these arguments do not reflect the evidence in this case. Rowan was the registered representative for the Trust Accounts and exercised discretionary trading authority over these Accounts. Indeed, during the hearing, Rowan himself acknowledged that he exercised discretionary trading authority over the Trust Accounts and that he did not file insider reports regarding his transactions in Biovail securities in these accounts.

[90] The wording of the "Discretionary Agreement" between Watt Carmichael and the Conset and Congor Trusts with regard to the Trust Accounts is especially informative. It states:

You shall maintain and operate the Account in the name of the undersigned and you are hereby authorized and requested to take such action from time to time in connection with the Account as you in your sole discretion, may consider necessary or desirable for its proper operation and administration and to that end you shall have full power and authority to invest the funds which may be in the Account from time to time in all types of securities including (but not so as to restrict the generality of the foregoing) options on securities commonly known as puts and calls, or to hold such funds in whole or in part in the form of cash, as you may deem appropriate, and to sell, exchange or otherwise deal in any such securities which may at any time form the part of the Account subject only to the following restrictions: [none listed]. (emphasis added)

[91] Although the discretionary agreement was accepted by Watt Carmichael, it is noteworthy that in the same agreement, under his signature, Rowan accepted discretionary authority over the Accounts as investment advisor.

[92] Based on the documentary evidence and the testimony of the witnesses, we find that there is clear and convincing evidence that Rowan met the test set out in the Robinson decision cited above. That is, Rowan was a person who, directly or indirectly, had or shared investment power over the Biovail securities in the Trust Accounts, which included the power to "direct the acquisition or disposition" of the securities.

[93] We note that Staff's allegations against Rowan rely on the assumption that it is not the brokerage firm, Watt Carmichael, but rather its employee, Rowan, who actually exercised the discretionary authority over the Accounts.

[94] The Respondents submit that this is not how discretionary accounts operate, and referred us to IDA Regulations 1300.4 and 1300.5:

1300.4 No person, other than a partner, director, officer or registered representative (other than a registered representative (mutual funds) or (non-retail)) who has been approved as such pursuant to the applicable By-Laws of the Association, shall effect trades for a customer in a discretionary account and any such permitted trades shall only be effected if:

(a) the prior written authorization has been given by the customer to the Member and accepted by the Member in compliance with regulation 1300.5; and

(b) the account has been specifically approved and accepted in writing as a discretionary account by the designated director, partner, officer, branch manager, futures contract principal or futures contract options principal, as the case may be, who authorized the opening of the account, ...

1300.5 The prior written authorization provided for by clause (a) of Regulation 1300.4 shall:

(a) define the extent of the discretionary authority which has been given to the Member;

...

(d) only be terminated by the customer by notice in writing, which notice shall be effective on receipt by the Member except with respect to transactions entered into prior to such receipt; and

(e) only be terminated by the Member by notice in writing, which notice shall be effective not less than 30 days from the date of mailing the notice to the customer by pre-paid ordinary mail at the customer's last address appearing in the records of the Member.

[95] In accordance with these requirements, the Respondents submit that the IDA-approved discretionary agreements for the Congor and Conset Accounts were between the accountholders and Watt Carmichael (not Rowan).

[96] Staff submits that pursuant to IDA Regulations 1300.4 and 1300.5, Rowan was the designated registered representative for the Conset and Congor Accounts. These Accounts were specifically approved and accepted by Rowan as discretionary accounts. The discretion gave broad investment power over the Biovail securities in these Trust Accounts, which power was exercised by Rowan. The Southridge Trust Account was not approved or accepted as a discretionary account but Rowan considered it to be a discretionary account and exercised his discretion in the same manner as he did with the Conset and Congor Trust Accounts. Rowan was also an insider of Biovail. Thus Staff submits Rowan was required to file insider reports of the purchases and sales of Biovail securities in the Trust Accounts.

[97] The Respondents also rely on National Instrument 62-103 ("NI 62-103"), which, in their submission, exempts "eligible institutional investors" that have discretion to vote, acquire or dispose in accordance with the beneficial owner's consent from the insider reporting requirements of section 107 of the Act. Under NI 62-103, eligible institutional investors include:

An investment manager in relation to securities over which it exercises discretion to vote, acquire or dispose without express consent of the beneficial owner, subject to applicable legal requirements, general investment policies, guidelines, objectives or restrictions...

(National Instrument 62-103 -- The Early Warning System and Related Take-Over Bids and Insider Reporting Issues, Part I, Section 1.1).

[98] NI 62-103 defines "investment manager" to include an "entity that is registered or licensed to provide investment counselling, portfolio management or similar advisory services in respect of securities...".and provides these services "for valuable consideration under a contractual arrangement".

[99] The Respondents submit that under NI 62-103, it is the entity that is defined as an eligible institutional investor and that is eligible to report trades under the alternative monthly reporting system established as an alternative to the insider reporting scheme under section 107 of the Act. NI 62-103 does not contemplate that an employee of an eligible institutional investor could be personally responsible for filing insider reports under section 107 of the Act. The Respondent submits that Staff's position is inconsistent with the scheme under NI 62-103, the IDA Regulations respecting discretionary accounts, and standard practice in the industry.

[100] Staff submits that NI 62-103 provides no support for the position advanced by the Respondents. According to Staff, National Instrument 62-103 provides that, in the ordinary course, insiders would be required to comply with the insider reporting requirements and early warning requirements under the Act, but there may be certain circumstances where they are exempt from such a requirement if they meet the criterion in Part 9. Part 9 of NI 62-103 contains the exemption from the insider reporting requirement for eligible institutional investors. In particular, section 9.1 sets out certain requirements in order to rely upon the exemption. There are a number of things that an institutional investor would need to do in order to rely upon that exemption.

[101] Section 5 of Part 9 states:

If an eligible institutional investor is exempt under subsection (1) from the insider reporting requirement for a reporting issuer, every director or senior officer of the eligible institutional investor who is an insider of the reporting issuer solely as a result of being director or senior officer of the eligible institutional investor is exempt from the insider reporting requirement for the reporting issuer.

[102] Staff submits that subsection (5) provides that if Rowan, who was a director and senior officer of Watt Carmichael, was also an insider of a reporting issuer (Biovail) solely as a result of his being a director or senior officer of Watt Carmichael, he would be exempt from the insider reporting requirements for Biovail. Such is not the case for Rowan, who was an insider of Biovail not because he was a director and officer of Watt Carmichael but because he was a director of Biovail. Thus, in Staff's submission, Rowan remained subject to the insider reporting requirements of the Act.

[103] We agree with Staff's interpretation of IDA Regulations 1300.4 and 1300.5 and NI 62-103.

[104] Finally, we take note of CSA Multilateral Policy 34-202 -- "Registrants Acting as Corporate Directors" ("MP 34-202"), which states:

1.1 Introduction

The position of a representative of a registrant acting as a director of or adviser to a reporting issuer is one that is fraught with the possibility of a conflict of interest. This arises more particularly in regard to questions of insider information and trading, and timely disclosure.

1.2 Conflict of Interest

The Canadian securities regulatory authorities emphasize that all registrants should be most conscious of their responsibilities in these situations and weigh the burden of dealing in an ethical manner with the conflicts of interest against the advantages of acting as a director of a reporting issuer, many shareholders of which may be clients of the registrant.

(Multilateral Policy 34-202 -- Registrants Acting as Corporate Directors, (1998), 21 O.S.C.B. 6608, ss. 1.1 and 1.2)

[105] Although the discretionary agreements for the Conset and Congor Accounts were between each of Conset and Congor and Watt Carmichael, we note that in IDA Regulation 1300.3 "discretionary account" is defined to mean ". . . an account of a customer . . . in respect of which a Member or any person acting on behalf of the Member exercises any discretionary authority in trading by or for such account, . . . ."

[106] We find that Rowan was the registered representative at Watt Carmichael who, in terms of IDA Regulations 1300.4 and 1300.5, effected trades of Biovail securities in the Trust Accounts. Rowan exercised the discretionary trading authority over the Conset and Congor Accounts and engaged in discretionary trading in the Southridge Account, and thus had or shared control or direction over the Biovail securities held in the Trust Accounts. Rowan was also a director and, as such, an insider of Biovail. In these circumstances, we find that Rowan had an obligation to file insider reports with respect to the trades of Biovail securities made in the Trust Accounts. The exemption from filing insider reports provided in NI 62-103 did not extend to him.

iv) Finding

[107] Accordingly, we find that Rowan, as an insider of Biovail by virtue of his role as a director of Biovail, was required to file insider reports with respect to trades of Biovail securities in the Trust Accounts in accordance with subsection 107(2) of the Act.

[108] Given the significant volume and frequency of trading in Biovail securities in these Accounts, we find that Rowan repeatedly breached the insider reporting requirements.

E. Did Rowan engage in conduct contrary to the public interest in failing to provide complete and accurate information to Biovail concerning the Biovail securities held in the Trust Accounts?

i) Submissions

Staff

[109] Staff submits that as a director of Biovail, Rowan was required to provide complete and accurate information to Biovail to be disclosed in its 2002, 2003 and 2004 Management Information Circulars.

[110] Staff submits that while the 2002 Management Information Circular stated that Rowan beneficially owned directly or indirectly or exercised control or direction over 1,217,953 Biovail common shares as at April 30, 2002, which included common shares held in the Conset Account, Rowan exercised or shared control or direction over at least another 3,982,102 Biovail common shares held in the Congor and Southridge Accounts as at April 30, 2002.

[111] Staff also submits that while the 2003 Management Information Circular stated that Rowan beneficially owned directly or indirectly or exercised control or direction over 1,190,403 Biovail common shares as at April 30, 2003, which included common shares held in the Conset Account, Rowan exercised or shared control or direction over at least another 3,000,966 Biovail common shares in the Congor and Southridge Accounts as at April 30, 2003.

[112] Staff also submits that while the 2004 Management Information Circular stated that Rowan beneficially owned directly or indirectly or exercised control or direction over 692,366 Biovail common shares as at April 30, 2004, which included shares in the Conset Account, Rowan exercised or shared control or direction over at least another 4,040,166 Biovail common shares in the Congor and Southridge Accounts as at April 30, 2004.

[113] Staff's position is that Rowan's decision to report the Biovail holdings in the Conset Account, while failing to report the Biovail holdings in the Congor and Southridge Accounts, led to Biovail's disclosure of incomplete and misleading information to the public in its Management Information Circulars. At a minimum, the reporting of only the Conset shares should have prompted further inquiries by Rowan. According to Staff, there is no evidence that Rowan made such inquiries or consulted legal counsel about his responsibilities in this regard, and thus, as a director of a public company, Rowan failed to fulfill an important obligation owed to shareholders and the investing public.

The Respondents

[114] The Respondents do not dispute the evidence about the Biovail holdings in the Trust Accounts. Counsel for the Respondents submits that Rowan had no obligation to report the holdings of Biovail securities in the Trust Accounts because he did not have control or direction over them.

[115] Rowan's evidence is that on the advice of the Biovail's Finance and Legal departments, he listed the securities held in the Conset Account in addition to those which he directly or indirectly beneficially owned or controlled (i.e. Biovail securities held in Rowan Management Ltd. or Rowan's personal account) in the 1998 Management Information Circular. Rowan claims that in subsequent years, he complied with the direction of the Finance and Legal departments that the reporting be consistent from to year to year, and therefore continued to report to Biovail, for purposes of the Management Information Circular, only the number of Biovail securities beneficially held by him and those held in the Conset Account.

[116] However, according to counsel for the Respondents, Rowan was not required to report Biovail securities held in the Conset Account because he did not exercise control or direction over those shares within the meaning of section 107 of the Act.

[117] The Respondents submit that while certain Biovail officers such as Cancellara in particular, have attempted to distance themselves from the Trusts, the evidence, especially that of Thompson and Garraway, shows that senior management at Biovail, in particular those responsible for preparing the Management Information Circulars, knew of the Trusts and knew that Biovail securities in certain of those Trust Accounts were traded by Rowan.

[118] The number of shares listed in the Management Information Circular for 2004 is not 686,466, as reported to Garraway by Rowan's assistant, but 692,366. According to the Respondents, this shows that the Biovail Legal department knew he traded securities for the Trusts, and modified the numbers he provided.

[119] In these circumstances, the Respondents submit that Rowan's evidence that he received advice from Miszuk and Cancellara about the number of Biovail securities to be reported by him in the 1998 Management Information Circular and the instruction that his reporting be consistent from year to year is credible and corroborated. They submit that the allegation that Rowan did, or could have, misled Biovail as to the number to be included in the Management Information Circulars is inconsistent with the evidence.

ii) The Law

[120] Pursuant to paragraph 86(1)(a) of the Act, Biovail was required to send annual Management Information Circulars to its shareholders. At the time of the conduct at issue, section 176 of Ontario Regulation 1015 required an information circular to contain the information prescribed by Form 30. (That obligation is now contained in Form 51-102F5 under National Instrument 51-102 -- Continuous Disclosure Obligations, (2004) 27 O.S.C.B. 3439, as amended.)

[121] Item 5 (para. vii) of Form 30 required disclosure of the following information:

The number of securities of each class of voting securities of the reporting issuer or of any subsidiary of the reporting issuer beneficially owned, directly or indirectly or over which control or direction is exercised by each proposed director.

(Ontario Regulation 1015, Form 30)

iii) Analysis

[122] In 2002, 2003 and 2004, Biovail filed with the Commission and sent to its shareholders Management Information Circulars which included disclosure of the number of Biovail securities purported to be owned or over which control or direction was exercised by each director, including Rowan.

[123] Rowan testified that he reported his personal holdings and the Biovail securities held in the Conset Account in these documents, but did not include the Biovail securities held in the Congor or Southridge Accounts.

[124] As a director of a reporting issuer, Rowan was required to disclose to Biovail, for inclusion in its Management Information Circulars, the securities that he beneficially owned, directly or indirectly or over which he exercised control or direction. There is no dispute that Rowan, as registered representative, traded heavily in Biovail securities held in the Trust Accounts. Moreover, we note that he signed discretionary agreements as Investment Advisor on behalf of Watt Carmichael for the Conset and Congor Accounts, and Rowan considered that he had discretionary trading authority over the Southridge Account.

[125] We find that Rowan's failure to report the Biovail holdings in the Congor and Southridge Accounts caused the disclosure contained in Management Information Circulars for 2002, 2003 and 2004 to be misleading or untrue or caused them to not state a fact that was required to be stated or that was necessary to make the statements in the circulars not misleading.

[126] The disclosure of only the securities in the Conset Trust in the Management Information Circular, plus the clear instructions on Form 30 to include the number of each class of voting securities of the issuer over which control or direction is exercised by the proposed director, should, at a minimum, have triggered further inquiries on the part of Rowan with regard to his obligation to disclose his holdings in the Congor and Southridge Accounts. But there is no convincing evidence that Rowan made such inquiries or consulted with legal counsel specifically about his responsibility to make such disclosure. Further, there is no convincing evidence that Rowan received advice from Biovail's Finance or Legal Departments as to the number of shares he should report in the Management Information Circulars.

[127] The reporting issuer is required to give accurate information to its shareholders as to the number of voting securities of the issuer that are beneficially owned, directly or indirectly, or over which control or direction is exercised by each proposed director. Rowan was obliged to file insider reports disclosing the number of voting securities of Biovail of which he had direct or indirect beneficial ownership or over which he exercised control or direction, including, we find, shared control or direction. It is incumbent on a director of a reporting issuer, through the filing of insider reports or otherwise, to ensure that the issuer has accurate, current information as to the director's ownership of or control or direction over securities of the issuer so as to enable the issuer to properly discharge its reporting obligations and failure by a director to do so, is, in our opinion, contrary to the public interest.

[128] On the facts before us, we find that Rowan failed to provide accurate information to Biovail as to the number of Biovail securities that he beneficially owned, directly or indirectly, or over which he exercised or shared control or direction, for disclosure in its 2002, 2003 and 2004 Management Information Circulars.

iv) Finding

[129] Accordingly, we find that Rowan engaged in conduct contrary to the public interest when he failed to provide complete and accurate information to Biovail concerning the number of Biovail common shares over which he exercised or shared control or direction.

F. Did Rowan engage in conduct contrary to the public interest by trading in Biovail securities in the Trust Accounts during Biovail's blackout periods?

i) Submissions

Staff

[130] Staff submits that Rowan engaged in discretionary trading of Biovail securities in the Trust Accounts during Biovail's 2002 and 2003 trading blackout periods (collectively, the "Biovail Blackout Periods") set out in the Biovail Blackout Policy.

[131] Staff submits that at all material times, Biovail had a clear and detailed Blackout Policy in place, and that Rowan knew about the Blackout Policy but disregarded it.

[132] Staff alleges that Rowan traded in large volumes of Biovail securities held in the Trust Accounts during the 2002 and 2003 Biovail Blackout Periods.

[133] Staff submits that Rowan's conduct was contrary to the public interest and fell far below the standards expected of a registrant who held a senior position at a registered broker and investment dealer and who was a member of the Biovail Board of Directors and the Biovail Audit Committee.

The Respondents

[134] There is no dispute that Rowan, as registered representative, traded in Biovail securities held in the Trust Accounts during Biovail Blackout Periods. The Respondents take the position there is no basis in law for Staff's allegation that these trades were contrary to the public interest.

[135] The Respondents submit that corporate blackout policies are internal guidelines only and do not have the force of law. Further, while an issuer can restrict personal trading by its insiders, an issuer's blackout policy cannot extend to trading on behalf of a client by an insider who is a registrant. The Respondents submit there is no law prohibiting an insider of a reporting issuer who is also a registrant from trading the reporting issuer's securities in a client's account. Rather, the public interest is protected by ensuring that the client not benefit from insider information.

[136] Further, the Respondents submit that there is no uniformity in the blackout policies set by each issuer and that issuers have authority to modify or waive compliance with blackout policies where it is appropriate to do so. At a minimum, counsel submits that Biovail consented tacitly (if not expressly) to Rowan trading in the Trust Accounts during blackout periods. The Respondents submit that it would be unreasonable for this Commission, on the facts of this case, to now establish for the first time an offence for not abiding by issuer blackout periods when trading in clients' accounts. Blackout periods are, and should remain, a matter between the issuer and its insiders.

ii) The Law

[137] National Policy 51-201 -- Disclosure Standards ("NP 51-201"), provides guidance on "best disclosure" practices. Its purpose provision begins by stating, "[i]t is fundamental that everyone investing in securities have equal access to information that may affect their investment decisions." The policy is intended to prevent "selective disclosure" of material non-public information, which "can create opportunities for insider trading and also undermines retail investors' confidence in the marketplace as a level playing field." (National Policy 51-201 -- Disclosure Standards (2002), 25 O.S.C.B. 4492, para.1.1(1))

[138] NP 51-201 states it is not intended to be prescriptive. Companies are encouraged to adopt the suggested measures "flexibly and sensibly to fit the situation of individual companies." (para. 1.1(2))

[139] The best practices encouraged by NP 51-201 include observing "a quarterly quiet period, during which no earnings guidance or comments with respect to the current quarter's operations or expected results will be provided to analysts, investors or other market professionals" [6:10] and adopting an insider trading and blackout period policy [6:11].With respect to blackout periods, it is recommended that trading by insiders, officers and employees "may typically not take place," for example, during a blackout period that surrounds a regularly scheduled earnings announcement. "However, insiders, officers and employees should have the opportunity to apply to the company's trading officer for approval to trade the company's securities during the blackout period."

[140] The Commission has recognized the importance of adherence by the directors and other insiders to corporate blackout periods. In Re Melnyk, the Commission stated:

[c]orporate black-out policies form an important element of securities law compliance by public companies and their insiders. There should be a heavy onus on any insider who trades, or recommends trading, during a black-out period to demonstrate that he or she did so without knowledge of any material fact or material change.

(Re Melnyk, (2007), 30 O.S.C.B. 5253, para. 31)

[141] This was also recognized by the Alberta Securities Commission in Re Seto, where it stated that:

We also find it significant that Inter-Tech's Board of Directors, either on their own initiative or at the behest of their financial and other advisers involved in the Precision negotiations, did not implement a trading "blackout period". We would have thought that such a directive would have been a normal practice in these circumstances and consistent with their fiduciary duties to all Inter-Tech shareholders.

(Re Seto, [2003] A.S.C.D. No. 270 at para. 49)

iii) Analysis

[142] Companies generally impose blackout periods on management and other insiders because of the increased risk posed by insiders having access to material undisclosed information during such periods. Blackout periods have played an important role in maintaining confidence in the capital markets for a considerable period of time.

[143] At all material times, Biovail had a clear and detailed policy concerning insider reporting and trading blackout periods. The evidence establishes that on December 5, 2001, Biovail circulated a written policy entitled "Insider Trading, Reporting and Blackout Policy" to its Board of Directors, including Rowan. The Biovail Blackout Policy provided a "general explanation of the corporate governance requirements of a public company as well as the insider trading rules and insider reporting requirements under the Securities Act (Ontario)".

[144] In an introductory section, the Biovail Blackout Policy stated:

It is illegal for any director, officer or employee of the Company or any subsidiary of the Company to trade in the securities of the Company while in the possession of material non-public information concerning the Company. It is also illegal for any director, officer or employee of the Company to give material non-public information to others who may trade on the basis of that information. In order to comply with applicable securities laws governing (i) trading in Company securities while in the possession of material non-public information concerning the Company and (ii) tipping or disclosing material non-public information to outsiders, and in order to prevent the appearance of improper trading or tipping, the Company has adopted this Insider Trading Policy for all of its directors, officers and employees, members of their families and others living in their households, and investment partnerships and other entities (such as trusts and corporations) over which such directors, officers or employees have or share voting or investment control.

Directors, officers and employees are responsible for ensuring compliance by their families and other members of their households and entities over which they exercise voting or investment control.

This Insider Trading Policy applies to any and all transactions in the Company's securities, including its common shares and options to purchase common shares, warrants and any other type of securities that the Company may issue in the future.

Any breach of the Insider Trading Policy is a serious offense which may lead to discipline by appropriate regulatory authorities, including possible fines and imprisonment. Any failure to adhere to the requirements specified herein also constitute [sic] grounds for immediate dismissal with cause from Biovail.

This memorandum provides a general explanation of the corporate governance requirements of a public company as well as the insider trading rules and insider reporting requirements under the Securities Act (Ontario). Each director, officer and employee is expected to review the enclosed materials and agrees to comply with the terms of this policy. Any questions on this policy should be directed to the Legal Department.

[145] With respect to Blackout Periods, the Biovail Blackout Policy stated the following:

Black-Out Periods

There is a mandatory seven (7) days blackout period for all employees of the Company prior to the release of quarterly and annual financial statements which shall continue until two (2) trading days after the time such information has been released to the public.

Additionally, an employee who is working on a particular transaction may be prohibited from selling securities of the Company for an indefinite period. You will be advised if the Company believes that you should not trade in securities of the Company as a result of your involvement in a particular transaction.

No insider or employee should trade in shares of Biovail until two trading days after the issuance of any news release in which material information is conveyed.

[146] The revised Biovail Blackout Policy, issued on April 4, 2003, added the following:

Moreover, there are instances where, unexpectedly, important issues will arise that may not be disseminated to an Insider at the precise time when they occur. In such circumstances, what the Company must avoid is the real potential that an Insider may be trading in the Company's stock during a period when the Company is involved in either considering or attempting to resolve such issue(s). Unfortunately, the Insider's lack of specific knowledge of such issues does not preclude personal embarrassment and/or potential liability to the Insider and the Company. Accordingly, effectively immediately, if any Member of the Board, Corporate Officer or Divisional Officer, intends to trade in the Company's shares, such person must inform either the Chairman of the Board or the Chief Legal Officer in advance so that a determination may be made as to whether there is any corporate reason to prevent such trading.

[147] With respect to insider trading, the Biovail Blackout Policy stated that every director of Biovail is an insider for the purposes of Insider Trading Rules. Insider information was defined as including but not limited to: (i) information about a significant transaction, such as a new financing; (ii) financial information such as the results from the previous quarter which have not been released to the investment community; (iii) information about a significant event (such as the release of a new product); and (iv) other information which a reasonable person may conclude could have an impact on the price of Biovail securities.

[148] Insiders were told: "Before trading shares in Biovail, you are strongly advised to contact the Legal Department to determine if you may trade in Biovail shares. All persons required to certify trading activities may not trade without the prior approval of the Legal Department."

[149] Further, insiders were required to file an insider report within 10 days following any trade in Biovail securities, including securities of Biovail "which you directly or indirectly acquire...or over which you exercise control or discretion...". Insiders were responsible for providing Thompson with information, "if the securities were indirectly acquired or are securities acquired over which you have control or discretion, the name of the registered holder of such securities."

[150] Rowan testified that he received the Biovail Blackout Policy with Thompson's December 5, 2001 covering letter, and that he knew that there was a mandatory blackout period covering seven days prior to the release of financial results and two trading days following their release.

[151] Through Garraway, Staff introduced correspondence addressed to Rowan and others that announced Blackout Periods in conjunction with releases of quarterly financial results and significant undisclosed transactions. There is no dispute that Rowan received the Blackout Period notices.

[152] During 2002, there were four Biovail Blackout Periods in connection with quarterly earnings announcements, as well as one additional Blackout Period, which subsumed the first two quarterly Blackout Periods. Rowan received Blackout Period notices on February 7, 2007, which announced a Blackout Period "until further notice", and April 24, 2002, which announced that the Blackout Period announced on February 7, 2002 would end at 9:30 a.m. Monday, April 29, 2002.

[153] The following chart summarizes, for each of the Biovail Blackout Periods in 2002, the undisputed evidence about the date and reason for the Blackout Period.

[154] During 2003, there were four Biovail Blackout Periods in connection with quarterly earnings announcements, and two additional Blackout Periods, which subsumed or overlapped with two of the quarterly Blackout Periods. Rowan received Blackout Period notices on February 25, 2003 ("cannot legally trade in Biovail . . . until March 7, 2003"), July 14, 2003 ("until further notice"), July 30, 2003 ("until further notice") and October 22, 2003 (trading could begin on November 4, 2003).

[155] The following chart summarizes, for each of the Biovail Blackout Periods in 2003, the undisputed evidence about the date and reason for the Blackout Period.

[156] The evidence establishes that, in 2002, Rowan engaged in discretionary trading of Biovail common shares in the Trust Accounts during each of the Biovail Blackout Periods. Specifically, there were acquisitions in excess of 2.5 million Biovail common shares at a cost of approximately U.S. $110 million, and dispositions in excess of 2 million Biovail common shares for proceeds of approximately U.S. $100 million during the 2002 Biovail Blackout Periods.

[157] In 2003, Rowan engaged in discretionary trading of Biovail common shares in the Trust Accounts during each of the Biovail Blackout Periods. Specifically, there were acquisitions in excess of 2.5 million Biovail common shares at a cost of approximately US$90 million and in excess of 2.8 million Biovail common shares were sold for proceeds of approximately US $100 million. Further, more than 11,000 Biovail call options were acquired for proceeds of approximately US$4 million, and 300,000 Biovail call options were exercised at a cost of approximately US$10 million.

iv) Finding

[158] We find there is ample evidence that Rowan engaged in a high volume of discretionary trading in Biovail securities in the Trust Accounts during the Biovail Blackout Periods in 2002 and 2003.

[159] We do not agree with the Respondents that blackout periods are simply a matter between the issuer and its insiders. Issuers establish blackout periods to ensure there will be no trading in the corporation's securities by persons who have access to undisclosed material information until that information has been disclosed to the market and sufficient time has elapsed to permit its evaluation. In this case, Rowan was an insider of Biovail and should have respected the Biovail Blackout Periods.

[160] We find that Rowan's conduct fell below the standards applicable to a registrant who is both in a senior position at a registered broker and investment dealer and a director of a reporting issuer and a member of its Audit Committee. We find that, in the circumstances of this case, Rowan's conduct was abusive of the integrity of the capital markets of Ontario and contrary to the public interest.

G. Did Rowan breach section 76 of the Act by trading in Biovail securities in the Trust Accounts while he was in possession of material undisclosed information concerning Biovail?

i) Submissions

Staff

[161] Subsection 76(1) of the Act prohibits a person in a special relationship with a reporting issuer from purchasing or selling securities once he or she is aware of a material fact or a material change regarding the issuer which has not been generally disclosed. As a director of Biovail, Rowan was in a special relationship with Biovail within the meaning of paragraph 76(5)(c) of the Act.

[162] Staff alleges that Rowan engaged in insider trading contrary to section 76 of the Act when he bought and sold shares in the Trust Accounts while in possession of material undisclosed information. The allegations relate to (a) the fourth quarter 2001 financial statements and 2001 consolidated financial statements; (b) the first quarter 2002 financial statements; (c) the second quarter 2002 financial statements; and (d) the first quarter 2003 financial statements.

[163] Specifically, in its Amended Statement of Allegations, Staff alleges that Rowan engaged in the following trading of Biovail securities at times when he had knowledge of material undisclosed information contained in the management reports:

(a) from February 19, 2002 to February 21, 2002 inclusive, 20,000 shares were purchased in and sold from the Conset Account and 45,000 shares were purchased in the Southridge Account;

(b) from April 23, 2002 to April 25, 2002, inclusive, 681,500 shares were purchased in the Congor, Conset and Southridge Accounts, 45,000 shares were sold from the Congor Account, 35,000 shares were sold from the Conset Account and 33,000 shares were sold from the Southridge Account;

(c) on July 24, 2002, 59,000 shares were sold from the Conset Account;

(d) on March 3, 2003, 172,600 shares were purchased in the Conset Account; and

(e) from April 25 to April 29, 2003, inclusive, 56,300 shares were purchased in the Conset Account.

[164] Staff submits that Rowan attended a number of Board and Audit Committee meetings and received material information concerning Biovail prior to and/or at the time of certain of these meetings. In particular, during 2002 and 2003, Rowan received Biovail management reports in relation to the upcoming release of Biovail's quarterly earning results. Staff referred us to these management reports.

[165] Staff submits there is clear and cogent evidence that Rowan was in possession of material facts concerning Biovail's financial results prior to the release of this information to the public.

The Respondents

[166] Rowan denied trading or instructing anyone to trade while he was in possession of inside information. The Respondents submit Rowan's evidence was uncontradicted, and that it was corroborated with respect to many of Staff's specific allegations.

[167] The Respondents submit that there was insufficient evidence about when Rowan received the information at issue and that the pattern of trading does not support Staff's allegations. In particular, the Respondents argue that the allegation is based entirely on the most fragile and circumstantial evidence of Miszuk. Miszuk has no knowledge as to when Rowan received inside information, but in several instances, Miszuk's evidence actually disproves Staff's allegations.

[168] The Respondents submit that an allegation of insider trading is very serious, and that Staff has failed to bring clear and convincing proof based on cogent evidence that Rowan traded while in possession of inside information.

[169] Further, the Respondents question the basis for Staff's allegations. In particular, the Respondents note that in its June 6, 2007 decision approving the Settlement Agreement between Staff and Melnyk, the Commission stated: "Based on the Settlement Agreement, we accept the submissions of Staff and counsel for Melnyk that this is not an insider trading case." [para. 20 of Settlement Approval decision]

[170] The Respondents also submit that Staff's five insider trading allegations against Rowan were only particularized in the Amended Statement of Allegations, dated June 5, 2007, just weeks before the start of the hearing, and the Respondents suggest this reflects Staff's lack of confidence in its allegations with respect to trading during Blackout Periods.

ii) The Law

[171] Section 76(1) of the Act prohibits the purchase or sale of securities of a reporting issuer by an insider with knowledge of material facts with respect to the reporting issuer that have not been generally disclosed. National Policy 51-201 Disclosure Standards provides guidance on best disclosure practices to ensure that everyone investing in securities has equal access to information which may affect their investment decisions. OSC Policy 33-601 provides registrants with Guidelines for Policies and Procedures Concerning Inside Information and MP 34-202 also provides guidance to Registrants Acting as Corporate Directors.

[172] During the relevant period, "material fact" was defined in section 1(1) of the Act as "a fact that significantly affects, or would reasonably be expected to have a significant effect on the market price or value of the securities". On April 7, 2003, the definition of "material fact" was amended to read as follows:

"material fact", when used in relation to securities issued or proposed to be issued, means a fact that would reasonably be expected to have a significant effect on the market price or the value of the securities;

There is no dispute in this case about the materiality of the facts. The dispute was about whether Rowan was in possession of these facts when the trades occurred.

[173] In R. v. Woods ("Woods"), Farley J. stated that the offence of insider trading "is in essence not a question of using insider information but of buying or selling securities of a company while possessed of insider information". He broke down the offence into four elements:

(a) the defendant is in a special relationship with the public company;

(b) the defendant purchases or sells securities of that public company;

(c) the defendant has knowledge of material information about that public company;

(d) which material information has not been generally disclosed.

(R. v. Woods, [1994] O.J. No. 392 (Gen. Div.) at para. 15)

[174] Justice Farley noted that until February 15, 1988, a person charged with insider trading had to demonstrate that he or she "did not make use of knowledge of material fact...in purchasing or selling securities." That defence is no longer available. (R. v. Woods, [1994] O.J. No. 392 (Gen. Div.) at para. 18)

[175] Accordingly, it is not necessary to prove actual use of inside information. An insider's reasons or motivations for trading are irrelevant at law. It is sufficient to establish trading while in possession of undisclosed material information.

[176] It is also unnecessary to establish that the respondent benefited personally from the misuse of inside information.

[177] In the Woods decision, the defendant traded for the account of one Richardson. Richardson agreed to allow Woods to arrange for short sales, when Woods convinced him it would be useful to hedge his investment. Woods was found guilty of insider trading for these short sales on Richardson's behalf.

[178] Justice Farley noted that "[w]ithout Woods, there would have been no short sales . . .," and stated:

The ordinary meaning of 'sell' does not imply a sale of one's beneficial interest. For instance, we have no difficulty in talking of a sales clerk in a department store selling merchandise but it is of course merchandise of the department store/company. Then there is the real estate agent who has sold the house, but it is the house of the vendor. As well one refers to the consignee selling goods, but it is the goods of the consignor which are sold. The section [75(1), now 76(1)] does not state that "no owner shall sell" but rather no person should do so.

(R. v. Woods, [1994] O.J. No. 392 (Gen. Div.) at para. 32)

[179] With respect to the interpretation of the insider trading provisions of the Act, Justice Farley stated:

Given the mischief rule and its application, it appears that the mischief to be corrected in the present instance was that of unequal opportunity in the securities market -- i.e. someone in a special relationship with a company (a director) might employ insider information to buy or sell shares of the company to the disadvantage of those without such insider information. It does not seem to me that the person in a special relationship must benefit from the misuse of insider information; this is obvious from the prohibition against tipping since the tippee is the one who benefits.

(R. v. Woods, [1994] O.J. No. 392 (Gen. Div.) at para. 36. See also Re Donnini, (2002), 25 O.S.C.B. 6225 at paras. 111,112, and 113)

[180] By the same reasoning, we find that subsection 76(1) of the Act also applies to a registrant who is an insider of a reporting issuer and who engages in discretionary trading in the securities of the issuer in respect of which he is an insider on behalf of the beneficial owner of the securities.

[181] In Re Danuke, (1981), 2 O.S.C.B. 31C at 33C, the Commission imposed sanctions on a respondent who traded for the account of one of his clients while in possession of undisclosed material information.

[182] Subsection 76(5) of the Act defines who is in a "special relationship" with a reporting issuer. The definition includes a person who is an "insider" of the reporting issuer. Section 1 of the Act defines "insider" as including "every director or senior officer of a reporting issuer." Rowan admits that the evidence establishes that he was at all material times a person in a "special relationship" with Biovail.

[183] The phrase "generally disclosed" is discussed in subsection 3.5(2) of NP 51-201. This policy explains that information has been generally disclosed if:

(a) the information has been disseminated in a manner calculated to effectively reach the marketplace; and

(b) public investors have been given a reasonable amount of time to analyze the information.

[184] The time necessary for such analysis varies from case to case, however an insider should generally wait a minimum of one full trading day after the release of the information before trading (Re Harold P. O'Connor et al. (1976) Vol. II (O.S.C.B. 149 at 175).

iii) Analysis

[185] For the following reasons, we are not satisfied that Staff has presented clear and compelling proof based on cogent evidence of insider trading.

(a) February 21, 2002 -- 2001 Fourth Quarter and 2001 Consolidated Financial Statements

[186] Staff submits that Rowan received the management report dated February 19, 2002 in respect of Biovail's 2001 consolidated financial statements, the draft press release concerning the financial statements, and the 2001 audit report prepared by Ernst and Young, Biovail's auditors. The February 19, 2002 management report, similar to other management reports provided to the Audit Committee in 2002 and 2003, states:

[t]he following report has been prepared to provide Senior Management with an overview of the financial performance of Biovail Corporation on a consolidated basis and should supplement the Management Reports received from each of the operating business units. The information contained within this report is deemed highly confidential due to the detail in information provided and is intended for Senior Management purposes only.

[187] The February 19, 2002 management report contained an Attachment "B", entitled "Comparative Consolidated Statements of Income (Loss)". Attachment "B" bears the date of February 19, 2002 and time of 12:03 p.m., and on that basis Miszuk testified that "the materials would have been all complete[d] and assembled the afternoon of February 19th and would have been distributed at that time." Miszuk further testified that the materials would generally be sent by same-day courier to committee members in the Greater Toronto Area, otherwise by overnight courier.

[188] The Audit Committee, consisting of Rowan and two others, met at Biovail's office at 4:00 p.m. (i.e. after the markets had closed) on February 20, 2002. Rowan and the other Audit Committee members approved the 2001 fourth quarter and full year 2001 financial statements and the earnings press release.

[189] Miszuk testified that the draft earnings release contained information from the February 19, 2002 management report provided to Rowan, and that the information set out in the press release was "material information."

[190] On February 21, 2002 Biovail issued its press release announcing the 2001 fourth quarter and full year 2001 financial statements.

[191] During the period February 19 to February 21, 2002, inclusive, 20,000 shares were purchased in and sold from the Conset Account and 45,000 shares were purchased in the Southridge Account.

[192] Rowan's direct evidence is that he did not receive the materials for the Audit Committee meeting of February 20, 2002 until he attended the meeting at 4:00 p.m. on that day. Miszuk testified in chief that he believed the materials, which were time-stamped 12:03 p.m., would have been couriered to Rowan on the afternoon of February 19, as this was Biovail's general practice. In cross-examination, Miszuk admitted that he did not personally send out materials to the directors in 2002 and 2003, he had no courier receipts or other records proving when material was sent to the Audit Committee, and there were complaints in 2002 and 2003 about materials not being made available in advance of the meetings.

[193] The evidence regarding the announcement of the fourth quarter results is that it was made before markets opened on February 21, 2002. If, as Rowan testified, he did not have the documentation for the Audit Committee until 4:00 p.m. on February 20, 2002, then he would not have been able to trade on inside information prior to its public disclosure.

(b) April 25, 2002 - 2002 First Quarter Financial Results

[194] Staff's second insider trading submission relates to Biovail's management report dated April 23, 2002 in respect of the 2002 first quarter financial statements, which was sent to Audit Committee members together with the 2001 annual report and the Ernst and Young 2001 audit report. The April 23, 2002 management report contains an Attachment "B" titled "Comparative Consolidated Statements of Income (Loss)". Attachment "B" bears the date April 23, 2002 and time of 1:02 p.m.

[195] On April 25, 2002 Biovail issued its press release announcing the 2002 first quarter interim financial results. Miszuk testified that "certain information from the April 23, 2002 management report would lead into the press release" and that the press release was "material disclosure". In this case, the Audit Committee appears to have met on April 26, 2002 after Biovail issued its press release.

[196] During the period April 23 to April 25, 2002 inclusive, 681,500 Biovail shares were purchased in and 113,000 Biovail shares sold from the Congor, Conset and Southridge Accounts.

[197] Rowan testified that he received the Audit Committee materials only at the meeting itself. This was confirmed by Miszuk, who testified that the Audit Committee was provided with the relevant documents at the Audit Committee meeting of April 26, 2002. This was after information had been released to the public on April 25, 2002.

(c) July 24, 2002 -- 2002 Second Quarter Financial Results

[198] Staff submits that on July 24, 2002, a revised management report was issued in respect of the 2002 second quarter interim financial results. The revised report "provides the disclosure on the recent developments that were completed within the interim quarter, consolidated financial results of the Company, income statement balance sheet, cash flow, and a brief MD&A that talks about the Company's performance". Miszuk testified that this document would have been a revised document and that he could not recall if an original document was sent out.

[199] The Audit Committee met on July 24, 2002 at 7:00 p.m. Miszuk testified that prior to the meeting "[t]here would have been a previous notice advising of the meeting date". Based on practice, prior written notice would be provided to the Audit Committee three to five days in advance of the scheduled meeting. The Audit Committee approved the 2002 first quarter interim financial earnings press release.

[200] On July 25, 2002, Biovail issued its press release announcing the second quarter 2002 financial results.

[201] On July 24, 2002, 59,000 Biovail shares were sold from the Conset Account.

[202] There is no evidence that the materials for the July 24, 2002 meeting were distributed prior to the meeting. Indeed, the time-stamp on the report indicates that it was printed at 5:16 p.m., after the close of the markets that day.

(d) March 4, 2003 -2002 Fourth Quarter and 2002 Consolidated Statements

[203] Staff submits that on February 19, 2003, Miszuk notified the Audit Committee of the scheduling of the Audit Committee meeting for March 3, 2003, enclosing the agenda for the meeting. Miszuk testified that in this case the materials were presented to the Audit Committee on March 3, 2003 in the form of a PowerPoint presentation, and that he believed that a management report had not been completed prior to the meeting.

[204] The Audit Committee met on March 3, 2003 at 4:00 p.m. and approved the financial statements and earnings release.

[205] On March 4, 2003, at 7:30 a.m., Biovail issued its press release announcing Biovail's earnings for the 2002 fourth quarter and full year results.

[206] On March 3, 2003, 172,600 Biovail shares were purchased in the Conset Account.

(e) April 29, 2003 -- 2003 First Quarter Financial Results

[207] Staff submits that Rowan also obtained inside information with respect to 2003 first quarter financial results. Staff relies on Miszuk, who testified that the management report dated April 25, 2003 addressed to the Audit Committee was sent by courier to Rowan and others. Attachment "B" to the April 25, 2003 management report is entitled "Comparative Consolidated Statements of Income (Loss)" and bears the date of April 25, 2003 and time of 3:34 p.m.

[208] Rowan testified that he was in Italy from about April 23 to May 7, 2003, and did not receive any documentation for the Audit Committee prior to the meeting.

[209] The Audit Committee met on April 28, 2003 at 1:00 p.m. Rowan participated by telephone. The Audit Committee approved the 2003 first quarter interim financial statements and the Biovail press release.

[210] On April 25, 2003, 51,300 Biovail shares were purchased in the Conset Account, and another 5,000 Biovail securities were purchased in Conset on April 28, 2003.

[211] The evidence before us indicates that from April 25 to April 28, inclusive, 56,300 Biovail shares were purchased in the Conset Account. However, we received no clear and convincing evidence that any of these shares were purchased between 1 p.m. and the close of business on April 28, 2003.

iv) Finding

[212] Miszuk testified that Biovail's management reports and financial statements would be prepared in advance of the meetings of the Audit Committee, which would occur approximately six times per annum. These reports would then be sent to the Committee two to three days in advance of the meeting of the Committee. The management report contained an update of all company business for the quarter, including financial results, and would provide the basis of the management discussion and analysis, included in the quarterly financial statements.

[213] However, upon cross-examination, Miszuk conceded that the materials might not have reached the Audit Committee before the meeting occurred, and that he could not prove that the documents did, in fact, reach the Audit Committee members before the meeting began.

[214] Rowan's direct evidence that he did not receive the materials prior to the Audit Committee meetings and that he did not trade or instruct anyone to trade while he was in possession of inside information remains uncontradicted. Staff did not, for example, produce courier receipts or other documentation as to when the materials were sent out, or call other members of the Audit Committee to testify about when they were given the relevant information.

[215] While substantial trading in Biovail securities took place during the periods in question, we find that the evidence relied upon by Staff to support the insider trading allegations is neither clear nor convincing, and therefore we do not find that Rowan breached the requirements set out in subsection 76(1) of the Act by trading Biovail securities held in the Congor, Conset and Southridge Accounts at times when he had knowledge of material undisclosed information.

v) Additional Particulars

[216] In addition to Staff's five insider trading allegations discussed above, Staff's written submissions included three additional insider trading allegations that were not included in the Amended Statement of Allegations.

[217] We agree with the Respondents that these additional allegations, which were highly prejudicial to Rowan, should not have been put before us in this manner. We make no findings in relation to these submissions because we agree with the Respondents that they were particularized too late to give the Respondents a fair opportunity to respond.

H. Did Rowan conduct unauthorized discretionary trading in the Southridge Account?

i) Submissions

Staff

[218] Staff alleges that Rowan engaged in discretionary trading in the Southridge Account without having authority to do so, contrary to OSC Rule 31-505 and contrary to the public interest.

The Respondents

[219] The Respondents submit that while the Southridge Account was not documented as a discretionary account, the Southridge Trustees knew and approved of Rowan's discretionary trading and authorized it by corporate resolution. Accordingly, the Respondents submit that Rowan did not exceed the authority granted him by the course of conduct between Watt Carmichael and the Southridge Trust.

ii) The Law

[220] Subsection 1.5(1) of OSC Rule 31-505 requires that "an individual that is registered as a salesperson, officer or partner of a registered dealer" "shall make such enquiries about each client of that registrant as," amongst other things, "are appropriate, in view of the nature of the client's investments and of the type of transaction being effected for the client's account, to ascertain the general investment needs and objectives of the client and the suitability of a proposed purchase or sale of a security for the client."

iii) Analysis

[221] There is no dispute about the main facts; rather, the parties disagree about what inferences and conclusions can be drawn from the facts.

[222] Rowan admits that he engaged in discretionary trading in the Southridge Account. He also admits that the Southridge Account was not opened and documented as a discretionary account. The New Client Application Form, signed by Rowan and a Southridge director on September 24, 1996, included the question, "have you authorized anyone to use discretion in handling your account?" and the direction, "If yes, please complete Discretionary Agreement." The "no" box was checked off, and therefore a Discretionary Agreement was not completed, and the account number did not contain a letter "D" denoting a discretionary account. A second New Client Application Form, signed by Rowan and Southridge on August 20, 2002, also indicated the account was not discretionary.

[223] However, Rowan testified that he believed he had discretionary authority over the account. He relies on the resolution passed by the Southridge Board of Directors on September 23, 1996 giving him discretionary authority over the Account. He also relies on the course of conduct between Watt Carmichael and Southridge over a number of years. He claims that Southridge only objected to certain options transactions, though he communicated with the Southridge representatives frequently and Southridge received regular reports on his trading in the Account.

[224] Rowan submits that the failure to properly document the discretionary nature of the account was an administrative error. We reject this.

[225] We received evidence of a number of occasions when the Southridge representatives faxed or telephoned Rowan to complain about unauthorized trading or to reiterate that all transactions must be approved in advance because the account was non-discretionary. The evidence suggests a concern Rowan was receiving instructions from Melnyk.

[226] For example, on September 25, 1998, Joan M. Link ("Link"), a Southridge representative, wrote to Rowan, stating:

Please note that, whilst Southridge Management Ltd. must provide you with instructions before any transactions occur on the account, the directors would like to be advised at any time should you wish to make investment recommendations, namely at any time you think it advisable that we sell Biovail shares. I would be grateful if you could confirm that you are still in agreement to act in this capacity.

[227] On October 2, 1998, Link made a note to file in relation to Melnyk wanting to open an options account with Watt Carmichael to raise cash. The memo refers to a telephone conversation between Link and Paula Glick ("Glick") (who Fong testified was Rowan's assistant at that time). Link notes that she asked Glick "to ensure that nothing occurs on the account" and confirmed that all transactions require prior approval from the Trustee. The point was repeated in Link's October 5, 1998 faxed memo to Rowan and Glick, which confirmed that "the directors are not in a position to complete the form nor to trade in options" and were awaiting a proposal from Fong, Melnyk's assistant. In that same memo, Link stated, "To reiterate, any transactions which occur on Southridge Management Ltd.'s brokerage account held with Watt Carmichael requires our approval prior to execution".

[228] Link's note to file, dated October 6, 1998, indicates that Southridge had received the account opening documentation for an options account at Watt Carmichael.

[229] On October 13, 1998, Fong faxed the following note to Link, on Melnyk's letterhead:

Further to our telephone conversation, this fax is to confirm Mr. Melnyk's wish to sell the equivalent number of Biovail shares in order to raise additional cash of US$500,000. In return, Mr. Melnyk has authorized the attached promissory note for US$500,000.

Please send Roger Rowan at Watt Carmichael instructions to sell Biovail shares in order to raise the additional US$500,000 and to transfer these funds to a Southridge Trust Account.

Upon receipt of these funds and the previously requested US$4,500,000, please wire the funds as per the attached fax (2 pages) from Eugene Melnyk.

If you have any questions, please do not hesitate to contact me.

[230] Link's note to file on October 27, 1998 included the following:

I reviewed the transaction advice slips received from Watt Carmichael and noted that 600,000 shares of Beta Brands Inc. were purchased. I asked Roger to confirm that this was actually for the account of Southridge, which he did. I then asked who issued these instructions and Roger confirmed that it was the settlor of the trust. Roger indicated that the settlor mentioned to him that he would be in contact with us to sort out the situation. I reiterated to him that this was not in accordance with the account mandates and that I would speak to my manager to determine the best course of action. I confirmed to him that this was a similar situation which has occurred before which was unacceptable to the directors. I mentioned that the directors would always consider investment advice from him (Roger) in his capacity as investment manager and could issue instructions quickly.

[231] This evidence makes it impossible for us to conclude that administrative error was the reason the Southridge Account was not documented as a discretionary account. Nor do we accept Rowan's evidence that Southridge was only concerned about options trading and not about his other discretionary trades. We find that Link repeatedly conveyed a concern about discretionary trading. For example, her November 2, 1998 memo states: "I confirmed with Roger that transactions on the Southridge Management Ltd. can only occur with the authority of the directors. EM does not have any authority to provide instructions for execution to Roger Rowan." On cross-examination, Rowan said he believed this was in the context of option strategies he had presented, but he conceded that the memo did not indicate any such limitation.

[232] Further, we received evidence of a chain of e-mails between Rowan, counsel for Southridge and Southridge representatives in November and December 2004. Rowan initiated the correspondence on November 11, 2004 with an e-mail to Southridge counsel requesting that they provide a letter to Watt Carmichael with the following suggested text:

This letter will confirm during the time that the Southridge Account has been at your firm, commencing in 1996, the Trustees of the Trust have instructed Mr. Roger Rowan to use full discretionary trading authority in operating the account. While Mr. Rowan provided the Trustees of Southridge with various trading strategies from time to time upon request, the mandate Mr. Rowan was given by the Trustees was to trade the securities in this account at his discretion and to provide the Trustees with copies of all trade confirmations and monthly statements summarizing the trading activities which they received by mail.

[233] On November 24, 2004, counsel for Southridge responded by e-mail, relaying Southridge's response. The Southridge representative reportedly wanted an explanation why the letter was necessary, "since their relationship with you had been in place since 1996." However, Southridge ultimately refused to issue the letter, stating, in a November 25, 2004 e-mail:

According to our records which include the most recent account forms for Watt Carmichael executed in 2004, the account is non-discretionary therefore we cannot execute the letter provided.

[234] In a subsequent e-mail dated December 8, 2004, a Southridge representative stated that based on her review of the file, "we have always considered this to be a non-discretionary account." Stating, "reference has been made to this in the past," she particularly noted a Southridge letter to Rowan in February 2000 reiterating that he was not authorized to trade without written consent.

[235] On December 22, 2004, Southridge advised "no further trading is permitted on our account without our express written authorization." As requested, Rowan confirmed by return fax that he had received the letter and would not trade without express written authorization.

[236] Based on the documentary evidence we received, we do not accept Rowan's evidence that this correspondence in November and December 2004 was the first time there was an issue about the discretionary or non-discretionary nature of the account.

[237] However, Southridge did not close or transfer the file, despite their concerns, and the evidence from the Southridge file, noted above, establishes that the Trustees knew about Rowan's discretionary trading in the account throughout the period the account was open. In addition, we were given no reason to reject Rowan's undisputed evidence that Southridge authorized various transactions from time to time and that they received confirmations of every transaction as well as month-end statements.

[238] In our view, the evidence suggests that Southridge may not have taken a consistent approach in handling the Watt Carmichael account. In addition, the evidence suggests that Rowan received trading instructions from Melnyk as well as Southridge. Rowan admitted knowing Melnyk was the settlor of the Trust, and it is apparent from the Southridge correspondence that the Trustee did too.

[239] For whatever reason, the Trustees of the Southridge Trust did not take decisive action to bring the unauthorized trading to an end.

[240] In any event, based on the limited submissions of the parties, we are not satisfied that unauthorized discretionary trading contravenes the KYC rule, which is silent on this point. The gist of that rule is that the registrant shall make such enquiries of his client as are appropriate ". . . to ascertain the general investment needs and objectives of the client and the suitability of a proposed purchase or sale of a security for a client."

[241] The trading mandate for the Southridge Account (i.e. the general investment needs and objectives of the client and the suitability of the trading proposed for the account) was established when the Southridge Account was opened. It was to maintain a core holding of Biovail securities and, subject to that, to maintain a trading strategy in shares and options of Biovail with the objective of exploiting volatility in the trading price of Biovail securities to achieve capital gains.

[242] It may be arguable that Rowan's conduct was in breach of the trading account agreement with the client but it was not a breach of the investment objectives of the client or the nature or type of securities to be bought and sold within the account.

[243] Thus, we find that Rowan's activities did not constitute a breach of subsection 1.5(1) of OSC Rule 31.505.

[244] We note that IDA Regulation 1300.4 sets out clear rules for discretionary trading, as follows:

No person, other than a partner, director, officer or registered representative (other than a registered representative (mutual funds) or (non-retail)) who has been approved as such pursuant to the applicable By-laws of the Association, shall effect trades for a customer in a discretionary account and any such permitted trades shall only be effected if:

(a) the prior written authorization has been given by the customer to the Member and accepted by the Member in compliance with Regulation 1300.5; and

(b) the account has been specifically approved and accepted in writing as a discretionary account by the designated director, partner, officer, branch manager, futures contract principal or futures contract options principal, as the case may be, who authorized the opening of the account,

and provided that any such person permitted to effect discretionary trades shall have actively dealt in, advised in respect of or performed analysis with respect to the securities or commodity futures contracts or options which are to be traded on a discretionary basis for a period of two years.

[245] Regulation 1300.5 sets out the requirements for the "prior written authorization provided for by clause (a) of Regulation 1300.4."

[246] However, as Staff did not allege a breach of Regulation 1300.4 in its Amended Statement of Allegations and neither party gave written or oral submissions on that rule, we decline to consider it.

iv) Finding

[247] For the reasons given, Commissioner Thakrar dissenting, we are not satisfied that Rowan traded in breach of subsection 1.5(1) of OSC Rule 31-505. However, we want to be clear that we do not approve of Rowan's handling of this Account.

[248] Ensuring appropriate documentation of the client's instructions and the authority granted is amongst the most fundamental obligations of a registrant. Careful documentation is especially important when a registrant engages in discretionary trading, which exposes the investor to greater risks. For this reason, a registrant may not engage in discretionary trading without the prior written authorization of the client which is specifically approved and accepted in accordance with IDA rules and regulations. This requirement is intended to protect not just sophisticated institutional investors but also less sophisticated retail investors, who may not monitor their account statements as effectively to ensure a registrant's compliance with instructions. Indeed, the securities regime squarely places the burden on the registrant, not the investor, to ensure compliance with the investor's wishes.

[249] Because the Southridge Account was not identified as a discretionary account, it was not included in the IDA Review in 1999, which considered, amongst other things, whether Melnyk owned a control block of Biovail securities. The failure to properly document the Southridge Account as a discretionary account had significant regulatory consequences in this case.

I. Did Rowan and Watt Carmichael mislead the IDA in providing an incomplete response to inquiries regarding Melnyk's interest in the Trust Accounts?

i) Submissions

Staff

[250] Staff alleges that Rowan and Watt Carmichael provided information they knew to be incomplete and misleading in response to the IDA's queries concerning the beneficial owners of the Congor and Conset Accounts.

[251] Staff relies on the following evidence.

[252] On December 23, 1999, the IDA sent Watt Carmichael its draft sales compliance review report. The report included, as a priority item, a requirement that Watt Carmichael provide "copies of the formal trust agreements for both the Conset and Congor Accounts" and "state the identity of the beneficial owners of these accounts." The requirement was explained as follows:

Given that Eugene Melnyk deposited the Biovail shares to the Conset and Congor Accounts and that the proceeds of the Biovail sales in the Conset Account were wired to Mr. Melnyk, we are not satisfied with the Member's contention that Mr. Melnyk does not have any interest in these accounts.

Further, as the legal opinions on file are based on certificates from two offshore secretaries, we are not satisfied with the assertion that the Congor and Conset Accounts do not form part of a control block of Biovail. Thus, in the absence of trust documents and other supporting documentation, the Association believes that the Biovail holdings in these accounts are part of Mr. Melnyk's control position. In addition, if these accounts are part of a control block, then the use of margin is not permitted on the Biovail positions and the debit balances in these accounts relating to the Biovail positions represent a 100% capital charge.

[253] The same requirement appears in the IDA's final report, dated January 21, 2000.

[254] Carmichael responded on behalf of Watt Carmichael in a letter dated March 29, 2000, enclosing letters dated October 31, 1996 (Conset) and November 15, 1996 (Congor) from Stewart & Associates, Biovail's Canadian counsel, stating that the Conset and Congor investment companies did not hold a control block of Biovail securities. Carmichael also stated that further documentation from New York counsel was expected and would be provided to the IDA.

[255] Dimitropoulos responded on behalf of the IDA by letter dated May 24, 2000. The IDA was not satisfied with Watt Carmichael's response because the legal opinions from Stewart & Associates were the same opinions the IDA had considered as part of its sales compliance review and rejected because they were based on certificates from the offshore secretaries of the Trusts. The IDA asked that the letter from New York counsel be forwarded as soon as possible and reiterated its request for the identities of the beneficial owners of the Congor and Conset Accounts and for further documentation that they did not hold control positions in Biovail. The Southridge Account was not part of the IDA's sales compliance review.

[256] A June 7, 2000 memorandum from Rowan to Melnyk enclosed the IDA's May 24, 2000 letter and continued:

Eugene, can we provide the IDA with some suitable response to get them to go away.Ie.,

1. Was there any documentation submitted to the SEC when BVF was listed on the NYSE which clarified the status of the trusts ie., that stated they are not part of the control block?

2. Is there a trust agreement available that would satisfy the IDA?

3. If you do not wish to disclose the beneficiaries to the IDA (I don't see any harm in doing so), is there some declaration we can provide the IDA which states that Eugene Melnyk is not a beneficiary of the trust [sic] and therefore has no beneficial ownership in them.

If we can provide the above, I am confident that we can get the IDA to go away. Please call me regarding this.

[257] On July 17, 2000, Fong sent two faxes to Rowan (the "Fong Faxes"). On the first fax cover sheet, on Melnyk's letterhead, is a note which states:

Hi Roger,

Please find attached a copy of the letter from Congor Trust.

We are still awaiting receipt of the one from Conset Trust.

Hope this is what you are looking for.

Arlene.

[258] Attached to the fax cover sheet was the Trustee's cover letter of the same date to Fong, stating "Further to our telephone conversation attached is a copy of the letter requested by Mr. Melnyk." The attached letter of the same date (the "Congor Letter"), which is addressed to Melnyk, lists the beneficiaries of the Congor Trust. Melnyk is listed amongst the beneficiaries.

[259] Fong's second fax to Rowan, on Biovail letterhead, was sent about three hours later on July 17, 2000. The cover sheet includes a handwritten note, "Hi Roger, Here is the letter from Conset. Arlene." The attached letter from the Trustee (the "Conset Letter") is addressed to Melnyk and states: "As requested, we confirm that in respect of The Conset Trust, which was established by you as Settlor on 23rd September 1996, the Beneficiaries include the following." The list does not include Melnyk.

[260] On July 19, 2000, Watt Carmichael suspended trading in the Conset and Congor Accounts, except for margin purposes, and advised the IDA accordingly.

[261] On July 24, 2000, Melnyk revocably disclaimed his interest in the Trusts.

[262] In an unsigned letter, dated July 31, 2000 and addressed to Dimitropoulos, Andrew Levander ("Levander"), Melnyk's U.S. counsel, stated:

Under the law of the Cayman Islands, which governs those trusts, the identity of the beneficiaries of the Trusts is a matter of strictest confidence. Nonetheless, we have recently received written confirmation from each of the respective trustees of The Congor Trust and The Conset Trust that Eugene Melnyk is not a current beneficiary of either trust.

[263] The letter was not forwarded to the IDA.

[264] However, on August 10, 2000, McKenney forwarded to the IDA another letter from Levander to Dimitropoulos, this one dated August 1, 2000 (the "Final Levander Letter"), which was substantially similar to the July 31, 2000 letter but stated, "we have been authorized to confirm that Eugene Melnyk is not a beneficiary of either trust"; the word "current" no longer appears in the sentence. Watt Carmichael did not forward the list of beneficiaries required by the IDA.

[265] Dimitropoulos responded by letter dated August 14, 2000, stating the matters raised in the IDA's report had now been satisfactorily resolved.

[266] Staff submits that at the time the Final Levander Letter was forwarded to the IDA, Rowan and Watt Carmichael had in their files both the Congor Letter and the Conset Letter, each dated July 17, 2000.

[267] Staff submits that Watt Carmichael's offices were small, with only one fax machine and few support staff, and that consequently the chances of the Congor Letter and the Conset Letter both arriving unnoticed are remote.

[268] Further, Staff relies on evidence that Rowan received numerous faxes from the Trustees instructing him to wire significant funds out of the Trust Accounts and into accounts held in Melnyk's name. In fact, in the period between January of 1999 and March of 2000, Rowan sent over US$42,500,000 and $842,000 from the Trust Accounts to Melnyk-related accounts. Staff also relies on De Francesca's evidence that Rowan and Melnyk spoke by telephone "three or four times per day." Staff submits that Rowan and Melnyk communicated frequently about his accounts.

[269] Further, as the registered representative assigned to the Trust Accounts, Rowan must have known that NBCN, Watt Carmichael's carrying broker, treated the three accounts as one for the purposes of lending on margin. NBCN treated the accounts in this way because it believed that they had a common owner, Melnyk. Jeraj testified that NBCN "identified that [the Trust Accounts] did belong to the same client" and that the source of this belief was the Trust Accounts documentation provided by Watt Carmichael.

[270] Staff submits that by providing the Final Levander Letter and not the Congor and Conset Letters, Rowan and Watt Carmichael misled the IDA. Staff submits that the duty to provide full and true disclosure to a regulator applies equally to the IDA as it does to the Commission.

[271] Staff does not agree with the Respondents' submission that they were not obliged to identify the beneficiaries of the Trust Accounts for the IDA. Staff submits that the Respondents were under a Know Your Client obligation at all material times, even if the OSC Rule 31-505 did not require identification of beneficiaries at that time. In any event, Staff submits that even if the IDA had no power to ask for this information, once Rowan and Watt Carmichael undertook to respond, they were bound to do so fully and truthfully. By not tendering the Congor Letter, Rowan and Watt Carmichael failed to do so, in Staff's submission.

[272] On this basis, Staff argues that Rowan knew that the information contained in the Final Levander Letter concerning Melnyk's status as a beneficiary of the Congor Trust was inaccurate. Staff submits that to forward the Final Levander Letter without making further inquiries was to seriously mislead the regulator. At a minimum, the Final Levander Letter should have prompted further inquiries concerning the apparent discrepancies with the information provided in the Congor Letter and with NBCN's credit treatment of the Trust Accounts.

The Respondents

[273] The Respondents submit that an allegation of misleading the IDA is a serious accusation and needs to be supported by clear and compelling evidence, which Staff has not called in this case.

[274] The Respondents submit there is no basis for any allegation against Watt Carmichael in this regard.

[275] With respect to Rowan, the Respondents rely on Rowan's evidence that he did not see the Fong Faxes until after he was interviewed by Staff in 2005, and Fong's evidence that the letters were requested by Melnyk and she did not discuss them with Rowan. In addition, Rowan testified that he had not seen the trust agreements at the time he responded to the IDA.

[276] According to the Respondents, the evidence adduced by Staff regarding this allegation is vague and far from the best evidence available. Staff's investigator gave hearsay evidence regarding the discovery of the Congor Letter by Katherine Schindler ("Schindler"), Rowan's assistant at Watt Carmichael, in 2005, and provided no evidence about when Watt Carmichael received it.

[277] The Respondents also submit that Staff could have called Schindler and Melnyk to testify in support of Staff's allegations, but failed to do so. The Respondents submit that the Commission should consider the possibility that Rowan was misled by Melnyk, and should infer from Staff's failure to call Melnyk to testify on the matter that Melnyk could not have contradicted Rowan's evidence.

[278] The Respondents further submit that the IDA had no power to compel the disclosure of the beneficial owners of a trust during the material period. This request went beyond the KYC rule of the time. In any event, although Rowan stated that he would have provided the Congor letter to the IDA if he had been aware of it, the Respondents submit he would have been under no obligation to do so.

[279] Finally, the Respondents submit that the Final Levander Letter, which was prepared on Melnyk's instruction, was exactly what the IDA had requested, and did not reflect any intent to mislead.

ii) The Law

[280] It is crucial to the implementation of the securities regulatory system, including the self-regulatory system, that registrants provide full and accurate responses to inquiries from their regulator. As expressed by the Ontario Court of Appeal:

The [Commission] is charged with the statutory obligation to do its best to ensure that those involved in the securities industry provide fair and accurate information so that public confidence in the integrity of the capital markets is maintained. It is difficult to imagine anything that could be more important to protecting the integrity of capital markets than ensuring that those involved in those markets, whether as direct participants or as advisers, provide full and accurate information to the [Commission].

(Wilder et al. v. Ontario Securities Commission (2001), 53 O.R. (3d) 519 (C.A.) at para. 22)

[281] Similarly, this statement by the Ontario Court of Appeal applies to the duties of an IDA member when responding to an IDA inquiry.

iii) Analysis

[282] We must decide whether or not Rowan was aware of the Congor Letter and the Conset Letter and if so, whether he misled the IDA by failing to provide them. Rowan's claim that he was unaware that the letters were in his files raises an issue of credibility.

[283] Though Staff has presented evidence that, in Staff's submission, gives rise to an inference that Rowan must have seen the letters or been aware of them, we are not convinced.

[284] Rowan testified that he did not recall seeing the Congor Letter or the Conset Letter until they were presented to him by Staff. He suggested his assistant may have filed them away without showing them to him.

[285] Though Staff suggested there is an inconsistency between Rowan's and McKenney's testimony at the hearing and McKenney's hearsay statement to OSC investigators in his June 2005 interview about what Rowan told him during the course of the OSC investigation, we are not satisfied there is any significant discrepancy.

[286] De Francesca was in the best position to testify about whether she received the faxes and gave them to Rowan, but Staff did not question her on this issue while she was on the stand. Nor did Staff call Schindler, Rowan's assistant at Watt Carmichael, who, according to Fitzsimmons, discovered the faxes in Watt Carmichael's files in 2005.

[287] Further, Fong testified that the letters were requested by Melnyk and she did not discuss them with Rowan.

[288] In short, Staff asks the Panel to make an inference (that Rowan saw the faxes) where none should be needed.

[289] Although it could be argued that Rowan, based on the history of his dealings with the Trust Accounts, the Trustees and Melnyk, had a reasonable basis for suspecting that Melnyk was a beneficiary of one or more of the Trusts, we did not see clear and compelling evidence that Rowan knew the identity of any beneficiary of the Trusts when Watt Carmichael responded to the IDA's enquiry.

[290] Misleading the IDA is a serious allegation that would require clear and convincing proof based on cogent evidence. We are not satisfied that Staff has met its burden.

iv) Finding

[291] For the reasons given, Commissioner Thakrar dissenting, we are not satisfied that Staff presented clear and convincing proof based on cogent evidence that Rowan was aware of the Fong Faxes or knew that Melnyk was a beneficiary of the Conset and Congor Trusts. We are not satisfied that Rowan or Watt Carmichael provided misleading responses to the IDA enquiry.

J. Did Rowan mislead the Commission?

i) Submissions

Staff

[292] Staff submits that, when interviewed by Staff in February 2005, Rowan gave misleading answers to Staff's questions. Staff's questions and Rowan's answers were as follows:

Q. Who is the beneficial owner of Conset Investments?

A. My understanding is there are a number of beneficiaries of the trust. I don't have a list of the beneficiaries.

Q. Who would have that?

A. The trustees would certainly have that.

Q. What is your understanding as to who the beneficiaries are?

A. I don't know who the beneficiaries are. My understanding is it's a number of individuals, and I don't know who any of the beneficiaries specifically are.

[293] According to Staff, at the time that he gave these answers, Rowan had in his possession or control the Conset Letter dated July 17, 2000, from the Conset Trustees to Melnyk listing the beneficiaries of the Conset Trust. The information was not provided to Staff at the time of his examination.

[294] Staff submits that Rowan's failure to provide the Commission with information on what he knew to be an important point constitutes a further example of misleading regulatory authorities. As a registrant, and as a senior officer of a registrant, this wrongdoing is particularly serious.

The Respondents

[295] The Respondents submit that this allegation is merely duplicative of the first allegation that Rowan misled the IDA by not providing the Conset Letter in response to the IDA's enquiry. Rowan denies having seen the Conset Letter at the time it was sent in July 2000. Alternatively, he submits that even if he had seen the Conset Letter, his answer to Staff in 2005 -- that he did not know who the beneficiaries were -- was entirely reasonable because the information available to him was that the Account holders were refusing to disclose beneficial ownership, citing Cayman Island confidentiality laws.

ii) Analysis

[296] For the reasons given above, we are not satisfied that Rowan was aware of the Conset and Congor Letters or that he knew who the beneficial owners of the Trust Accounts were in 2000, when the IDA required Watt Carmichael to provide this information. The questions put by Staff during its interview in 2005 were in the present tense. None of the questions probed Rowan's knowledge of the identity of the beneficiaries in 2000. It is fair to assume that, from Rowan's perspective, he was being asked who the beneficiaries were as at the time of the interview, namely February 2005. Neither Rowan nor Watt Carmichael had been dealing with the Trust Accounts since some time in the second quarter of 2004, and there is no convincing evidence that Rowan knew who the beneficiaries were at the time of the interview. We conclude, therefore, that there is no convincing evidence that his answers were misleading.

iii) Finding

[297] For the reasons given, Commissioner Thakrar dissenting, we are not satisfied that Rowan misled the Commission when he was interviewed by Staff in February 2005.

K. Did McKenney, Carmichael and Watt Carmichael, fail to adequately supervise Rowan's trading in Biovail securities in the Trust Accounts?

i) Submissions

Staff

[298] Staff alleges that McKenney, Carmichael and Watt Carmichael did not adequately supervise Rowan's trading in Biovail securities in the Trust Accounts.

[299] Staff alleges that Carmichael, in his capacity as Chairman, CEO and UDP, and McKenney, in his capacity as CCO, failed to adequately supervise trading by Rowan and to address conflicts of interest despite indications that supervision was required. Specifically, Staff alleges that Carmichael and McKenney knew or should have known that:

(a) Rowan had multiple roles as a director of Biovail and member of Biovail's Audit Committee, and as the President of Watt Carmichael and the registered representative for the Trust Accounts;

(b) Rowan engaged in discretionary trading of Biovail securities in the Trust Accounts in 2002 and 2003; and

(c) Rowan, as a director of Biovail, was required to cease trading in Biovail securities during the Biovail Blackout Periods.

[300] Further, Staff notes that that the Trust Accounts were held in the name of offshore investment corporations, collectively held a very large position in Biovail shares, were highly concentrated in Biovail shares, and conducted very active trading in Biovail shares, all of which Staff submits constituted additional risk factors that called for greater supervision of the Accounts.

[301] Staff alleges that in spite of the clear risks posed by Rowan's positions as a director of Biovail and registered representative for the Trust Accounts, McKenney and Carmichael failed to ensure that:

(a) Rowan filed insider reports relating to his trading of Biovail securities in the Trust Accounts;

(b) Rowan ceased trading in Biovail shares in the Trust Accounts during Biovail Blackout Periods; and

(c) Rowan ceased trading in Biovail shares in the Trust Accounts during periods when he was in possession of material undisclosed information about Biovail.

[302] Staff submits that Watt Carmichael's policies and procedures were inadequate to properly supervise Rowan's trading.

[303] With only a few exceptions, Staff does not accept that the trades at issue were made in response to margin calls by Watt Carmichael's carrying broker. Further, Staff does not accept that Watt Carmichael's carrying broker was responsible for supervising trading in the Trust Accounts. Staff submits that the carrying broker agreements in force during the period at issue in this case expressly state that the broker, Watt Carmichael, is responsible for compliance with applicable law and self-regulatory organization requirements, including but not limited to obtaining account opening documentation, following KYC rules, and determining the suitability of trading activity and the nature of securities purchased.

[304] In addition, Staff does not accept that the IDA's failure to raise supervisory concerns with Watt Carmichael during its sales compliance reviews indicates the IDA was satisfied with Watt Carmichael's accounts supervision. Staff submits that the supervisory failures alleged by Staff involve issues that are not routinely reviewed in sales compliance reviews and that in a "non-financial" audit, there is no expectation that a sales compliance review will inspect every aspect of a client's business.

[305] In any event, Staff submits that the IDA did ask questions about Watt Carmichael's supervision of trading in the Trust Accounts, and that the Final Levander Letter provided in response (Watt Carmichael's letter to the IDA dated August 10, 2000, discussed above at paragraph 263 and following) was misleading. We have rejected this allegation, for reasons given above at paragraphs 281-290 above.

[306] Finally, Staff submits that the actions and views of the IDA do not bind the Commission, which has authority to determine whether a registrant and its officers have fulfilled their supervisory responsibilities under Rule 31-505 and sole jurisdiction to determine whether a respondent has acted contrary to the public interest. Accordingly, Staff submits that McKenney, Carmichael and Watt Carmichael, not the IDA, bore responsibility for supervising Rowan's trading in the Trust Accounts.

The Respondents

[307] The Respondents submit that the "failure to supervise" allegations against McKenney and Carmichael are unfounded and over-reaching. These allegations, which have an injurious impact on the unblemished reputations of McKenney and Carmichael, are particularly unfortunate, in the Respondents' submission, in light of the abundant evidence that the IDA was satisfied with the way Watt Carmichael did its business.

[308] According to the Respondents, all the witnesses who testified about supervision standards, including Kleberg (Staff's expert witness), and Johnston and Dimitropoulos (the IDA representatives called by Staff), confirmed that there is no industry standard requiring compliance officers to monitor whether a registrant who is an insider of a reporting issuer is filing insider reports of trades in securities of the issuer and complying with issuer blackout periods, and that is why the IDA's sales compliance review did not concern these issues. The Respondents submit that if the Panel now decides to impose such a requirement, it should not be the standard for judging the conduct of McKenney and Carmichael in past years, especially considering that the IDA approved the supervision provided by Watt Carmichael.

[309] The Respondents submit that the allegation against Carmichael is even less well-founded than the allegation against McKenney. As the UDP, Carmichael was responsible for ensuring that Watt Carmichael had appropriate policies and procedures in place and qualified personnel to supervise compliance. The Respondents submit that Carmichael fulfilled these obligations, and that Watt Carmichael's policies were crafted in consultation with, and expressly approved by, the IDA. In the Respondents' submission, there is no basis for this allegation against Carmichael, who has had 45 years of experience in the industry.

ii) The Law

[310] OSC Rule 31-505, IDA Regulation 1300.2 and IDA Policy No. 2 require IDA members to supervise trading in client accounts and to implement procedures and policies to ensure that client accounts are supervised. Section 3.1 of Rule 31-505, entitled "Supervisory Terms", provides as follows:

A registered dealer shall supervise each of its registered salespersons, officers and partners and a registered adviser shall supervise each of its registered officers and partners in accordance with Ontario securities law and terms or conditions imposed by the Director or the Commission on the registration of the salesperson, officer or partner of the dealer or the officer or partner of the adviser requiring that the actions of the registered salesperson, officer or partner of the registered dealer or the registered officer or partner of the registered adviser be supervised in a particular manner.

(OSC Rule 31 -- 505)

[311] Further, IDA Regulation 1300.2 provides as follows:

Each Member shall designate a director, partner or officer or, in the case of a branch office, a branch manager reporting directly to the designated director, partner or officer who shall be responsible for the opening of new accounts and the supervision of account activity. Each such designated person shall be approved by the applicable District Council and, where necessary to ensure continuous supervision, the Member may appoint one or more alternates to such designated person who shall be so approved. The director, partner or officer as the case may be, shall be responsible for establishing and maintaining procedures for account supervision and such persons, or in the case of a branch office, the branch manager shall ensure that the handling of client business is within the bounds of ethical conduct consistent with just and equitable principles of trade and not detrimental to the interests of the securities industry.

[312] Proper supervision by registrants is a critical component of the securities regulatory system. As stated by the Alberta Securities Commission in Re Roche Securities Ltd., [2004] A.S.C.D. 400 ("Roche"):

The issue here turns on the objectives underlying the concept of registration. As we noted earlier, the Act as a whole aims to protect investors and to foster market fairness, market efficiency and investor confidence. Registrants have a special, and in some ways privileged, role in the securities regulatory framework. They are entrusted to use their expertise and knowledge in such a way that investors, and the capital market, are served competently and ethically.

The responsibilities of individual registrants such as securities salespersons or brokers are complemented and supplemented by the responsibility of the registered dealers who employ them. Those dealers must ensure that the business conducted on their behalf by their personnel is conducted appropriately.

In this context, the notion of "supervision" may be seen as shorthand for the array of systems, procedures, checks and balances that firms put in place to ensure that trading and other activities carried on with and for firm clients proceed fairly and in accordance with applicable regulatory requirements and norms. Registered firms, and their supervisory and compliance procedures, serve as gatekeepers for dealings between the firms and the world outside. When they do their job, misconduct or simple error on the part of individual personnel can be deterred or, failing that, detected promptly before harm (or further harm) to investors and the capital market generally.

Some of the procedures are identified generally in section 30 of the ASC Rules, but that provision need not and should not be viewed as an exhaustive and definitive prescription.

A registered dealer cannot disassociate itself from the actions of its personnel, and least of all from the actions of its most influential personnel. Whenever misconduct can be attributed to individuals in connection with trading activity conducted for, on behalf of or through the registered dealer that employs them, it seems to us natural to inquire into the adequacy of the dealer's supervision of the individuals.

(Re Roche Securities Ltd., [2004] A.S.C.D. No. 400, at para. 149-153)

[313] As noted above, Canadian Securities Administrators recognized the inherent danger of having registrants acting as corporate directors in MP 34-202. -- Registrants Acting as Corporate Directors, which states:

The position of a representative of a registrant acting as a director of or adviser to a reporting issuer is one that is fraught with the possibility of a conflict of interest. This arises more particularly in regard to questions of insider information and trading, and timely disclosure.

(Multilateral Policy 34-202 -- Registrants acting as Corporate Directors, ss. 1.1 and 1.2)

[314] OSC Policy 33-601 -- Guidelines for Policies and Procedures Concerning Inside Information ("OSC Policy 33-601") contains a discussion of the measures that registrants are required to adopt in order to deal with inside information that members of their firms may possess. Section 2.1 of this Policy sets out that:

(1) While the selection and implementation of policies and procedures by a registrant to prevent contravention of subsection 76(1) of the Act must be determined by the registrant having regard to its business activities, a registrant should consider establishing written policies and procedures in the following areas:

(a) education of employees;

(b) containment of inside information;

(c) restriction of transactions; and

(d) compliance.

(2) In the view of the Commission, the board of directors and senior officers of a registrant should be responsible for ensuring that appropriate policies and procedures for the business activities of the registrant are adopted, maintained and enforced.

(OSC Policy 33-601 -- Guidelines for Policies and Procedures Concerning Inside Information, (1998), 21 O.S.C.B. 617)

iii) Analysis

Kleberg's Evidence

[315] We accept Kleberg's expert evidence only as it related to industry standards for brokerage compliance practices.

[316] Kleberg testified about the division of supervisory responsibilities that is mandated within securities brokerages. Each firm must have a UDP who is responsible for the firm's overall compliance with regulatory requirements as well as overseeing the development and implementation of its compliance practices and procedures. However, the UDP is not operationally responsible for day-to-day compliance activities.

[317] A firm must also have a CCO who bears primary responsibility for supervising the firm's accounts as well as developing and implementing its compliance policies and procedures. In Kleberg's words, the CCO is responsible for creating awareness of compliance issues within the firm, monitoring adherence with regulatory requirements and ensuring compliance with such requirements.

[318] Kleberg also stressed that compliance policies and procedures must be reflective of and responsive to a firm's particular business. Kleberg testified about IDA Policy No. 2 (Minimum Standards for Retail Account Supervision), which states: "This Policy establishes minimum industry standards for retail account supervision." It also states:

Members are required to know and comply with Association and other self-regulatory organization by-laws, rules, regulations and policies and applicable securities legislation which may apply in any given circumstance. [emphasis added]

[319] Kleberg testified that OSC Policy 33-601, which requires written policies and procedures dealing with the containment and monitoring of inside information, should guide registrants in setting out their responses to the possession of inside information.

[320] Kleberg testified that he had examined Watt Carmichael's Policies and Procedures Manual to examine its treatment of insider information containment. His conclusion was that "it did not address the appropriate procedures".

[321] Kleberg concluded that these Trust Accounts warranted especially close supervision and required effective policies and procedures. In his words, the Trust Accounts were "screaming for attention". He highlighted the salient features of the Trust Accounts from a supervisory perspective:

(a) the accounts held a very large position in Biovail securities;

(b) the accounts were highly concentrated in Biovail securities;

(c) the accounts conducted very active trading in Biovail securities;

(d) the registered representative assigned to the accounts was an insider of Biovail; and

(e) the registered representative held discretionary trading authority over the accounts.

[322] Kleberg acknowledged that industry standards would not generally require the CCO to monitor adherence to corporate blackout periods by a brokerage client who is an insider of a reporting issuer. However, it was Kleberg's opinion that where a registered representative who is also an insider of a reporting issuer ("RR/insider") has discretionary authority to trade in securities of the reporting issuer, close supervision by the CCO is required to ensure that an RR/insider does not trade in the issuer's securities during the issuer's blackout periods. Kleberg stated that this monitoring would not be difficult since the CCO could simply ask the reporting issuer to notify him of any blackout periods.

[323] Kleberg explained at the hearing that a CCO should monitor all trading by an RR/insider for compliance with the blackout periods. After discussing blacklisting and grey listing, Kleberg stated:

In this situation, it's a little bit more complex because usually, one does not have a situation where the insider happens to be a registrant who services clients as well. So I have to extend my comments by saying the insider in this case, who is also a registrant, should not only [not] trade for his own account. He should not give advice during the blackout period and he should not do discretionary trading on behalf of clients during the blackout period.

[324] Kleberg testified that industry standards would require that all Biovail trades at Watt Carmichael be monitored during such periods.

[325] Staff submits that McKenney should at least have met the industry standard and monitored Biovail trading in all accounts at the firm. This monitoring was required to ensure that Rowan did not transmit any inside information concerning Biovail to other investment advisors or clients.

[326] Part of the close attention required was the need to verify that Rowan was filing reports under section 107 of the Act for each transaction in Biovail securities in the Trust Accounts. Kleberg expressed the opinion that, given the unique characteristics of these accounts, a CCO should verify that insider reports are filed. Further, he should document the steps he takes to verify the filings.

[327] Even if the RR/insider assures the CCO that the transactions are being reported, the CCO should still verify this information. As Kleberg explained, this would be easy to do by periodically checking the insider reporting website.

[328] Kleberg also testified that the UDP should ensure that his CCO carries out his responsibilities in this area including supervising the filing of insider reports.

iv) Findings

[329] For the following reasons, we find that Carmichael, McKenney and Watt Carmichael failed to supervise Rowan's trading in Biovail securities in the Trust Accounts.

McKenney

[330] The CCO is responsible for creating awareness of compliance issues within the firm, monitoring adherence with regulatory requirements and ensuring compliance with such requirements.

[331] McKenney testified that he was aware that:

(a) Rowan was a director of Biovail, a member of its Audit Committee, and the registered representative for the Trust Accounts;

(b) Rowan conducted discretionary trading in Biovail securities in the Trust Accounts; and

(c) Rowan was an insider of Biovail and thus required to comply with its trading blackout periods and insider reporting requirements.

[332] McKenney also admitted being aware of the concentration of Biovail securities in the Trust Accounts, the unusually high volume of trading in the Biovail securities in the Trust Accounts, that these were offshore accounts and that Melnyk was the settlor.

[333] Nevertheless, in spite of the clear risks, McKenney failed to properly supervise Rowan's trading in the Trust Accounts. In particular, McKenney, as CCO, failed to ensure that:

(a) Rowan filed insider reports relating to his trading in Biovail securities in the Trust Accounts;

(b) Rowan ceased trading in Biovail securities in the Trust Accounts during Biovail Blackout Periods; and

(c) Rowan ceased trading in Biovail securities in the Trust Accounts during periods where he was in possession of material undisclosed information concerning Biovail.

[334] We find that McKenney made only sporadic and inadequate attempts to determine when Rowan had knowledge of information not generally disclosed.

[335] McKenney testified that he did not monitor Rowan's compliance with the Biovail Blackout Periods because in his opinion he was not required to do so.

[336] McKenney testified that he monitored Rowan's trading in Biovail securities at times when Rowan was in possession of material undisclosed information concerning Biovail. He stated that he determined when Rowan was in possession of such information in two ways:

(a) when Rowan informed him that he was in possession of such information; and

(b) when it came to his attention that Rowan was about to leave the office to attend a Biovail Board of Directors or Audit Committee meeting.

[337] McKenney testified that, once notified that Rowan was in possession of material undisclosed information concerning Biovail, he would alert the Watt Carmichael trading desk that no trades in Biovail securities were to be entered in accounts for which Rowan was the registered representative until further notice.

[338] McKenney stated that such restrictions were only imposed on accounts for which Rowan was the registered representative. He testified that he did not monitor the trading in Biovail securities in any other accounts at Watt Carmichael during such periods.

[339] We find that McKenney did not properly monitor Rowan's possession of inside information. It is insufficient for a CCO to accept information provided by a registered representative at face value. As Kleberg explained, industry standards dictate that trust in a registered representative should always be accompanied by independent checks of the information provided:

When I go to the registrant and ask him a question, then I trust that he tells me the truth, but there has to be the occasional reasonable verification.

[340] It was also inappropriate for McKenney to rely on happenstance to find out that Rowan was leaving the office to attend a Biovail Board or Audit Committee meeting. McKenney relied entirely on reporting by the registered representative with no independent verification. Such an approach could easily miss, for example, Biovail meetings that were conducted by conference call. In fact, McKenney admitted that he would not have known of such meetings.

[341] The measures imposed in response to Rowan's admitted possession of such information were equally insufficient. For example, McKenney stated that he only monitored trading in Biovail securities in accounts controlled by Rowan. This approach was adopted even in the face of a statement in Watt Carmichael's Policy and Procedures Manual that "all trading activities of Watt Carmichael Inc. will be affected whenever Watt Carmichael Inc. is in receipt of insider information".

[342] As Chief Compliance Officer of Watt Carmichael, McKenney was responsible for supervising Rowan's trading to ensure compliance. We find he failed to do so.

Watt Carmichael

[343] Carmichael testified that in his opinion, Watt Carmichael's Policies for information containment and monitoring for insider trading were adequate for its business, including supervision of the Trust Accounts.

[344] In our view, the evidence demonstrates that Watt Carmichael's compliance policies, procedures and practices were inadequate in that they failed to address the inherent risk in Rowan's dual role as registered representative for the Trust Accounts with discretionary trading authority and as an insider of Biovail.

[345] In particular, Watt Carmichael failed to adequately supervise Rowan's trading in Biovail securities in the Trust Accounts, in that Watt Carmichael failed to ensure the containment of inside information, failed to ensure Rowan's compliance with insider trading and disclosure rules and the Biovail Blackout Policy, and failed to properly document its compliance activities.

Carmichael

[346] Carmichael, as Chairman, CEO and acknowledged UDP of Watt Carmichael, is responsible for the firm's overall compliance with regulatory requirements, and for overseeing the development and implementation of its compliance practices and procedures.

[347] Carmichael testified that the Trust Accounts came to his attention in 1996 or 1997 and that he knew that:

(a) Melnyk was the settlor of the Trusts;

(b) the Trust Accounts held mostly Biovail shares;

(c) Rowan was a director of Biovail, a member of its Audit Committee, and the registered representative for the Trust Accounts;

(d) Rowan conducted discretionary trading in Biovail securities in the Conset and Congor Accounts;

(e) there was a high volume of trading in the Trust Accounts; and

(f) Rowan was an insider of Biovail and thus required to comply with its trading blackout periods and insider reporting requirements.

[348] Carmichael admitted that he was aware of Biovail's quarterly and annual reports because Biovail was a client, and that he received a daily trading blotter that showed the trading activity in the Accounts under Rowan's registered representative number.

[349] Carmichael testified that Watt Carmichael did not monitor Rowan's compliance with the Biovail Blackout Periods because in his opinion it was not required to do so.

[350] Carmichael testified that Watt Carmichael relied on Rowan to disclose when he had inside information and could not trade.

[351] We find that Carmichael, given his knowledge of the unique nature of the Trust Accounts, should have ensured that Watt Carmichael had adequate policies, procedures and practices in place to ensure Watt Carmichael's compliance with its responsibilities referred to in paragraph 345 above.

[352] As Chairman, CEO and UDP, Carmichael was ultimately responsible for ensuring that Watt Carmichael had appropriate policies, procedures and practices in place, and for ensuring that McKenney, as Chief Compliance Officer, satisfied his oversight responsibilities. We find that Carmichael failed to fulfill this responsibility as Chairman, CEO and UDP, contrary to the public interest.

iv) Finding

[353] In light of the evidence, we conclude that McKenney, Carmichael and Watt Carmichael failed to adequately supervise Rowan's trading in Biovail securities in the Trust Accounts.

VI. CONCLUSION

[354] For these Reasons we find that:

(a) Rowan breached section 107 of the Act by failing to file insider reports in respect of trades in Biovail securities that he executed in the Trust Accounts;

(b) Rowan engaged in conduct contrary to the public interest by failing to disclose to Biovail the Biovail securities held in the Trust Accounts over which he exercised control or direction;

(c) Rowan engaged in conduct contrary to the public interest by trading in Biovail securities in the Trust Accounts during Biovail's Blackout Periods;

(d) Rowan did not breach section 76 of the Act;

(e) Rowan did not contravene OSC Rule 31-505 (Know Your Client) by conducting unauthorized discretionary trading in the Southridge Account;

(f) Rowan and Watt Carmichael did not mislead the IDA;

(g) Rowan did not mislead the Commission;

(h) McKenney, Carmichael and Watt Carmichael failed to adequately supervise Rowan's trading in Biovail securities in the Trust Accounts; and

(i) the conduct of the Respondents with regards to paragraphs (a), (b), (c) and (h) was contrary to the public interest.

[355] The parties shall contact the Office of the Secretary within 10 days of this decision to set a date for a sanctions hearing, failing which a date will be fixed by the Office of the Secretary.

Dated at Toronto, this 20th day of June, 2008.

COMMISSIONER THAKRAR (DISSENTING IN PART):

A. Introduction

[1] I concur with my colleagues' conclusions, except that I am respectfully unable to concur with respect to Staff's allegations that:

(a) Contrary to the public interest, Rowan and Watt Carmichael provided responses to the IDA's request for information as to the identity of the beneficiaries of the Congor and Conset Trusts which they knew or ought to have known were misleading or untrue or did not state facts that were required to be stated to make their statements not misleading;

(b) Contrary to the public interest, Rowan made statements to Staff as to the identity of the beneficiaries of the Conset Trust which he knew or ought to have known were misleading or untrue or did not state facts that were required to be stated to make his statements not misleading; and

(c) Rowan purported to exercise discretionary trading authority in the Southridge Account when he did not have such discretionary authority, contrary to the Know Your Client requirements set out in subsection 1.5(1) of OSC Rule 31-505 -- Conditions of Registration, (1999), 22 O.S.C.B. 731 and (2003) 26 O.S.C.B. 7170, referred to as the "Know Your Client" ("KYC") rule ("OSC Rule 31-505"), and contrary to the public interest.

[2] I concur with my colleagues that Staff bears the burden of presenting clear and compelling proof based upon cogent evidence in support of each of its allegations. I am also mindful of the seriousness of these allegations and of the consequences of these findings for the Respondents. However, viewing the evidence in its totality, I find that Staff presented compelling evidence in support of these allegations. I therefore conclude that, contrary to the public interest, Rowan and Watt Carmichael misled the IDA, that Rowan misled the Commission, and that Rowan engaged in unauthorized discretionary trading in the Southridge Account.

[3] My reasons follow.

B Did Rowan and Watt Carmichael mislead the IDA in providing an incomplete response to inquiries regarding Melnyk's interest in the Trust Accounts?

i) Introduction

[4] Staff alleges that contrary to the public interest, Rowan and Watt Carmichael provided responses to the IDA's request for information as to the identity of the beneficiaries of the Congor and Conset Trusts which they knew or ought to have known were misleading or untrue or did not state facts that were required to be stated to make their statements not misleading.

[5] Rowan testified that he did not see the Fong Faxes until shown them by Staff. He also testified that he did not know of Melnyk's beneficial interest in the Trusts until after he was interviewed by Staff in 2005.

[6] In my view, Staff presented compelling evidence that Rowan was aware of the Fong Faxes and the Congor and Conset Letters and knew that Melnyk was a beneficiary of the trusts at the time of the IDA enquiries in 2000.

[7] My reasons are as follows.

ii) The Congor Letter and the Conset Letter were requested for the IDA

[8] I find it significant that the Fong Faxes, including the Congor Letter and the Conset Letter, were addressed to Rowan during the IDA's 1999 sales compliance review of Watt Carmichael (the "Review"). In fact, they were sent in response to a request from Rowan to Melnyk relating to the Review.

[9] On December 23, 1999, Dimitropoulos, the Manager of Sales Compliance at the IDA, sent McKenney the IDA's draft report resulting from its completed Review, noting that the draft report sets out "a number of items that require your attention," including a requirement that Watt Carmichael provide copies of the trust agreements for the Congor and Conset accounts.

[10] The final IDA report, sent to Carmichael on January 21, 2000, with copies to Rowan and McKenney, indicated that the IDA's concerns were not yet resolved. Under the heading "Supervision of Account Activity", the report identified the following as "[t]he priority item which the Member firm must address and resolve":

2.3 Trading Concerns -- IDA Regulation 1300.1 and 1300.2; IDA Policy No. 2 Sections II and IV -- Priority Item

A review of two off-short corporate accounts noted various concerns as follows:

Conset Investments Ltd. -- [Account Number] -- R.R. Roger Rowan

Account documentation does not provide enough information to determine the beneficial owner(s). The corporate resolution indicates that the Secretary is a third party corporate secretary. The RR indicated that the CEO of Biovail, Eugene Melnyk, "donated" the Biovail stock to this account under the terms of a trust and is the Settlor of the trust. No trust agreement was on file. As of May 31, 1999, the account held over US$20 million dollars worth of Biovail stock. It was also noted that as of may 31, 1999, the US margin account had a debit balance of US$2,882,952.78. With the exception of 4.7% of the portfolio holdings, all other holdings were Biovail. In addition, it was noted that the account sold 110,000 Biovail shares for total proceeds of US$4,364,093.60 on April 5, 6, 14, 15 and 19, 1999 and then on April 13 and 14, 1999 wired US$2,500,000 to a bank account in New York that belonged to Eugene Melnyk.

Congor Investments Ltd. -- [Account Number] -- R.R. Roger Rowan

The account documentation on file with the Member does not provide enough information to determine the beneficial owner(s). The corporate resolution indicates that the Secretary is a third party corporate secretary. The RR indicated that the CEO of Biovail, Eugene Melnyk, "donated" the Biovail stock to this account under the terms of a trust and is the Settlor of the trust. No trust agreement was on file. As of May 31, 1999, the account held over US$17 million dollars worth of Biovail stock. It as also noted that as of May 31, 1999, the US margin account had a debit balance of US$2,709,428.35 with Biovail being the only security held in the account.

Requirement

Given that Eugene Melnyk deposited the Biovail shares to the Conset and Congor accounts and that the proceeds of the Biovail sales in the Conset account were wired to Mr. Melnyk, we are not satisfied with the Member's contention that Mr. Melnyk does not have any interest in these accounts.

Further, as the legal opinions on file are based on certificates from two off-shore secretaries, we are not satisfied with the assertion that the Congor and Conset accounts do not form part of a control block of Biovail. Thus, in the absence of trust documents and other supporting documentation, the Association believes that the Biovail holdings in these accounts are part of Mr. Melnyk's control position. In addition, if these accounts are part of a control block, then the use of margin is not permitted on the Biovail positions and the debit balances in these accounts relating to the Biovail positions represent a 100% capital charge.

The Member is required to provide the Association with copies of the formal trust agreements for both the Conset and Congor accounts. Also the Member is required to state the identify of the beneficial owner of these accounts.

[11] Dimitropoulos testified that if Melnyk was a beneficial owner of the Conset and Congor Accounts, there would be several ramifications: "the clients would have been deemed to be insiders of Biovail", "the debit balances against the security would have been one hundred percent capital charge", "there would have been no loan value on Biovail due to the control position", and any capital charge would result in "a capital hit against Watt Carmichael."

[12] Johnston, the sales compliance officer who participated in the IDA review testified "that the Accounts were carrying a large debit balance on margin", and if Melnyk had some type of interest in the Accounts, this would have raised a number of issues: "these accounts were being given margin and so if in fact the Biovail shares were part of his control block position, number one, they would have been violating control block distribution rules any time they made a sale. Number two, they wouldn't have been allowed to have margin. So there would have been an immediate capital hit either to the client if they couldn't put up margin that was required or it could potentially put the firm into some type of early warning from a capital position because of the fact that they were granting margin that would not be allowed under IDA rules".

[13] Carmichael's March 29, 2000 response to the IDA on behalf of Watt Carmichael was as follows:

Please find enclosed two letters from Stewart & Associates the Canadian Counsel for Biovail Corp. to First Marathon Securities Limited (now National Bank Financial) rendering a legal opinion the shares deposited in the accounts Conset Investments Limited and Congor Investments Limited are not "control block" securities. At the time the accounts were opened First Marathon did ask for confirmation for margin purposes that they were not control block and asked for the enclosed letters. We believe that this is so and rely on these letters to continue with margin eligibility in the accounts.

Regarding trust agreements between Conset, Congor and Biovail and/or Mr. Melnyk, indication is that perhaps this has nothing to do [with] the relationship between Watt Carmichael, Conset and Congor as these offshore accounts are set up as separate Limited Companies with Officers and Directors with the powers of those positions. If Conset or Congor issue instructions to pay funds other than to them directly we feel this [is] there [sic] concern as long as we have the documentation and the proper signatures to do so.

While having said the above we are expecting more documentation from legal counsel in New York to further enhance our position and to forward on to you. We are pleased to meet with you in the near future on the above if it is your wish.

[14] As my colleagues noted, the IDA was not satisfied. In his May 24, 2000 letter to Carmichael on behalf of the IDA, Dimitropoulos stated:

The Member's response did not satisfy the Association's request to identify the beneficial owner(s) of the Congor and Conset accounts. In addition, the Member did not provide sufficient documentation to prove that the Congor and Conset accounts do not form part of a control block of Biovail. The response included copies of two legal opinions from Stewart & Associates, however these legal opinions were the same documents that we had reviewed during the 1999 SCR. In fact, Item 2.3 of the 1999 SCR had stated "as the legal opinions on file are based on certificates from two off-shore secretaries, we are not satisfied with the assertion that the Congor and Conset accounts do not form part of a control block of Biovail."

We further disagree with the Member's assertion that, if Conset or Congor issue instructions to pay funds to third parties, the Member should not be concerned as long as it has the proper signatures and documentation. We believe that the Member does have a duty to ensure that its clients are not involved in any violation of the Securities Act. As mentioned in our 1999 SCR, the activities surrounding Mr. Eugene Melnyk's involvement in the Conset and Congor accounts do raise concerns regarding the beneficial ownership of these accounts since it appears that the Biovail holdings in these accounts may form part of Mr. Melnyk's control position.

Finally, your response indicated that the Member is expecting more documentation from legal counsel in New York. Please forward these documents to the Association as soon as possible. In addition, please forward any further documents that would identify the beneficial owners of the Conset and Congor accounts and documents to ascertain whether the Biovail holdings in these account form part of Mr. Melnyk's control position in Biovail.

Your immediate attention and a written response to the above items are appreciated. . . .

[15] My colleagues have noted Rowan's June 7, 2000 memo to Melnyk, which was as follows:

Re: IDA Letter regarding Conset and Congor Accounts

Attached is a copy of the letter dated May 24/00 from the IDA regarding the above accounts.

Eugene, can we provide the IDA with some suitable response to get them to go away.Ie.,

1. Was there any documentation submitted to the SEC when BVF was listed on the NYSE which clarified the status of the trusts ie., that stated they are not part of the control block?

2. Is there a trust agreement available that would satisfy the IDA?

3. If you do not wish to disclose the beneficiaries to the IDA (I don't see any harm in doing so), is there some declaration we can provide the IDA which states that Eugene Melnyk is not a beneficiary of the trust [sic] and therefore has no beneficial ownership in them.

If we can provide the above, I am confident that we can get the IDA to go away. Please call me regarding this.

[16] This memo shows that Rowan was well aware of the reasons for the IDA's questions. It also provides the context for the Fong Faxes. In my view, Rowan would have expected a response to this request, which concerned a critical outstanding issue raised in the IDA Review.

[17] The first of the Fong Faxes consisted of three documents, all of which were dated July 17, 2000: a fax cover sheet from Fong to Rowan, a letter from Coutts (Cayman) Limited ("Coutts"), the Trustee for the Congor Trust, to Fong, and a letter from Coutts to Melnyk.

[18] The fax cover sheet is on Melnyk's letterhead, and includes the following typewritten note under the subject line, "Beneficiaries -- Congor and Conset Trusts":

Hi Roger,

Please find attached a copy of the letter from Congor Trust.

We are still awaiting receipt of the one from Conset Trust.

Hope this is what you are looking for.

Arlene.

[19] Coutts' cover letter of the same date is addressed to Fong and states:

Further to our telephone conversation attached is a copy of the letter requested by Mr. Melnyk.

[20] The attached letter from Coutts (the "Congor Letter") is addressed to Melnyk, and, under the subject line, "The Congor Trust", states:

Further to your request I can advise that the beneficiaries of the Trust are as follows:

The first name on the list is Melnyk's, and several of the other names appear to belong to Melnyk's family members. The Congor Letter concludes:

I trust this information is sufficient for your purpose, although please let either Lesley or myself know if you require anything further.

[21] The second Fong Fax consists of two documents: a fax cover sheet and a letter from Caledonian Bank & Trust Limited ("Caledonian"), the Trustee for Conset.

[22] The fax cover sheet is on the letterhead of Biovail Laboratories Incorporated and the date and time imprint indicates it was sent about three hours after the first Fong Fax on July 17, 2000. The cover sheet includes the following handwritten note:

Hi Roger,

Here is the letter from Conset.

Arlene.

[23] The attached letter from Caledonian, also dated July 17, 2000 (the "Conset Letter") is addressed to Melnyk under the subject line, "Re: The Conset Trust". It states:

As requested, we confirm that in respect of The Conset Trust, which was established by you as Settlor on 23rd September 1996, the Beneficiaries include the following: [emphasis added]

[24] The list does not include Melnyk. It appears to include members of his family.

[25] Fong's covering letters make it clear she is responding to Rowan's memo to Melnyk, and that the Congor Letter and Conset Letter were intended to be provided to the IDA. We received no evidence that Rowan followed up on his June 7, 2000 memo to Melnyk. In my view, the most probable explanation is that the two Fong Faxes were Melnyk's response.

[26] If the Conset Letter and the Congor Letter had been forwarded to the IDA, I find it likely that the IDA would have concluded that Melnyk was a beneficiary of the Conset Trust and would most likely have asked whether he was also a beneficiary of the Congor Trust, because of the careful wording of the letter from Caledonian.

[27] If the IDA had concluded that the Biovail securities in the Conset and Congor Accounts were part of a control block, this would have impacted the marginability of the Biovail securities in the Trust Accounts. This could have had serious consequences for Rowan and Watt Carmichael. As the monthly statements for the Trust Accounts showed, Rowan's trades in Biovail securities in these accounts generated significant commissions for him and the firm. Rowan engaged in heavy trading of Biovail securities in the Trust Accounts during the period in dispute. McKenney described the volume in these accounts as "pretty astounding" and said no other Watt Carmichael account came anywhere near it in terms of volume of trading.

[28] In fact, during 2002, 2003 and 2004, the three Trust Accounts at Watt Carmichael traded on an aggregate basis nearly 33 million shares of Biovail with a value in excess of US$1.1 billion, and purchased nearly 25,000 call options for $10 million. The evidence indicated that over $2.3 million in commissions was paid to Watt Carmichael in relation to Biovail trading in the Trust Accounts over the same period, and commissions were also earned in relation to the other Biovail and Melnyk-related accounts at Watt Carmichael. In addition to potential loss of revenue, there would have been serious implications on marginability and capital requirements for Watt Carmichael.

[29] In my view, certain correspondence after July 17, 2000 appears to be a reaction to the Conset and Congor Letters with respect to whether Melnyk was a beneficiary of the Trust Accounts.

[30] On July 19, 2000, two days after the Fong Faxes were directed to Rowan, McKenney wrote a memo to Rowan, copied to Carmichael and the Watt Carmichael trading desk, suspending trading in Conset and Congor Accounts until further notice, except for trading for margin purposes with approval from Watt Carmichael's compliance department. McKenney forwarded the memo to Dimitropoulos at the IDA on the same day, advising that the documents requested in his May 24, 2000 letter were expected "very promptly".

[31] On July 24, 2000, Melnyk sent letters to the trustees of the Conset Trust and the Congor Trust revocably disclaiming his interest in the Trusts (the "Disclaimer Letters"). The two letters are identical, except for the name of the Trust and trust administrator. The Disclaimer Letters confirm that Melnyk was a beneficiary of both Trusts at that time. The Congor Disclaimer Letter to Coutts will be quoted because it resolves any uncertainty left by the wording of the Congor Letter:

As you are aware, I am the Settlor and a member of the Discretionary Class of Beneficiaries of the Congor Trust, which was created by Deed of Settlement dated 23 September 1996. Clause 12(a) of the Deed of Settlement permits a beneficiary to disclaim his interest in the Settlement in whole or in part.

Pursuant to that power, and any other power which would enable me to do so, I hereby revocably disclaim my entire interest in the Congor Trust. Please note that this disclaimer of interest is revocable and may be revoked by me by letter in writing to you during the existence of the Congor Trust.

Please sign and date a copy of this letter acknowledging your receipt and agreement.

[32] On July 31, 2000, one week after Melnyk wrote the Disclaimer Letters, Rowan received the Draft Levander Letter and discussed it with McKenney.

iii) The Revision of the Levander Letter

[33] The Final Levander Letter is addressed to Dimitropoulos, and states:

We have been asked to respond to your letter dated May 24, 2000 regarding the identity of "the beneficial owner(s) of the Congor and Conset accounts" at Watt Carmichael, Inc. As you are undoubtedly aware, the actual owners of those two accounts are, respectively, The Congor Trust, and The Conset Trust. Both of those trusts were settled, i.e., established, by Eugene Melnyk under the laws of the Cayman Islands approximately four years ago. Each trust has as its trustee a different major financial institution: Caledonian Bank & Trust Limited is the trustee of The Conset Trust and Coutts (Cayman) Limited, the Cayman subsidiary of the Coutts Group, which, in turn, is part of NatWest, is the trustee of The Congor Trust.

Under the law of the Cayman Islands, which governs those trusts, the identity of the beneficiaries of the Trusts is a matter of strictest confidence. Nonetheless, we have recently received written confirmation from each of the respective trustees of The Congor Trust and The Conset Trust regarding the current beneficiaries of the Trusts, and we have been authorized to confirm that Eugene Melnyk is not a beneficiary of either Trust. Nor, of course, is he a trustee of the Trusts.

[34] McKenney's covering letter to Dimitropoulos, dated August 10, 2000, states:

I am responding on behalf of Mr. Harry J. Carmichael.

ITEM 2.3 -- Trading Concerns

Please find a letter to your attention from Mr. Andrew J. Levander of Swidler Berlin Shereff Friedman LLP, New York. Mr. Levander concludes verbally that because Mr. Melnyk is not a beneficiary or a trustee of Conset or Congor that the shares are not Control Stock.

Mr. Levander let it be known that he would be happy to talk to you about the contents of the letter for further clarification and any other issues related to your concerns about Congor and Conset.

The account suspension remains in place.

[35] Dimitropoulos responded by letter to Carmichael, copied to McKenney, dated August 14, 2000, stating:

Thank you for the response dated August 10, 2000 to Item 2.3 of our 1999 Sales Compliance Review of Watt Carmichael, Inc. All matters raised in the Association's report have now been satisfactorily resolved. Thank you for your attention to our report.

We wish to notify you, however, that copies of your August 10th correspondence and Mr. Andrew J. Levander's letter have been forwarded to the Ontario Securities Commission for its consideration.

[36] On April 25, 2005, the Commission summoned Craig Schleyer, who was filling McKenney's compliance role at Watt Carmichael at that time because McKenney was ill, to attend for examination and produce several documents, including the Fong Faxes and "a draft letter dated about July 2000 from a Mr. Andrew Levander."

[37] Fitzsimmons, a Commission investigator, testified that these specific requests were prompted by Staff's interview of Schindler, who replaced De Francesca as Rowan's assistant. Schindler told Staff she found the Fong Faxes and the draft Levander letter in Watt Carmichael's files when preparing for her examination. Fitzsimmons also testified that the Fong Faxes and the Draft Levander Letter were produced to Staff by Watt Carmichael's counsel in response to the section 11 summons.

[38] The Draft Levander Letter, which was unsigned, was dated July 31, 2000 and addressed to Dimitropoulos. It was substantially similar to the Final Levander Letter, except for a crucial sentence. The Draft Levander Letter states:

. . . we have recently received written confirmation from each of the respective trustees of The Congor Trust and The Conset Trust that Eugene Melnyk is not a current beneficiary of either trust. [emphasis added]

[39] The Draft Levander Letter was not sent to the IDA. In contrast, the Final Levander Letter, which was sent to the IDA, states:

. . . we have recently received written confirmation from each of the respective trustees of The Congor Trust and The Conset Trust regarding the current beneficiaries of the Trusts, and we have been authorized to confirm that Eugene Melnyk is not a beneficiary of either Trust. [emphasis added]

[40] I find that the change in wording is significant, and suggests a careful revision.

[41] On the reverse of the Draft Levander Letter is found a handwritten telephone number which Fitzsimmons ascertained and McKenney admitted was the number for McKenney's cottage.

[42] Rowan testified that he received and reviewed the Draft Levander Letter on or about July 31, 2000, the date it was sent to Watt Carmichael along with a note from Levander stating this was the letter he intended to send the IDA.

[43] On receiving the letter, Rowan testified: "I believe I telephoned Mike, Michael McKenney -- he was on holidays at the time -- and I indicated to him that we had received a draft copy of the letter that we hoped would satisfy the IDA." He denied discussing possible changes to the draft with McKenney or Levander or anyone else. He testified that McKenney's response was: "we need a hard copy of the letter forwarded to the IDA and a copy to us and he would deal with lifting the suspension of the accounts when he returned from holidays and we had that original letter on file."

[44] McKenney denied seeing the draft letter at that time. He agreed the telephone number was his. When asked why his phone number was on the letter, McKenney's testimony referred back to Rowan's evidence, as follows:

Well, as Mr. Rowan said, he phoned me at the time. I don't recall him phoning me though but he said he phoned me and asked me about the letter. I would imagine that he wanted the trading restriction lifted because we had this letter now, but I didn't know at the time that it was a draft letter or anything like that.

[45] McKenney denied communicating with Levander about the wording of the letter and testified he had never had any correspondence with or spoken with Levander.

[46] I found Rowan's and McKenney's testimony evasive with respect to their telephone conversation about the Draft Levander Letter. I find it more likely that Rowan and McKenney, as senior officers of Watt Carmichael, discussed the wording of the letter and that the letter was revised as a direct or indirect result of their discussions. The timing of these events is significant. Rowan received the Draft Levander Letter on July 31, 2000, about seven weeks after he wrote his June 7, 2000 memo to Melnyk requesting documentation for the IDA, and only two weeks after the Fong Faxes, including the Conset Letter and the Congor Letter, were sent to Rowan, and shortly after Watt Carmichael's suspension of trading in the Conset and Congor Accounts. Even if I accept that Rowan did not receive and was unaware of the Fong Faxes when they were received by Watt Carmichael, I have no doubt Rowan would have followed up on his June 7, 2000 memo and would have become aware of the Fong Faxes and their contents after receiving the Draft Levander Letter, and that he would have been aware of the reason for the revised wording of the Final Levander Letter.

iv) Rowan and Melnyk Communicated Frequently

[47] When Rowan was asked to explain why he would not have received the Fong Faxes, though they were directed to him, he said:

Well, all material coming into the office by fax or, indeed, by mail did not come immediately to me. It went to my assistants, whoever that was at the time, and they would pass certain material on to me and other material they would simply file, depending on what it is.[emphasis added]

[48] Rowan's testimony that he did not receive and was not aware of the Fong Faxes is inconsistent with the other evidence we heard about Watt Carmichael's business.

[49] There is no dispute that Watt Carmichael's offices were small, with only one fax machine and few support staff, and that the Fong faxes were addressed to Rowan and subsequently found in Watt Carmichael's files.

[50] Contrary to Rowan's testimony that he had "occasional discussions" with Melnyk, as the settlor, about the Trust Accounts and about the personal accounts of Melnyk and his wife, De Francesca, Rowan's assistant at the time, testified that she faxed monthly statements for the Trust Accounts to Melnyk or Fong. She also testified that Melnyk called Rowan "three or four times per day." Rowan testified in chief that he and Melnyk would only speak that often when Melnyk was on a "road show" presenting Biovail to investors. On cross-examination, when confronted with De Francesca's testimony, Rowan said: "some days I would talk to him three or four times a day and sometimes I would talk to him once a day or once every two weeks."

[51] I find De Francesca's evidence more credible because it is more consistent with the other evidence we heard about the close business relationship and frequent contacts between Rowan and Melnyk. Rowan testified that he met Melnyk in the late eighties and they became "quite familiar" with each other over the next seven or eight years, such that Melnyk approached him to stand for election to the Biovail Board of Directors. Rowan was elected to the board in June 1997 and remained a member of the Board of Directors at the time of the hearing. He was also appointed to Biovail's Audit Committee.

[52] We received undisputed evidence that the Trusts, acting on Melnyk's instructions, sent Rowan numerous faxes ordering him to wire large amounts of money from the Trust Accounts to Melnyk's various accounts. For example, the Respondents did not challenge Staff's evidence that Rowan transferred over US$42,500,000 and $842,000 from the Trust Accounts to Melnyk's accounts between January of 1999 and March of 2000. On cross-examination, Rowan denied that the wire transfers caused him to wonder if Melnyk had a beneficial interest in the Trust Accounts. I find this implausible.

[53] The evidence shows that Rowan's and Watt Carmichael's business was heavily dependent on a high volume of telephoned, faxed and e-mail communication with Melnyk and the Trusts. Apart from Rowan's evidence about the Fong Faxes, we heard no evidence to suggest that any other documents went astray at Watt Carmichael.

[54] The Fong Faxes concerned an IDA enquiry that could have had significant implications if the IDA had concluded that Melnyk had a beneficial interest in the Congor and Conset Accounts and that the Accounts formed part of a control position in Biovail securities. Rowan and Watt Carmichael earned significant commissions from the Trust Accounts, the personal accounts of Melnyk and his wife, and other Biovail-related accounts.

[55] In these circumstances, Rowan's testimony that an assistant might have filed away the Fong Faxes without showing them to him is implausible, in my view. I therefore find it much more likely that Rowan received and read the Fong Faxes or, at the very least, was made aware of their contents.

v) The Conset, Congor and Southridge Accounts were Treated as One for Margin Purposes

[56] Jeraj, a manager at NBCN, Watt Carmichael's carrying broker, had dealings with the Trust Accounts throughout the period in dispute. He testified that NBCN treated the Conset, Congor and Southridge Accounts as a single account for purposes of making margin/concentration calls since at least May of 1998. Jeraj explained that NBCN had imposed margin limits on the accounts, considered together, beyond what industry standards would have imposed, because the accounts held only Biovail securities. He testified further that the margin limit was set, and subsequently increased, by agreement with Watt Carmichael. He testified that the margin calls in these accounts were concentration calls.

[57] Jeraj explained NBCN's computerized memos for the Trust Accounts, which were entered into evidence. They include numerous margin calls. Jeraj explained that NBCN would discuss the options with Watt Carmichael. Though details of communications are not included in the memos, Jeraj explained that NBCN would send an e-mail to Rowan or McKenney with respect to any margin calls. He testified that the reference to "Roger" in relation to a margin call on April 9, 2002 indicated communication with Rowan in which it was agreed that the margin call would be covered in the "next couple days." The memos also include similar references to "Roger" or "RR" on November 9, 2000, March 21, 2001 and February 6, 2002. There are also references to "Mike" or "Mike M", and Jeraj explained that these referred to McKenney.

[58] When asked why NBCN consolidated the Trust Accounts for margin/ concentration purposes, Jeraj explained, "These accounts were not linked in the sense of -- they were separate accounts. We identified that they did belong to the same client. So having done that, from a risk point of view, we had to address all of them together." Asked further who was the client, Jeraj answered "I believe it was Mr. Melnyk." Jeraj was then asked why NBCN identified Melnyk as the owner, despite the fact these were three separate accounts held by investment companies behind which was a trust. Jeraj explained that NBCN has "a process where we review all of our large clients," and "if they came to us, asking for a loan, then we would scrutinize it even more and go and take a look at the file and see who the client is, in order to better understand who we're dealing with." He explained that NBCN would have based their analysis on documents obtained from Watt Carmichael.

[59] Rowan testified that NBCN treated the three accounts as one for credit purposes because of the high concentration of Biovail securities, and did not care what the debit balance was in any one of the three accounts, as long as the total debit balance for the three accounts was within the margin limit. He did not agree with the suggestion that there was a concern about all three accounts being connected to Melnyk, though he admitted NBCN was aware he had settled the trusts.

[60] McKenney also understood that NBCN had placed "a money cap on the three accounts as a whole" because of the concentration in Biovail securities. He testified that he would refer NBCN's margin/concentration calls to Rowan, who would bring them back onside by selling some stock, usually Biovail. McKenney testified that Watt Carmichael would sell Biovail stock from the Trust Account with the highest debit balance in order to meet a margin/concentration call, even if that were not the account in relation to which the call was made.

[61] I do not accept Rowan's and McKenney's explanation for NBCN's treatment of the Trust Accounts because there would be no basis in law for treating the Trust Accounts as one just because each held a high concentration of Biovail securities, unless the Accounts had common ownership. I accept Jeraj's explanation.

[62] We heard no evidence to suggest that Rowan or anyone else at Watt Carmichael objected to NBCN's decision to treat the Trust Accounts as one account for margin and concentration purposes. In fact, Watt Carmichael did the same when it responded to margin/concentration calls by selling Biovail securities from whichever one of the accounts had the highest debit balance.

vi) Conclusion

[63] Rowan denied receiving or knowing about the Fong Faxes and denied knowing that Melnyk was a beneficiary of the Conset and Congor Trusts until after he was interviewed by Staff in 2005. In my view there is clear and compelling evidence to the contrary:

(i) Rowan had a longstanding business relationship with Melnyk as the registered representative for the personal accounts of Melnyk and his wife at Watt Carmichael as well as other Biovail-related accounts and as a member of the Biovail board and Audit Committee.

(ii) Rowan and Melnyk communicated frequently, by telephone, e-mail and fax, including numerous wire transfers from the Trust Accounts to various Melnyk-related accounts.

(iii) NBCN treated the Conset, Congor and Southridge Accounts as one for margin and concentration purposes. This decision was based on documents provided by Watt Carmichael and we heard no evidence that Watt Carmichael objected. In fact, Watt Carmichael responded to margin/concentration calls on any one of the Accounts by liquidating Biovail securities from whichever account had the highest debit balance.

(iv) Rowan was involved in the IDA review, and advised the IDA he had no trust agreement on file. He was well aware of the IDA's concerns.

(v) The issues were serious, because Rowan and Watt Carmichael earned significant commissions from the Trust Accounts, and because if the IDA concluded that the Congor and Conset Trust were owned by Melnyk and that Melnyk held a control position in Biovail, there would have been serious implications, including capital charges against Watt Carmichael.

(vi) When the IDA was not satisfied by the Stewart letters, Rowan wrote to Melnyk on June 7, 2000 asking for "some suitable response to get the IDA to go away," and the Fong Faxes, which were sent on July 17, 2000 in response to Rowan's request, were directed to Rowan and subsequently found in Watt Carmichael's files.

(vii) On July 31, 2000, Rowan received the Draft Levander Letter and discussed it with McKenney. On August 1, 2000, the Final Levander Letter, including a significant revision, was prepared, and on August 10, 2000, McKenney sent the Final Levander Letter to the IDA. Even if I accept that Rowan did not receive and was unaware of the Fong Faxes and the Conset and Congor Letters when they were received by Watt Carmichael, I have no doubt Rowan would have become aware of their contents in discussing the Draft Levander Letter, and that he was aware of the reason for the revised wording of the Final Levander Letter.

[64] Since the three accounts were held by three different Trusts, the only reasonable inference arising from the history of trading, the significant margin activity in the Accounts, the cross-netting of Account balances for margin purposes, and the significant wire transfer of funds from the Trust Accounts to Melnyk-related accounts, is that Rowan and Watt Carmichael knew or should have known Melnyk had a beneficial interest in all three Accounts.

[65] We are entitled to assume, absent credible evidence to the contrary, that the Fong Faxes, which were addressed to Rowan, in response to his request to identify the beneficiaries of the Congor and Conset Trusts, with respect to a critical outstanding issue raised in the IDA Review, were received and read by Rowan. In my view, the weight of the evidence in this case gives rise to a strong inference that Rowan had received the Fong Faxes, or was aware of their contents, knew of Melnyk's beneficial interest in the Trust Accounts, understood the significance of the Final Levander Letter and was directly or indirectly involved in its revised wording. I find the evidence clear, cogent and compelling.

[66] For these reasons, I conclude that Rowan and Watt Carmichael provided responses to the IDA's request for information as to the identity of the beneficiaries of the Congor and Conset Trusts which they knew or ought to have known were misleading or untrue or did not state facts that were required to be stated to make their statements not misleading.

C. Did Rowan mislead the Commission?

i) Introduction

[67] Further, based on the evidentiary record viewed as a whole, I conclude that Rowan misled the Commission when he was interviewed by Staff in February 2005.

[68] Staff alleges that contrary to the public interest Rowan made statements to Staff as to the identity of the beneficiaries of the Conset Trust which he knew or ought to have known were misleading or untrue or did not state facts that were required to be stated to make his statements not misleading.

[69] For convenience, Staff's questions and Rowan's answers are repeated here:

Q. Who is the beneficial owner of Conset Investments?

A. My understanding is there are a number of beneficiaries of the trust. I don't have a list of the beneficiaries.

Q. Who would have that?

A. The trustees would certainly have that.

Q. What is your understanding as to who the beneficiaries are?

A. I don't know who the beneficiaries are. My understanding is it's a number of individuals, and I don't know who any of the beneficiaries specifically are.

[70] In concluding that Rowan's answers were misleading, I rely on the evidence we received about the IDA Review, Rowan's trading in the Trust Accounts in 2002, 2003 and 2004, and the Commission's enquiries in 2004.

ii) The IDA Review

[71] For the reasons given above, I conclude that when Watt Carmichael provided the IDA with the Final Levander Letter on August 10, 2000, Rowan had received the Fong Faxes, or was aware of their contents, knew of Melnyk's beneficial interest in the Trust Accounts, understood the significance of the Final Levander Letter and was directly or indirectly involved in its revised wording.

[72] Given the significance of the IDA review and the ensuing correspondence, and given the importance of Melnyk's business to Rowan and Watt Carmichael, I do not accept that the matter would have been forgotten by February 2005.

iii) Trading in the Trust Accounts in 2002, 2003 and 2004

[73] Once the IDA advised Watt Carmichael that its concerns had been satisfied on August 14, 2000, the trading suspension was lifted and Rowan resumed trading as registered representative in the Conset, Congor and Southridge Accounts. The evidence, including evidence about Watt Carmichael's commissions from the Trust Accounts, indicates Rowan traded heavily in the Trust Accounts at least until early 2004.

[74] Moreover, in late 2004, Rowan attempted to obtain a letter from R&H stating that the Southridge trustees had given him full discretionary trading authority from 1996, when the Account was opened. Finally, on December 22, 2004, R&H advised that "no further trading is permitted on our account without our express written authorization." As requested by the trustees, Rowan confirmed by return fax that he had received the letter and would comply. This exchange of correspondence occurred less than two months before Rowan was interviewed by Commission Staff.

[75] Though my colleagues refer to a five-year gap between the end of the IDA Review and Rowan's interview at the Commission in February 2005, I conclude these were matters of current interest to Rowan throughout the intervening period.

[76] Moreover, Rowan would have known of the Commission's enquiries long before he was interviewed.

[77] The IDA letter, dated August 14, 2000, from Dimitropoulos to Watt Carmichael, advised that the Final Levander Letter, along with McKenney's August 10, 2000 letter, had been forwarded to the Commission.

iv) The Commission Enquiries in 2004

[78] By February 2005, when Rowan was interviewed, the Commission had been making active enquiries for about a year. On March 31, 2004, the Commission issued an Order under section 19(3) of the Act requiring Watt Carmichael to produce a number of documents, including the "identity of the persons who have a direct or indirect interest" in the Congor and Conset Accounts. The Order was extended by Order of April 13, 2004. On April 23, 2004, Schleyer forwarded a letter from Coutts to Rowan, dated April 14, 2004, with respect to Congor, and a letter from Caledonian to Rowan, dated April 19, 2004, with respect to Conset. Neither Coutts nor Caledonian provided the information, both relying on Cayman secrecy laws, and Watt Carmichael's covering letter added nothing further. On July 8, 2004, the Commission issued another section 19(3) Order, this time for all copies of e-mail sent or received by Rowan in relation to Congor, Conset, Melnyk, Biovail and Archer. As the President and COO of Watt Carmichael and the registered representative on the Congor and Conset Accounts, Rowan would have been involved in responding to these requests. Staff's questions in February 2005 would not have been a surprise for Rowan.

v) Conclusion

[79] It is crucial to the securities regulatory system that registrants provide full and accurate responses to inquiries from the regulator. As stated by the Ontario Court of Appeal in Wilder:

The [Commission] is charged with the statutory obligation to do its best to ensure that those involved in the securities industry provide fair and accurate information so that public confidence in the integrity of the capital markets is maintained. It is difficult to imagine anything that could be more important to protecting the integrity of capital markets than ensuring that those involved in those markets, whether as direct participants or as advisers, provide full and accurate information to the [Commission].

(Wilder et al. v. Ontario Securities Commission (2001), 53 O.R. (3d) 519 (C.A.) at para. 22)

[80] I find that Rowan's answers to Staff's questions about the beneficiaries of the Conset Trust were evasive and incomplete. Even if Rowan had not been aware of the Fong Faxes providing the Conset and Congor Letters, there is no dispute that he was aware of the Stewart Letters, the Draft Levander Letter and the Final Levander Letter. He was also aware that Melnyk was the settlor of the Trusts, that Melnyk donated Biovail stock (19 percent of the outstanding shares of Biovail in 1996 when he established the Trusts), and that the Trusts were offshore. He was also aware of the Trustees' reliance on Cayman secrecy laws, the numerous significant funds transfers he executed from the Trust Accounts to Melnyk-related accounts, and the fact that both Watt Carmichael and NBCN treated the Trust Accounts as one for margin and concentration purposes. From this, I conclude that Rowan should have known that Melnyk was one of the beneficiaries of the Conset and Congor Trusts.

[81] Rowan's answers to Staff's questions were misleading and incomplete, and fell far short of what is expected of a registrant and the President and COO of a registrant. I conclude that Rowan made statements to Staff as to the identity of the beneficiaries of the Conset and Congor Trusts which he knew or ought to have known were misleading or untrue or did not state facts that were required to be stated to make his statements not misleading, contrary to the public interest.

D. Did Rowan conduct unauthorized discretionary trading in the Southridge Account?

[82] Staff alleges that Rowan engaged in discretionary trading without authority, contrary to the Know Your Client rule and contrary to the public interest.

[83] I concur with my colleagues that the Southridge Account was not opened and documented as a discretionary account, and that on a number of occasions the Southridge trustees complained to Rowan about unauthorized trading or reiterated that the account was non-discretionary and therefore all transactions must be approved in advance. I also concur that the lack of documented discretionary authority did not result from administrative oversight, as claimed by Rowan.

[84] In my view, there was evidence that Rowan was also trading in the Southridge Account on Melnyk's instructions, in addition to instructions from the account holders, the Trustees of the Southridge Trust. Further, the evidence, viewed in its totality, suggests that the Biovail securities in the Conset, Congor and Southridge Accounts may have formed part of a control position held by Melnyk. Biovail's Management Information Circulars for 2000, 2001, 2002, 2003 and 2004 show that Melnyk beneficially owned, directly or indirectly, or exercised control or direction over 19.6 percent, 18.8 percent, 16.7 percent, 16.5 percent and 14.5 percent (respectively) of the total outstanding common shares of Biovail. As we heard in the evidence, this excluded the Biovail shares held in the Trust Accounts.

[85] I find it significant that Melnyk was the settlor and a beneficiary of the Southridge Trust. Indeed, there was undisputed evidence that NBCN and Watt Carmichael treated all three Trust Accounts as one for margin/concentration purposes. Further, the failure to document Southridge as a discretionary account had significant regulatory implications. Had the IDA known that Rowan was engaging in discretionary trading in the Southridge Account, as well as the Conset and Congor Accounts, it would likely have made further enquiries into whether Melnyk had a controlling interest in Biovail securities held in the Trust Accounts.

[86] Subsection 1.1(2) of OSC Rule 31-505 is subtitled "Recognized Self-Regulatory Organization" and reads as follows:

A member of the Investment Dealers Association of Canada may comply with a requirement of this part by complying with a Regulation, rule, regulation, policy, procedure, interpretation or practice of the Investment Dealers Association of Canada dealing with the same subject matter as that requirement that has been approved by the Commission and published by the Investment Dealers Association of Canada.

[87] OSC Rule 31-505 sets out a number of rules governing new accounts and supervision, including section 1.5, "Know your Client and Suitability." In my view, ascertaining the scope of trading authority granted by the client is fundamental to the Know your Client rule. In my view, IDA Regulations 1300.4 and 1300.5 operationalize section 1.5 of OSC Rule 31-505 at self-regulatory organization and Member level, pursuant to 1.1(2) of OSC Rule 31-505.

[88] Whatever "mixed messages" Rowan may have received from various representatives of the trustees, it was his obligation under Ontario securities law to ensure his trading was authorized by the Trustees of the Southridge Trust. In addition, ensuring a client's instructions and authority, including proper documentation, is amongst a registrant's most fundamental obligations and critical to the integrity of the capital markets. Ontario securities law places the burden of compliance on the registrant, not the investor.

[89] As a registrant and a senior officer of a registrant, Rowan is expected to be aware of his obligations under Ontario securities law, including OSC Rules and IDA Regulations, by which he is bound. I conclude that by engaging in discretionary trading in the Southridge Account without the required discretionary authority from the account holder (Southridge Trust), he acted contrary to the public interest.

Dated at Toronto, this 20th day of June, 2008.

Anil Kumar Jain

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, c. S.5, AS AMENDED

AND

IN THE MATTER OF

ANIL KUMAR JAIN

HEARING HELD PURSUANT TO SECTIONS 127 AND 127.1 OF THE ACT

SETTLEMENT HEARING RE: ANIL KUMAR JAIN

ORAL RULING AND REASONS

The following text has been prepared for the purpose of publication in the Ontario Securities Commission Bulletin and is based on excerpts of the transcript of the hearing. The excerpts have been edited and supplemented and the text has been approved by the Chair of the Panel for the purpose of providing a public record of the decision.

Chair:

[1] This was a hearing under sections 127 and 127.1 of the Securities Act, R.S.O. 1990, c. S.5, as amended, (the "Act") for the Ontario Securities Commission (the "Commission") to consider whether it is in the public interest to approve a proposed Settlement Agreement between Staff of the Commission ("Staff") and the respondent Anil Kumar Jain ("Mr. Jain").

[2] We have read the written submissions, and heard the oral submissions and we have decided to approve the Settlement Agreement as being in the public interest.

[3] This case involves unregistered advising and unregistered trading. This type of conduct concerns the Commission because Mr. Jain engaged in activities without proper registration, supervision and compliance oversight.

[4] From the end of May 2003 to March 2008, Mr. Jain acted as an advisor without being registered as an advisor and performed acts in furtherance of a trade while unregistered to trade securities contrary to section 25(1)(a) and (c) of the Act.

[5] During this time, he dealt with several dealers and at some point thought he was either registered or being registered. He was proactive with the Commission with respect to his registration, and the particular facts with respect to his dealings of 2003 to 2007 are set out in paragraphs 9 to 17 of the Settlement Agreement.

[6] In particular, Mr. Jain had an active website that described the investment services he offered which included preparing a financial plan, preparing periodic financial reports and rebalancing client accounts. He offered advice to his clients and conducted acts in furtherance of a trade on behalf of his clients.

[7] By entering into the Settlement Agreement, Mr. Jain has recognized that his conduct was contrary to the public interest, and Mr. Jain has accepted sanctions which include:

• Mr. Jain shall cease trading in securities for nine months;

• Mr. Jain shall be prohibited from acquiring any securities for nine months;

• any exemptions contained in Ontario securities law shall not apply to Mr. Jain for nine months; and

• Mr. Jain shall pay costs of $3,000.00 toward the cost of this hearing.

[8] We are guided by the sanctioning factors Staff referred us to in Re Belteco Holdings Inc. (1998), 21 O.S.C.B. 7743, which include:

• the seriousness of the allegations;

• the respondent's experience in the marketplace;

• the level of the respondent's activity in the marketplace;

• whether or not there has been a recognition of the seriousness of the improprieties;

• the restraint of future conduct that is likely to be prejudicial to the public interest (with reference to past conduct);

• any mitigating factors; and

• the remorse of the respondent.

[9] We are also mindful that sanctions are to be protective and preventative. It is the Commission's mandate, as set out in section 1.1 of the Act, to provide protection to investors from unfair, improper or fraudulent practices and to foster fair and efficient capital markets and confidence in the capital markets. It is not the role of the Commission to punish a respondent, but rather to make an Order that will protect investors and prevent their exposure to similar conduct in the future.

[10] In this case, we find that the sanctions are adequate. Staff has pointed out in their submissions that there is no suggestion that Mr. Jain recommended unsuitable investments to his clients or misappropriated the funds of clients. There has been no harm to clients in the present case.

[11] We were also influenced by the following mitigating factors set out in the Settlement Agreement. Specifically:

• Mr. Jain cooperated with Staff's investigation;

• Mr. Jain removed all references to investment practices from his website effective March 30, 2008;

• Mr. Jain commenced transfer of his investment practice to a registered representative; and

• Mr. Jain has not engaged in any acts in furtherance of a trade since termination of his relationship with ASL Direct Inc. in September 2007.

[12] Taking into consideration Mr. Jain's cooperation with Staff, his efforts to correct his conduct, and that the investing public was not harmed, we are satisfied that Mr. Jain does not pose a threat to the capital markets, the sanctions included in the Settlement Agreement are adequate and that it is in the public interest to approve this Settlement Agreement.

Approved by the Chair of the Panel on this 24th day of June 2008.

"Wendell S. Wigle"

Chapter 4 -- Cease Trading Orders

Temporary, Permanent & Rescinding Issuer Cease Trading Orders

Temporary, Permanent & Rescinding Management Cease Trading Orders

* There were no Management Cease Trading Orders for this week.

Outstanding Management & Insider Cease Trading Orders

Chapter 5 -- Rules and Policies

Amendments to NI 51-102 Continuous Disclosure Obligations, Form 51-102F3 Material Change Report, Companion Policy 51-102CP Continuous Disclosure Obligations, NI 52-108 Auditor Oversight, Companion Policy 52-110CP to NI 52-110 Audit Committees and NI 81-106 Investment Fund Continuous Disclosure

AMENDMENTS TO

NATIONAL INSTRUMENT 51-102 CONTINUOUS DISCLOSURE OBLIGATIONS

1. National Instrument 51-102 Continuous Disclosure Obligations is amended by this Instrument.

2. Subsection 4.11(8) is amended by striking out "Except in Alberta and Manitoba, if" and substituting "If".

3. Subsections 7.1(3) and (4) are repealed.

4. Subsection 7.1(5) is amended by striking out "or (3)".

5. Subsection 7.1(7) is amended by striking out "or (3)".

6. Subsection 9.1(3) is repealed.

7. Section 9.2 is amended by adding the following after subsection (3):

(4) Despite paragraph 9.1(2)(b), a person or company, other than management of a reporting issuer or a person or company acting on behalf of management, may solicit proxies from registered securityholders of a reporting issuer without sending an information circular, if

(a) the solicitation is made to the public by broadcast, speech or publication;

(b) soliciting proxies by broadcast, speech or publication is permitted by the laws under which the reporting issuer is incorporated, organized or continued and the person or company making the solicitation complies with the requirements, if any, of those laws relating to the broadcast, speech or publication;

(c) the person or company has filed the following information:

(i) the name and address of the reporting issuer to which the solicitation relates,

(ii) the information required under item 2, sections 3.2, 3.3 and 3.4 and paragraphs (b) and (d) of item 5 of Form 51-102F5 Information Circular,

(iii) any information required to be disclosed in respect of the broadcast, speech or publication by the laws under which the reporting issuer is incorporated, organized or continued, and

(iv) a copy of any communication intended to be published; and

(d) the broadcast, speech or publication contains the information referred to in paragraphs (c)(i) to (iii).

(5) Subsection (4) does not apply to a person or company that is proposing, at the time of the solicitation, a significant acquisition or restructuring transaction involving the reporting issuer and the person or company, under which securities of the person or company, or securities of an affiliate of the person or company, are to be changed, exchanged, issued or distributed, unless

(a) the person or company has filed an information circular or other document containing the information required by section 14.4 of Form 51-102F5 Information Circular; and

(b) the solicitation refers to that information circular or other document and discloses that the circular or other document is on SEDAR.

(6) Subsection (4) does not apply to a person or company that is nominating or proposing to nominate, at the time of the solicitation, an individual, including himself or herself, for election as a director of the reporting issuer, unless

(a) the person or company has filed an information circular or other document containing the information required by Form 51-102F5 Information Circular in respect of the proposed nominee; and

(b) the solicitation refers to that information circular or other document and discloses that the circular or other document is on SEDAR.

8. Section 9.5 is repealed and the following substituted:

9.5 Exemption

Sections 9.1 to 9.4 do not apply to a reporting issuer, or a person or company that solicits proxies from registered holders of voting securities of a reporting issuer, if

(a) the reporting issuer or other person or company complies with the requirements of the laws relating to the solicitation of proxies under which the reporting issuer is incorporated, organized or continued;

(b) the requirements referred to in subsection (a) are substantially similar to the requirements of this Part; and

(c) the reporting issuer or other person or company files a copy of any information circular and form of proxy, or other documents that contain substantially similar information, promptly after the reporting issuer or other person or company sends the circular, form or other document in connection with the meeting.

9. This amendment comes into force July 4, 2008.

AMENDMENTS TO

FORM 51-102F3 MATERIAL CHANGE REPORT

1. Form 51-102F3 Material Change Report is amended by this Instrument.

2. Form 51-102F3 is amended by,

(a) in Item 6, striking out "or (3)" wherever it appears,

(b) in the Instruction after Item 6, striking out "(4),", and

(c) in the Instructions after Item 7, striking out ", (3)".

3. This amendment comes into force July 4, 2008.

AMENDMENTS TO

COMPANION POLICY 51-102CP CONTINUOUS DISCLOSURE OBLIGATIONS

1. Companion Policy 51-102CP Continuous Disclosure Obligations is amended:

(a) by striking out the word "Multilateral" and substituting the word "National", and by striking out "or, in British Columbia, BC Instrument 52-509 Audit Committees" in section 1.7.

(b) by adding the following after section 9.2:

9.3 Proxy Solicitations Made to the Public by Broadcast, Speech or Publication

Subsection 9.2(4) of the Instrument provides an exemption from the proxy solicitation and information circular requirements for certain proxy solicitations made to the public by broadcast, speech or publication. The exemption permits securityholders to solicit proxies by public means, including a speech or broadcast, through a newspaper advertisement or over the Internet (provided that the solicitation contains certain information and that information is filed on SEDAR).

The exemption will only apply if the proxy solicitation is made to the public. Securities regulatory authorities generally consider a solicitation to be made to the public if it is disseminated in a manner calculated to effectively reach the marketplace. A solicitation to the public would generally include a solicitation that is made by:

(a) a speech in a public forum; or

(b) a press release, a statement or an advertisement provided through a broadcast medium or by a telephone conference call or electronic or other communication facility generally available to the public, or appearing in a newspaper, a magazine, a website or other publication generally available to the public.

A proxy solicitation to the public would generally not include a solicitation made by phone, mail or email to only a select group of securityholders of a reporting issuer.

(c) by striking out the address of the Manitoba Securities Commission in section 13.1 and substituting the following:

Manitoba Securities Commission

500 - 400 St. Mary Avenue

Winnipeg, Manitoba

R3C 4K5

 

Attention: Corporate Finance

2. This amendment comes into force July 4, 2008.

AMENDMENTS TO

NATIONAL INSTRUMENT 52-108 AUDITOR OVERSIGHT

1. National Instrument 52-108 Auditor Oversight is amended by this Instrument.

2. Subsection 1.2(2) is repealed.

3. This amendment comes into force July 4, 2008.

AMENDMENTS TO

COMPANION POLICY 52-110CP TO NATIONAL INSTRUMENT 52-110 AUDIT COMMITTEES

1. Companion Policy 52-110CP to National Instrument 52-110 Audit Committees is amended in section 1.1 by,

(a) inserting "New Brunswick," after "Ontario,", and

(b) striking out "New Brunswick," after "a policy in".

2. This amendment comes into force July 4, 2008.

AMENDMENTS TO

NATIONAL INSTRUMENT 81-106 INVESTMENT FUND CONTINUOUS DISCLOSURE

1. National Instrument 81-106 Investment Fund Continuous Disclosure is amended by this Instrument.

2. Subparagraph 11.2(1)(c)(iii) is amended by striking out "or (3)" wherever it appears.

3. Subsection 11.2(3) is repealed.

4. Subsection 12.2(3) is repealed.

5. This amendment comes into force July 4, 2008.

Chapter 8 -- Notice of Exempt Financings

Reports of Trades Submitted on Forms 45-106F1 and 45-501F1