IN THE MATTER OF A DISCIPLINE HEARING PURSUANT TO BY-LAW 20 OF THE INVESTMENT DEALERS ASSOCIATION OF CANADA. Quebec District Council.

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1 IN THE MATTER OF A DISCIPLINE HEARING PURSUANT TO BY-LAW 20 OF THE INVESTMENT DEALERS ASSOCIATION OF CANADA Quebec District Council Re: SERGE BÉLEC NOTICE OF HEARING AND PARTICULARS NOTICE is hereby given that a hearing will be held before the Quebec District Council ( District Council ) of the Investment Dealers Association of Canada ( Association ), on Tuesday January 20, 2004, at 1 Place Ville-Marie, Suite 2802, Montreal, Quebec, at 9:30 a.m. or as soon thereafter as the hearing can be held, regarding a disciplinary action brought by Association Staff concerning Serge Bélec ( Respondent ). NOTICE is further given that Association Staff allege that the following violations of the Association s By-laws, Regulations or Policies were committed by the Respondent who, at the material time, was a registered representative in the employ of Leduc & Associés Valeurs mobilières (Canada) Ltée, a Member firm of the Association. VIOLATIONS 1. The Respondent Serge Bélec is alleged to have committed the following violations. Count 1 Count 2 Count 3 In December 2000 and January 2001, the Respondent Serge Bélec made two unauthorized transactions in the account of his client SK contrary to Sections 4 and 5 of Association Regulation 1300 In December 2000 and January 2001, the Respondent Serge Bélec made four unauthorized transactions in the account of his client AMK, contrary to Sections 4 and 5 of Association Regulation In April 2001, the Respondent Serge Bélec engaged in conduct unbecoming in that he offered his clients SK and AMK compensation for the losses incurred by them, without the authorization of his employer, contrary to Association By-law PARTICULARS NOTICE is further given that the Respondent will find here below a summary of the facts alleged and intended to be relied upon and the conclusions drawn by the Association at the said hearing. I BACKGROUND

2 2. The Staff ( Association ) of the Investment Dealers Association of Canada initiated an investigation concerning the conduct of Serge Bélec ( Bélec ) when he was a registered representative in the employ of Leduc & Associés Valeurs mobilières (Canada) Ltée, a Member firm of the Association. This investigation was initiated on the basis of complaints filed by the Respondent s clients SK and AMK. 3. II STATEMENT OF FACTS (a) Material Facts (i) The Respondent 4. The Respondent was registered as a mutual fund representative from July to December 1999 and as a registered representative employed by Leduc & Associés Valeurs mobilières (Canada) Ltée from December 1999 until his dismissal on or about May 31, The Respondent worked at the Ste-Thérèse sub-branch office operated by Leduc. 6. The Respondent is no longer a registered representative employed by a Member of the Association. (ii) First Mandate Received by Respondent 7. The Respondent opened an account at Leduc in July 1999 under no. 4NHHX4A in the name of AMK, who was 19 years old. 8. Several trades were made by the Respondent with the authorization of his client AMK. 9. In July 2000, the Respondent suggested that his client AMK should take out a loan in the amount of $30, at the Laurentian Bank for the purpose of investing in two mutual funds. AMK accepted the Respondent s suggestion. 10. Also in July 2000, the Respondent opened an off-book account at Fonds CI under no to make trades for his client AMK using, inter alia, the $30, loan. 11. On December 5, 2000, the Respondent made a trade without the authorization equal to $15, from Mutual Fund CI-711 to Mutual Fund CI On December 7, 2000, the Respondent made a trade without the authorization equal to $35, from Mutual Fund CI-703 to Mutual Fund CI

3 13. On December 8, 2000, the Respondent made a trade without the authorization equal to $35, from Mutual Fund CI-668 to Mutual Fund CI On January 2, 2001, the Respondent made a trade without the authorization of his client AMK in account no in that he transferred an amount equal to $25, from Mutual Fund CI-704 to Mutual Fund CI These transactions were made even as AMK s assets were decreasing noticeably and they purported to limit the losses. 16. This way, the Respondent avoided informing his client of the noticeable decrease in her assets. 17. It was only in April 2001, as a result of margin calls, that AMK noticed that her assets had decreased noticeably and that unauthorized transactions had been made in her account by the Respondent. AMK contacted the Respondent to complain. 18. In reply, the Respondent offered AMK compensation for the losses incurred by her without referring the matter to his supervisor. (iii) Second Mandate Received by Respondent 19. In July 1999, the Respondent opened an account under no. 4NHHX5A at Leduc in the name of LK in trust for SK who at the time was 23 years old. 20. The information on the account holder related to LK but the analysis of the investment objectives and risk factors related to SK. 21. The Respondent received instructions from SK, not from LK. 22. In September 2000, the Respondent further opened an off-book account at Fonds CI under no in the name of AMK but the investments belonged to SK. 23. On December 5, 2000, the Respondent made a trade in account no without the authorization of the account holder AMK or the beneficiary SK in that he transferred an amount equal to $21, from Mutual Fund CI-780 to Mutual Fund CI On January 2, 2001, the Respondent made a trade in account no without the authorization of the account holder AMK or the beneficiary SK in that he transferred an amount equal to $15, from Mutual Fund CI-704 to Mutual Fund CI These transactions were made even as SK s assets were decreasing noticeably and they purported to limit the losses. 26. In this way, the Respondent avoided informing his client of the noticeable decrease in her assets. 3

4 27. It is only in April 2001, as a result of margin calls, that SK noticed that her assets had noticeably decreased and that transactions, unauthorized by the account holder AMK or the beneficiary SK, had been made in her account by the Respondent. She contacted the Respondent to complain. 28. In reply, the Respondent offered SK compensation for the losses incurred by her without referring the matter to his supervisor. III NOTICE OF HEARING 29. NOTICE is further given that the Respondent shall be entitled to appear and be heard and be accompanied by counsel or agent at the hearing and to call, examine and cross-examine witnesses. 30. NOTICE is further given that Association By-laws provide that if, in the opinion of the District Council, the Respondent has failed to comply with or carry out the provisions of any applicable federal or provincial By-law relating to trading or advising in respect of securities or commodities or of any regulation or policy made pursuant thereto; has failed to comply with or carry out the provisions of any By-law, Regulation, Ruling or Policy of the Association; has engaged in any business conduct or practice which such District Council, in its discretion, considers unbecoming or not in the public interest; or is otherwise not qualified whether by integrity, solvency, training or experience, the District Council has the power to impose any one or more of the following penalties: (a) (b) a reprimand; a fine not exceeding the greater of: (i) (ii) $1,000, per offence; and an amount equal to three times the pecuniary benefit which accrued to such person as a result of committing the violation; (c) (d) (e) (f) suspension of the approval of the person for such specified period and upon such terms as District Council may determine, revocation of approval of such person; prohibition of approval of the person in any capacity for any period of time; such conditions of approval or continued approval as may be considered appropriate by the District Council. 31. NOTICE is further given that the District Council may, in its discretion, require that the Respondent pay the whole or part of the costs of the proceedings before the District Council and any investigation relating thereto. 4

5 32. NOTICE is further given that the District Council may accept as having been proven any facts alleged or conclusions drawn by the Association in the Notice of Hearing and Particulars that are not specifically denied, with a summary of the facts alleged and conclusions drawn based on those alleged facts, in a Reply. 33. NOTICE is further given that the Respondent has ten (10) days from the date on which this Notice of Hearing and Particulars was served, to serve a Reply upon: Investment Dealers Association of Canada 1 Place Ville-Marie - Suite 2802 MONTREAL, Quebec H3B 4R4 Attention: Alain Arsenault, Counsel 34. A Reply may either: (a) specifically deny (with a summary of the facts alleged and intended to be relied upon by the Respondent, and the conclusions drawn by the Respondent based on all the alleged facts) any or all of the facts alleged or the conclusions drawn by the Association in the Notice of Hearing and Particulars; or (b) admit the facts alleged and conclusions drawn by the Association in the Notice of Hearing and Particulars and plead circumstances in mitigation of any penalty to be assessed. 35. NOTICE is further given that if the Respondent fails to serve a Reply or attend at the hearing, notwithstanding that a Reply may have been served, the District Council may, without further notice to and in the absence of the Respondent, proceed with the hearing of the matter on the date and at the time and place set out in this notice, or on any subsequent date, at any time and place, and the District Council may accept the facts alleged or the conclusions drawn by the Association in this notice as having been proven and may impose any of the penalties prescribed by the By-laws of the Association. DATED AT MONTREAL, Province of Quebec, this day of December CARMEN CRÉPIN Vice-President, Quebec 5