T HE MAN I TO BA SEGUR / T IE S C O M M I 55 I a N THE SECURITIES ACT Sections 148.1(1) and 154 LORI DIANE JOHNSON and GORDON JOSEPH WIMBLE WHEREAS: (A) On April 29, 2009, The issued a Notice of Hearing ("Notice") giving consider , inter alia, whether or not it was in the public interest to grant an order pursuant to subsection 8(1) of The Securities Act ("Act") with respect to Lori Diane Johnson (JOHNSON) and Gordon Joseph Wimble (WIMBLE). (B) Staff of the Commission Settlement Agreement (a copy of which is attached as Schedule "A") dated June 14, 2010 ("Settlement Agreement") which proposed Notice, subject to the approval of the Commission. (C) JOHNSON and WIMBLE have consented to the issuance have waived their right to a full hearing. (D) On June 18, 2010, the Commission held a hearing ("Sett lement Hearing") to consider whether or not to approve the Settlement Agreemen t. (E) At the Settlement Hearing Agreement and is of the opinion that it is in the public interest to make this Order. IT IS ORDERED: 1. THAT the Settlement Agreement (Schedule "A") be and the same is hereby approved; 2. THAT pursuant to subsection 148.1 (1) of the Act: a) JOHNSON pay an administrat ive November 15, 2010; 500-400 St. Mary Avenue, Winnipeg, Manitoba R3C 4K5 • tel: (204) 945.2548 Order No. 6158 June 18, 2010 Manitoba Securities Commission ("Commission") notice of its intention to hold a hearing to and JOHNSON and WIMBLE entered into a settlement of the proceedings initiated by the of this Order and the Commission approved the Settlement penalty of $10,000.00 on or before • fax : (204) 945.0330· www. msc.gov .mb.ca
b) WIMBLE pay an administrative penalty of $7,500.00 on or before November 15,2010; 3. JOHNSON and WIMBLE pay costs to the Commission in the amount of $7 ,500.00 each , on or before July 15, 2010. BY ORDER OF THE COMMISSION
SCHEDULE "A" T H E: MANliOBA S E C U Rl i l E: S C OMM I S S I O N IN THE MATTER OF: THE SECURITIES ACT - and -IN THE MATTER OF: CIBC WORLD MARKETS INC. LORI DIANE JOHNSON and GORDON JOSEPH WIMBLE SETTLEMENT AGREEMENT A. INTRODUCTION A.1 By way of Notice of Hearing and Statement of Allegations Manitoba Securities Commission Diane Johnson ("JOHNSON") and Commission's intention to hold a hearing under The Securities Act (the "Act"). A.2 Discussions have been held between JOHNSON, WIMBLE and Staff of the Commission ("Staff") in an effort Hearing and Statement of Allegations ("Proceedings "). has been reached based on the terms and conditions ("Settlement Agreement"). 500-400 St. Mary Avenue, Winni peg, Manitoba R3C 4K5 • tel: (204 ) 945.2548 of Staff of The (the "Commission"), notice was given to Lori Gordon Joseph Wimble ("WIMBLE") of the to settle the matters set out in the Notice of A settlement ("Settlement") set forth in this agreement • fax: (204) 945.0 330 • www.msc.gov.mb.ca
A.3 Pursuant to the Settlement, that the Proceedings initiated against disposed of in accordance with Agreement as set forth below. consent to the Settlement and to the making of the consent order referred to in Part o below, on the terms and conditions set forth in this Settlement Agreement. B. STATEMENT OF FACTS B.1 JOHNSON and WIMBLE agree with the facts set out in this Part B. Registration B.2 JOHNSON is a resident of the City of Winnipeg, in the Province of Manitoba. B.3 WIMBLE is a resident of the City of Winnipeg, in the Province of Manitoba. B.4 CIBC World Markets Inc. is registered under the Act as an investment dealer. B.5 CIBC World Markets Inc. was previously registered as an investment dealer under the name CIBC Wood Gundy Securities Inc. (CIBC World CIBC Wood Gundy Securities Inc. are hereinafter referred to as "CIBC"). Page 2 Staff agrees to recommend to the Commission WIMBLE and JOHNSON be resolved and the terms and conditions of the Settlement JOHNSON and WIMBLE each for themselves Markets Inc. and
B.6 JOHNSON was first registe red under the Act as a salesperson on January 25 , 1995 and at all material times was registered as a salesperson with CIBC . B.7 WIMBLE at all material times manager and trading officer with CIBC. Supervision and Compliance B.8 CIBC at all material times operated and continues to operate its head office in Toronto, Ontario and has a branch Branch "). B.9 WIMBLE at all material times Branch. B.10 At all material times, WIMBLE accounts and salespersons in the Winnipeg included reviewing New Account Application trading and making enquiries of salespersons with identified by those reviews and investigating client complaints. Page 3 was registered under the Act as a branch office in the City of Winnipeg ("Winnipeg was the branch manager of the Winnipeg had a role in the ongoing monitoring of client Branch. The monitoring by WIMBLE Forms, reviewing daily and monthly respect to potential problems
Clients - ROBERT KOTYK and BARBARA KOTYK B.11 In or about June, 1999, ROBERT KOTYK clients of JOHNSON. B.12 A number of accounts were opened in BARBARA KOTYK's and KOTYK's name. For each account , completed by JOHNSON which account. B.13 The accounts opened by ROBERT KOTYK and BARBARA KOTYK included, but are not limited to, the following accounts : Account Type Owner No. 552-48673 LIRA ROBERT KOTYK 552-41904 RRSP ROBERT KOTYK 551-76519 LIRA BARBARA KOTYK * as of August 23, 1999 ** as of July 30, 1999 *** as of October 28, 1999 B.1 4 When ROBERT KOTYK and BARBARA KOTYK met JOHNSON, they were ages 51 and 48 respectively. ROBERT KOTYK JOHNSON they: Page 4 and BARBARA KOTYK became ROBERT a Know Your Client ("KYC") form was included objectives and risk tolerance for each Objectives Risk Initial Tolerance Investment 100% long Low- 0% $151,631 .18 * term gain Med - 80% Hiqh - 20% 100% long Low- 0% $77,152.79 ** term gain Med -80% Hioh - 20% 100% Long Low-10% $66,414.34 *** term gain Med - 80% Hiqh - 10% and BARBARA KOTYK advised
Page 5 • Retired from their jobs in Winnipeg ; • Planned to move to Seattle , Washington so ROBERT KOTYK could work for a few years; • Would return to Canada in a few years in order to retire in Canada . B.15 Prior to leaving Canada, ROBERT KOTYK and BARBARA KOTYK advised JOHNSON they had to liquidate their assets which , in turn, they wished to invest with JOHNSON and have her provide investment advice on. B.16 ROBERT KOTYK and BARBARA KOTYK held their accounts at CIBC for the period of 1999 to 2002 with JOHNSON as their registered representative . B.17 During the period 1999 2002, JOHNSON made numerous recommendations to ROBERT KOTYK and BARBARA KOTYK as to securities to hold within their accounts. B.18 As a result of some recommendations made by JOHNSON, together with some unsolicited transactions requested by the Kotyks, the risk level in ROBERT KOTYK's and BARBARA KOTYK's accounts increased and a percentage of the portfolios became unsuitable based on ROBERT KOTYK's and BARBARA KOTYK's risk profiles. B.19 ROBERT KOTYK's and BARBARA KOTYK's risk profile in their KYCs was not updated while their accounts were held at CIBC.
B.20 ROBERT KOTYK and BARBARA KOTYK and in 2002 they transferred their accounts from CIBC to another dealer. Client - Tony PROSICK B.21 In or about February, 2001 , Tony Prosick ("PROSICK") became a client JOHNSON B.22 When PROSICK became a client of JOHNSON, he completed a KYC form which identified his object ives and accoun t is as follows: Account No. Type Objectives 552-69204 RRSP 100% long term gain * as of February 21, 2001 B.23 When PROSICK opened his account at CIBC, he advised JOHNSON he was 50 years old. B.24 PROSICK held his account JOHNSON as his registered representative . Page 6 suffe red losses in their accounts of risk tolerances. Particulars of PROSICK's Risk Tolerance Initial Investment Low risk - 0% $24,500.52* Med. risk - 90% Hiqh risk - 10% at CIBC for the period 2001 - 2004 with
B.25 During the period 2001 - 2003, PROSICK contributed a further $17 ,000 .00 to his account. B.26 During the period 2001 - PROSICK as to the securities he should hold in his account. this advice. B.27 During the period 2001 purchased securities and increased the high risk holdings in his account beyond the 10% high risk component identified in his KYC form. PROSICK 's account became over weighted original profile set out in his KYC. B.28 PROSICK's risk profile on his KYC form was not updated while the account was held at CIBC. B.29 PROSICK suffered losses in his account while held at CIBC. Client - Sharon POlET B.30 In or about November , 1999, Sharon JOHNSON. Page 7 2003, JOHNSON made recommendations to PROSICK followed - 2003, PROSICK, on JOHNSON's advice, As a result, a percentage of in high risk secur ities, based on the Polet ("POlEr) became a client of
B.31 When POlET became a client of JOHNSON, she wh ich identified her objectives and risk tolerances. are as follows : Account No. Type Objectives 710-08092 Margin/open 50% - medium term 50% -long term gain 552-49056 RRSP 50% - medium term 50% -long term qain * as of December 31 , 1999 ** as of December 31, 1999 B.32 When POlET opened her accounts money being transferred into these accounts were her life savings , she did not wish to lose any of the principal and that she wanted to retire at age 62. years of age when she became a client of JOHNSON. 8.34 POlET had her accounts JOHNSON as her registered representative. 8 .35 During the period 1999 - POlET concerning the securities she should hold in her accounts. this advice. Page 8 completed a KYC form Particulars of POlET's accounts Risk Initial Tolerance Investment Medium risk $28 ,968 .99 * 100% Medium risk $84,360.59 ** 100% at CIBC, she advised JOHNSON the POlET was 57 at CIBC for the period 1999 - 2002 with 2002, JOHNSON made recommendations to POlET followed
8 .36 During the period JOHNSON became over weighted with mutual funds which exceeded her medium risk profile . B.37 POLET's risk profile on her KYC form CIBC . B.38 POLET suffered losses in her account 2002 transferred her accounts from CIBC. Clients - George LAKE and Kelly LAKE B.39 George Lake and Kelly Lake (the "LAKES") February, 2000. BAO When the LAKES became clients of JOHNSON , they completed a KYC form which identified their objectives accounts opened at CIBC with JOHNSON as their registered representative are as follows: Account Type Owner No. 710- Margin/cash George 08248 Lake and Kelly Lake Page 9 was POLET's advisor, POLET's accounts was not updated while a client at held at CIBC and subsequently in became clients of JOHNSON in and risk tolerance. Particulars of the LAKES ' Objectives Risk Initial Tolerance Investment 50% mid- Low-O% $421 ,741.25 * term Med - 90% 50% - long High -10% term growth
710- Cash George 08338 Lake and . Kelly Lake (ITF SA) 710- Cash George 08337 Lake and Kelly Lake (ITF SAB) * as of March 3, 2000 ** as of March 31, 2000 *** as of March 31 , 2000 B.41 Between February 2000 - LAKES concerning securities to JOHNSON's recommendations. B.42 During the period JOHNSON included certain securities which exceeded the LAKES' the KYC forms. B.43 The LAKES suffered losses in their accounts at CIBC. B.44 The LAKES' KYC forms were not updated while they held accounts at CIBC. B.45 The LAKES settled outstanding matters concerning their accounts with CIBC prior to the commencement of these proceedings . Page 10 100% long Med- $16,382.03 ** term 100% growth 100% long Med- $14,340.36 ** * term 100% growth 2003, JOHNSON made recommendations to the hold in their accounts. The LAKES followed was the LAKES' advisor, their accounts risk levels as indicated on
Other matters B.46 Since 2003 , CIBC has implemented supervision of branches and supervision within branches. These measures include, but are not limited to, creation Department and CIBC Wood Gundy respective mandates are to provide ensuring adequate supervision procedures are implemented and maintained and to conduct on-site examinations of address supervisory issues. B.47 Staff acknowledge that WIMBLE and JOHNSON were cooperative with Staff during the course of the investigation. COMPENSATION FOR FINANCIAL LOSS B.48 Financial loss claims under the Act have been filed by BARBARA KOTYK, ROBERT KOTYK, TONY PROSICK the Director, Legal and Enforcement ("Director") of the Commission. loss claims have been resolved with the Claimants prepared to withdraw his or her claim Upon approval of the Settlement Agreement, the agreed upon sums to be paid to the Claimants will be paid forthwith. Page 11 a number of measures to enhance of a Business Risk and Sales Supervision Field Risk Services Department whose guidelines and direction to branch managers CIBC Wood Gundy branches to identify and and SHARON POLET (the "Claimants") with The financial and each of the Claimants is if the Settlement Agreement is approved . Staff is satisfied adequate arrangements have
Page 12 been made to forward the agreed upon sums to the Claimants upon approval of this Settlement Agreement. C. ACKNOWLEDGEMENTS C.1 JOHNSON acknowledges and agrees that she: a) failed to update Know Your Client forms; b) recommended certain unsuitable investments to the clients named in the Statement of Allegations ("Clients") given those Clients' personal circumstances, financial circumstances and risk tolerance. C.2 WIMBLE acknowledges and agrees that he failed to detect on a timely basis the fact the Clients had a greater percentage of high risk investments in their accounts than what is specified in their KYCs. D. TERMS OF SETTLEMENT 0 .1 Staff seek a Consent Order from the Commission consistent, with the terms contained in 0.2 of the Settlement Agreement pursuant to the provisions of the Act. 0.2 The Consent Order sought by Staff is as follows: a) that the Settlement Agreement be approved;
b) pursuant to subsection administrative penalty of $10,000.00 on or before November 15, 2010; c) pursuant to subsection administrative penalty of $7,500.00 on or before November 15, 2010; d) JOHNSON and WIMBLE pay costs to the Commission in the amount of $ 7,500 .00 each, on or before July 15, 2010. 0 .3 In the event the Settlement Agreement is approved, Staff will discontinue the proceedings as against CIBC World Markets Inc. E. PROCEDURE FOR APPROVAL OF SETTLEMENT E1. The approval of this Settlement Agreement and the making Order set out in this Settlement hearing pursuant to the Notice of Hearing. E2. Staff, JOHNSON and WIMBLE approved by the Commission, it will constitute the entirety of the evidence to be submitted to the Commission JOHNSON and WIMBLE hereby waive their respective rights to a full hearing and appeal of this matter. E.3 Notwithstanding any other provision of this Settlement Agreement, if, for any reason whatsoever, this Page 13 148.1 (1) of the Act, JOHNSON pay an 148.1 (1) of the Act, WIMBLE pay an of the Consent Agreement shall be sought at a public agree that if this Settlement Agreement is in connection with the Proceedings and Settlement Agreement is not approved by the
Commission or the Consent Order referred to in Section 0 above is not made by the Commission, Staff will be entitled to proceed with whatever steps it is entitled by law to take, including but not restricted to, the commencement of a hearing before the Commission, or the settlement discussions. JOHNSON and WIMBLE shall have all of the usual rights of a person subject to such proceedings. E.4 If the Settlement Agreement is not approved or the Consent Order set out in Section 0 above is not made Settlement Agreement shall remain confidential and shall not be raised in this or any other proceeding, and any admissions Agreement shall be considered furtherance of settlement discussions parties and which will be inadmissible in any proceeding whatsoever. E.5 If this Settlement Agreement Consent Order made upon the terms set out in this Settlement Agreement, this Settlement Agreement will be a public document. E.6 JOHNSON and WIMBLE agree that if this Settlement Agreement is approved by the Commission and the Consent Order is made upon the terms set out in this Settlement Agreement, JOHNSON and WIMBLE will not raise as a basis for attack on the Order, this Page 14 unaffected by this Settlement Agreement In the event that such steps are taken, CIBC, by the Commission , the terms of this contained in this Settlement as without prejudice communications in which will not be binding upon the is approved by the Commission and the Settlement Agreement, or the negotiation or
.. process of approval of this unfairness, or any such other challenges to the validity of the Consent Order. E.7 It is agreed by all parties that the Commission and the Consent Order is made this Settlement Agreement, inconsistent with the terms of this Agreement. nitoba, this JSflrJay of DATED at Winnipeg , Manitoba, thi ~::::-7&-Z_/ ",,=::::, Witness DATED at Winnipeg , Manitoba, this/~~ay 0 Staff of the Manitoba Securities Commission Per:Page 15 Settlement Agreement, alleged bias, alleged if this Settlement Agreement is approved by upon the terms set out in none of them will make any statements ,2010. 1lf ~9: 'nj / da , 2010. , 2010.
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