VSE: Paulson,
Approved Person Disciplined
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Notice to Members #07/99
Vancouver Stock Exchange: Paulson, Approved Person Disciplined
By way of an Offer of Settlement, Dale Michael Paulson
("Paulson"), at the time of the infraction an Approved Person employed by
Wolverton Securities Ltd. ("Wolverton"), has agreed to the imposition of the
following penalties by the Exchange for violation of Exchange By-Law 5.01(2):
- payment of a fine in the amount of $5,000;
- withdrawal of Exchange approval for a period of 60 days;
- a requirement to re-write and pass the examination based on the Conduct and Practices
Handbook for Securities and Industry Professionals;
- strict supervision for a period of one year upon returning to the industry, and
- an assessment of investigative costs in the amount of $750.
By-Law 5.01(2) states in part that an infraction includes any conduct
that is not expressly provided for in the By-Laws, Rules or Regulations which is
unbecoming or detrimental to the interests of the Exchange or the public.
In or about February 1998, two clients of
Paulson agreed to share a private placement of 33,333 shares of Exchange listed Cypango
Ventures Ltd. (the "Private Placement") at a price of $0.15 per unit for a total
cost of $5,000.
On March 6, 1998, both clients provided cheques in the amounts of
$2,500 to Paulson, which were deposited to their respective brokerage accounts. On May 19,
1998, the Private Placement was issued in the name of the eligible subscribing client
("Client A") and the full debit of $5,000 posted to Client A’s account.
Paulson attempted to journal $2,500 from the non-subscribing client ("Client B")
to Client A’s account to pay for half of the outstanding debit. Wolverton would not
permit the transfer of $2,500 from Client B to Client A’s account because the Private
Placement was issued in the name of Client A only, and Client B did not qualify for the
Private Placement.
On June 5, 1998, Client B provided a cheque in the amount of $2,500 to
Paulson (the "Cheque"), as payment for Client B’s share of the Private
Placement. Client B understood that Paulson would cash the Cheque and deposit the $2,500
cash to Client A’s account. Paulson, however, deposited the Cheque to his personal
bank account where it was temporarily used by Paulson to cover personal expenses. Paulson
subsequently covered the debit in Client A’s account through cash deposits.
As a result of cash deposits from Paulson to Client B’s account,
Wolverton conducted an investigation. Wolverton determined that Client B was not aware of
the temporary use of his money by Paulson. Paulson made
personal use of client funds without the client’s knowledge or authorization.
Paulson’s attempts to circumvent the Private Placement exemption
and the unauthorized use of client funds was conduct unbecoming and in violation of
Exchange By-Law 5.01(2).
No fault was attributed to the Member
Firm, who reported Paulson’s conduct to the Exchange.
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