IDA File No. 1223/Nov/04

IN THE MATTER OF A DISCIPLINARY HEARING

PURSUANT TO PART 10 OF BY-LAW 20 OF THE

INVESTMENT DEALERS ASSOCIATION OF CANADA ("Association")

RE: TUMER SALIH BAHCHELI ("Respondent")

DECISION OF' A HEARING PANEL OF THE ALBERTA DISTRICT COUNCIL OF THE

INVESTMENT DEALERS ASSOCIATION OF CANADA

Hearing: May 8 and 9,2007 at Calgary, Alberta

Hearing Panel Decision: September 12,2007

Hearing Panel: Alan V.M. Beattie, Q.C., Chair Bruce N. Calvin, Industry Representative Peter McWilliams, Industry Representative

Counsel: For the Association Barbara G. Lohmann

For the Respondent John D. Blair

Appearing: For the Association Richard Douglas, Senior Investigator - Witness

For the Respondent Turner Salih Bahcheli, Respondent - Witness Margaret Bahcheli, Wife of Respondent Geoff Stenger, Student at Law

TABLE OP CONTENTS

1. Notice of Hearing; Particulars; Penalties & Costs

2. Response to Notice of Wearing

3. Pertinent Regulations, Interpretation Guidelines and Disciplinary Sanction Guidelines

4. Further Evidence

5. Argument of the Association

6. Argument of the Respondeilt

7. Reply of the Association

8, Decision

PANEL DECISION

1. NOTICE OF HEARING; PARTICULARS: PENALTIES & COSTS

The Notice of Hearing dated January 22, 2007 (Exhibit I), advises that pursuant to Rule 6.2 of the Association's Rules of Practice and Procedure the hearing is "designated on the Standard Track". The Notice of Hearing includes:

THE PURPOSE OF THE HEARlNG is to determine whether Tumer Salih Bahcheli ("the Respondent") has committed the following contraventions that are alleged by the Association:

COUNT 1

From on or about March 2005 to August 2006, the Respondent, at all material times a Registered Representative ("RR) employed at Jennings Capital Inc. ("Jennings"), a Member finn, failed to co-operate with the Association in that he failed to provide information and documents as required by the Association in the course of an investigation, contrary to Association By-law 19.5 and/or By-law 29.1.

PARTICULARS

TAKE FURTHER NOTICE that the following is a summary of the facts alleged and to be relied upon by the Association at the hearing (Hearing Panel Note: For ease of reference rhe Exhibit nunzbers have been inserted, in italics):

BACKGROUND

1. The Respondent first became licensed as an RR with Wood Gundy on February 27, 1990 where he worked until January 1993 when he becme employed as an RR with Midland Walywn. On or about May 9, 1995 he becme employed as an RR with Yorkton Securities Inc. ("Yorkton") (now Orion Securities Inc. "Orion"). The respondent's employment was terminated for cause by Yorkton on or about March 8, 2002 (Ex. 4, Tab I). He was subsequently employed by Leede Financial Markets Inc. from March 2 1, 2002 - March 15, 2004 following which he was employed by Research Capital Corporation from March 18, 2004 to October 12, 2004. He is currently employed by Jennings in Calgary, Alberta.

2. In November 2004, the Association received a letter from Orion (Ex.4, Tab I ) which indicated that the Respondent may have been involved in a $1 million private placement in InBusiness Solutions Inc. (the "InBusiness Private Placement") on behalf of clients, without the knowledge of Yorkton, Orion's predecessor (Ex. 4, Tab I).

3. Orion advised Association Staff that it had recovered the Respondent's e-mails which included drafts of a settlement agreement that summarized the terms of the InBusiness Private Placement ("Settlement Agreement"), as well as some releases and indemnity agreements (Ex. 4, Tabs 3-8), all of which Orion was previously unaware of. The Settlement Agreement, to which

the Respondent was a party, included a requirement that 200,000 shares of Royal Sovereign Exploration Inc. ("RSX"), duly endorsed in blank for transfer, be delivered by the other signatory, P.P., to the respondent in care of a law firm, BW LLP. These documents were e- mailed to the respondent under a cover letter dated September 14, 2001 from P.P.'s solicitor. The cover letter indicates that the address for the delivery of the RSX shares was inserted into the Settlement Agreement at the request of the Respondent and further at the Respondent's request, that a solicitor at BW LLP was copies with the letter and attachments for that solicitor's review.

4. The delivery of the RSX shares to the Respondent, in care of BW LLP was a condition of the InBusiness Private Placement.

5. Computershare records indicate that on or about October 1, 2001, 200,000 RSX shares were transferred to FO. Computershare records indicate further that, on or about July 11, 2002, 200,000 RSX shares were transferred from FO to the Respondent. Yahoo Finance records indicate that on the date of these transfers, each RSX share was worth $0.50. These shares were transferred back to FO on or about June 23, 2006.

INWSTIGA TION

6. By letter dated March 1, 2005, the Association advised the Respondent that the Enforcement Department of the Association had begun an investigation into his conduct as an RR formerly with the Calgary, Alberta office of Yorkton (Ex.4, Tab 9).

7. During the course of the investigation, the Respondent was interviewed by Association Staff in September 2005 and there was a subsequent exchange of correspondence between Association Staff and counsel for the Respondent.

8. Through the interview and correspondence, the Respondent advised the Association that FO purchased the 200,000 RSX shares and that FO is both the respondent's client and half brother. When asked about the circumstances surrounding the RSX share transfers (as indicated in the Computershare records), the Respondent, through his counsel, advised that the transfer of the 200,000 RSX shares from FO to the Respondent was made part of a one time personal loan (the "Loan") so that the Respondent could use the shares as partial security for the Loan. Once the share lending arrangement was satisfied, the h l l amount of the shares would be transferred back to FO. The lender was not a client of the Respondent's and the Loan has now been fully repaid. It was the solicitors for the lender that required the 200,000 RSX shares to be transferred into the Respondent's name (Ex.4, Tab 17).

9. As the Respondent was the borrower in the Loan transaction, the Association requested that the Respondent take all steps required to obtain and disclose all documents and/or information pertaining to the Loan and the InBusiness Private Placement (Ex. 4, Tab 18).

10. The Respondent, thrdugh his counsel, confirmed that BW LLP had represented him but only in regard to the releases related to the InBusiness Private Placement (Ex.4, Tab 21). Further, while he asked the lender to provide all the Loan documentation, the lender refused to do so as the information was personal and private (Ex.4, Tab 24). The Association was further

advised that the Respondent was not in possession of any documents pertaining to the InBusiness Private Placement (Ex. 4, Tab 21).

11. On or about July 11, 2006, Association Staff wrote to the Respondent's counsel, in light of previous communications and correspondence with the Respondent, through his counsel. Staff wanted to ensure that there were no miscommunications and accordingly, made a request to obtain previously requested information as well as new information. It was made clear that this referred not solely to items in the respondent's physical possession, but also documents and information that he has access to, such as documents in the possession of his legal counsel. The Association requested the documents related to the Loan, although the name of the lender could be redacted. The Association also requested, inter alia, the following:

the retainer letter between the Respondent and BW LLP; a letter from BW LLP outlining the services provided to the Respondent; a signed copy of all the releases for which BW LLP represented the Respondent: on what authority he acted and why Yorkton's name was included on the releases; a detailed explanation of the background behind the releases and the financial and business relationships between the parties; with respect to documents regarding the InI3usiness Private Placement, the Association requested all documents either in the Respondent's possession or under his control, such as documents in the possession of his legal counsel; documents and explanations about why the Settlement Agreement was required when it was the respondent's clients making the Investment and the clients were not a party to the Settlement Agreement; an explanation and documents explaining why the 200,000 RSX shares were a condition of the Settlement Agreement; a written explanation and supporting documents explaining why other parties like FO and others were involved in the releases, including an explanation of the connection between the releases and the Inl3usiness Private Placement; and the Respondent stated in his interview that the 200,000 RSX shares had been sold to FO, so the Association requested documents and details regarding that sale.

The deadline for the response was July 26,2006.

12. In response to an Association letter dated May 16,2006 (Ex.4, Tab 22), Association Staff received a letter dated July 11, 2006 (Ex.4, Tab 26) from the Respondent's counsel. The letter indicated that they have requested and have been refused permission from the lender to share the documentation about the Loan since the lender deemed the information to be personal. Also, the Respondent is not in possession of any of the documents in relation to the InBusiness Private Placement and the client's have refused to release information.

13. Association Staff received another letter dated July 26, 2006 (Ex. 4, Tab 27) from the Respondent's counsel which indicated that they would not be in a position to respond by the imposed deadline of July 26, 2006. They would advise the Association when they were in a position to advise when they would be able to respond.

14. Association Staff sent a letter dated August 3, 2006 (Ex.4, Tab 28) to the Respondent's counsel since the Association still had not received any of the information or documents requested in the July 1 I, 2006 letter. That new deadline imposed was August 10, 2006. The Association reminded the Respondent that disciplinary action could be taken against him for failure to co-operate.

15. On September 12, 2006, the Association wrote once again to the Respondent's counsel (Ex.4, Tab 29) to advise that it had not received a response to its August 3, 2006 letter and that the matter had been referred for disciplinary action against the Respondent.

16. On or about September 14, 2006, the Association received a letter from another lawyer in the Respondent's counsel's firm (Ex.4, Tab 30) advising that the Respondent's counsel was out of the office until September 26,2006 at which time he would respond.

17. There has been no further communication from either the Respondent or his counsel.

18. The Association has determined the documents and/or information requested of the Respondent by the Association to be relevant and essential in order for the Association to determine the entire circumstances surrounding the InBusiness Private Placement, the RSX shares and the Loan. Notwithstanding the repeated requests made of the Respondent, the Association still has not been made aware of the purpose of the involvement of the 200,000 RSX shares in the InBusiness Private Placement, the details of the Loan and the circumstances and details surrounding FO's purchase of the 200,000 RSX shares. Accordingly, the Respondent's failure to co-operate with the Association has hindered and delayed the progress of the Association's investigation.

PENALTIES & COSTS

TAKE FURTHER NOTICE that if the Hearing Panel concludes that the Respondent did commit any or all of the contraventions alleged by the Association in the Notice of Hearing, the Hearing Panel may, pursuant to By-law 20.33 and By-law 20.34, impose any one or more of the following penalties:

Where the Respondent is/was an Approved Person:

(a) a reprimand;

(b) a fine not exceeding the greater of:

(i) $1,000,000 per contravention; and

(ii) an amount equal to three times the profit made or loss avoided by such Approved Person by reason of the contravention.

(c) suspension of approval for any period of time and upon any conditions or terms;

(d) terms and conditions of continued approval;

(e) prohibition of approval in any capacity for any period of time;

(0 termination of the rights and privileges of approval;

(g) revocation of approval;

(h) a permanent bar from approval with the Association; or

(i) any other fit remedy or penalty.

TAM3 FURTHER NOTICE that if the Hearing Panel concludes that the Respondent did commit any or all of the contraventions alleged by the Association in the Notice of Hearing, the Hearing Panel may pursuant to By-law 20.49 assess and order any investigation and prosecution costs determined to be appropriate and reasonable in the circumstances.

2. RESPONSE TO NOTICE OF HEARING

A Response to Notice of Hearing was served upon the Association by Mr. Raymond Coad, Q.C.,

of Fraser Milner Casgrain LLP, then counsel for the Respondent, dated February 22, 2007

(Exhibit 2), as follows:

1. The Respondent, Tumer Salih Bahcheli ("Mr. Bahcheli"), denies the allegation in the Notice of Hearing that the Respondent "failed to co-operate with the Association in that he failed to provide information and documents as required by the Association".

2. In answer to the whole of the Notice of Hearing, the Respondent states that at all material times he co-operated fully and on a best efforts basis with the investigation initiated by the Investment Dealers Association ("IDA").

3. In answer to the allegation of conduct contrary to Association By-law 19.5, the Respondent met or exceeded the three heads of obligation of By-law 19.5 as follows:

(a) To submit a report in writing with regard to any matter involved in any such investigation;

(b) To produce for inspection and provide copies of any books, records, accounts and documents that are in the possession or control of the Member or the person, that the Association determines may be relevant to a matter under examination or investigation and such information, books, records and documents shall be provided in such manner and form, including electronically, as may be required by the Association; and

(c) To attend and give information respecting any such matters;

In that the Respondent provided the information requested pursuant to the normal course of an investigation.

4. In answer to the allegation of conduct contrary to Association By-law 29.1, the Respondent has met or exceeded the two relevant heads of obligation of By-law 29.1 in that:

(a) The respondent has maintained high standards of ethics and conduct at all times including using, at the behest of the IDA, goodwill and friendly relations to persuade un-interested third parties to provide private third party information and third party solicitor-client privileged information owned by members of the public who highly value discretion and privacy. In particular, the parties to the InBusiness Private Placement have never shared the subject documentation with the Respondent.

(b) The Respondent has strived to comply with the Association's repeated requests for the same or similar information without appearing to the relevant third parties to be engaged in unbecoming conduct or conduct detrimental to the public interest in attempting to collect private and/or privileged information.

5. In particular response to paragraph 1 of the Notice of Hearing.

(a) The Respondent was wrongfully terminated from his employnlent at Yorkton Securities Inc. ("Yorkton" or "Orion") on March 8,2002.

(b) The Respondent is currently engaged in legal proceedings against Yorkton for damages arising from his wrongful dismissal (Action No. 040 1-03 126).

(c) The Respondent alleges that Yorkton wrongfully filed a false document with the IDA in that the Uniform Termination Notice dated March 8, 2002 stated that Yorkton had cause for the termination.

(d) There was no IDA investigation of the Respondent at the time of the termination.

(e) As a result of Yorkton's allegations in the Unifonn Termination Notice, the IDA commenced an investigation of the Respondent on or about May, 2002.

(f) After concluding an approximately 18 month investigation of the Respondent's business, the Respondent was taken to a panel hearing wherein the evidence of any wrongdoing was found to be insufficient and the charges not sustained (Judgement dated January 3 1,2004, IDA File No. 020 1 -MAR/02).

6. In particular response to paragraph 2 of the Notice of Hearing, the Respondent agrees that on November, 2004 a letter was sent to the IDA by Orion implying that Orion had no knowledge of an InBusiness private placement transaction and in effect resurrecting and alleging again termination with cause.

7. In particular response to paragraph 3 of the Notice of Hearing, the Respondent has no knowledge of the extent of communications that took place between the IDA and Orion; however, the Respondent believes that the IDA and Orion have failed to properly inform themselves of Yorkton's corporate knowledge, policies and procedures by neglecting to include in the investigation those people employed by Yorkton at the relevant time of the alleged transaction.

8. The Respondent acknowledges the facts that are set out in paragraphs 4 and 5.

9. In particular response to paragraphs 6 to 17 of the Notice of Hearing, the Respondent states that the facts are as follows:

(a) On August 10,2005, Hinson Ng, a Senior Investigator of the Enforcement Department of the IDA, wrote to Raymond Code, Q.C., counsel for the Respondent, advising that the IDA was investigating the conduct of the Respondent while he was employed with Yorkton. The Respondent voluntarily agreed to be interviewed by the IDA.

(b) On September 13, 2005, Mr. Coad wrote to Mr. Ng confirming the September 20, 2005 IDA interview of the Respondent, giving the IDA notice of the wrongful dismissal litigation between the Respondent and Orion, and raising concerns of the Respondent regarding Orion.

(c) On September 20, 2005, the IDA interviewed the Respondent in the presence of his counsel. Despite several requests, a transcript of this interview was not provided to the Respondent until February 12,2007.

(d) The Respondent specifically denies paragraph 9. On September 21, 2005, Mr. Ng wrote to Mr. Coad requesting that the Respondent search his records and provide specific records and docunlents as follows:

(i) A signed copy of the settlement agreement between Mr. Bahcheli and P.P.

(ii) Copies of any other documentation in respect of the private placement transaction of $ 1 million dollar convertible debenture in InBusiness Solutions by (the R Family).

(iii) Copies of any documentation in respect to the 200,000 shares of Royal Sovereign Exploration Inc. and (F.O.).

The IDA requested that this information be provided by October 11,2005.

(e) On October 11, 2005, Mr. Coad wrote to Mr. Ng advising that the Respondent did not have any of the requested records and documents in his possession because of the circumstances of the Respondent's wrongful dismissal from Yorkton wherein the Respondent was escorted from the premises without his computer or any files, all of which remain with Orion.

( f ) On March 13, 2006, 5 months after Mr. Coad's October 1 1, 2005 letter, Richard Douglas, a Senior Investigator of the Enforcement Department of the IDA, wrote to Mr. Coad demanding additional information. Mr. Douglas specifically requested that the Respondent authorize

Burstall Winger LLP, who was not counsel for the Respondent but was counsel for (the R Fanlily), the parties who made the private placement in InBusiness Solutions, to provide a1 information and a written explanation with respect to the RSX share transfer. A deadline of March 24, 2006 was imposed. Mr. Coad never received this letter until an additional copy was faxed to him on March 28,2006.

(g) On March 28, 2006, Mr. Douglas sent a letter to Mr. Coad demanding that Mr. Coad respond to his letter of March 13, 2006 by April 5, 2006. Mr. Douglas also advised that if there were no response, disciplinary action would be taken against the Respondent.

(h) On April 3, 2006, Mr. Coad wrote to Mr. Douglas advising him that he had not received Mr. Douglas' letter of March 13,2006 until March 28,2006.

(i) On April 5, 2006, Mr. Coad wrote to Mr. Douglas addressing the questions raised in Mr. Douglas' correspondence of March 13, 2006. In particular, Mr. Coad explained that Burstall Winger LLP had never acted on behalf of the Respondent.

0) On April 7,2006, Mr. Douglas wrote to Mr. Coad requesting that the Respondent provide additional information and documents. In particular, Mr. Douglas demanded that the Respondent provide him with copies of documents related to a personal loan, and that the Respondent authorize Macleod Dixon LLP, counsel for the lender of the personal loan, to provide all information and documents related to the RSX share transfer. Mr. Douglas imposed a deadline of April 2 1,2006.

(k) On April 21, 2006, Mr. Coad wrote to Mr. Douglas, addressing the inquiries in Mr. Douglas' April 17, 2006 correspondence and advised among other things that the personal loan did not involve a client and that Macleod Dixon LLP did not at anytime act on behalf of the Respondent.

(1) On April 21, 2006, Mr. Douglas wrote to Mr. Coad requesting additional information and documentation pertaining to the InBusiness Solutions private placement and the personal loan. A deadline of April 28,2006 was imposed.

(m) On April 27, 2006, Mr. Coad wrote to Mr. DougIas requesting that he be provided with an extension to May 15,2006, as he was in trial and the Respondent was abroad.

(n) On May 4,2006, Mr. Douglas wrote to Mr. Coad granting an extension to May 15,2006.

(0) On May 15,2006, Mr. Coad wrote to Mr. Douglas addressing the inquiries set out in Mr. Douglas' April 21, 2006 correspondence. In his letter, Mr. Coad again explained that the Respondent had requested Macleod Dixon LLP contact the IDA directly and confirm their relationship with the Respondent. In addition, Mr. Coad again explained that the Respondent could not provide any information with respect to the private loan as the lender refused to allow this information be disclosed to the IDA. Finally, Mr. Coad explained that the Respondent did not have in his possession any documentation related to the InBusiness Solutions private placement.

(p) On May 16, 2006, Mr. Douglas wrote to Mr. Coad accusing the Respondent of not taking the required steps to obtain and disclose the information he requested in his April 21, 2006 correspondence. Mr. Douglas advised that this matter would be referred to Enforcement Counsel to commence disciplinary proceedings under IDA By-law 19.5.

(q) On July 11, 2006, Mr. Coad wrote to Mr. Douglas outlining the efforts that the Respondent had taken in obtaining the requested information and documents. In particular, regarding the personal loan, Mr. Coad again explained that the lender had refused to allow the Respondent to disclose his private information and that the Respondent requested the lender's counsel, Gordon Van Vliet of Macleod Dixon LLP, to respond to the IDA directly regarding the registration of the 200,000 RSX shares. Mr. Van Vliet subsequently wrote to Mr. Douglas outlining his client's position. In addition, Mr. Coad explained that the Respondent had asked Mr. Grant Stapon of Bennett Jones LLP, current counsel for (the R Family), to provide documents and/or information about the InBusiness Solutions private placement but that this request had been refused. A letter from Mr. Stapon setting out his position was provided to Mr. Douglas.

(r) On July 1 1,2006, Mr. Douglas wrote to Mr. Coad requesting that the Respondent provide the previously requested information as well as additional information and documentation with respect to the RSX share transaction, the InBusiness private placement, the private loan and an explanation of the Respondent's relationship with Burstall Winger LLP. Mr. Douglas demanded that this information be obtained during Stampede Week and imposed a deadline of July 26, 2006.

(s) On July 26, 2006, Mr. Coad wrote to Mr. Douglas advising him that he was not in a position to meet the deadline of July 26,2006.

(t) The Respondent was out of the province for the later part of July and all of August 2006.

(u) On August 3, 2006, Mr. Douglas wrote to Mr. Coad advising him that the Respondent had until August 10, 2006 to address the inquiries set out in the July 11, 2006 letter, which letter included the repeated request for the InBusiness debenture documentation previously identified to the IDA as solicitor-client privileged by Bennett Jones LLP. The July 11, 2006 letter required the Respondent go to (the R Family's) prior counsel at Burstall Winger LLP to see if that firm would release information privileged between itself and its former client but also, unknown to Burstall Winger LLP, identified and classified as privileged between Bennett Jones LLP and its client.

(v) Given the significant issue of solicitor-client privilege, at no time did the IDA indicate to the Respondent or his counsel that it had attempted to contact the third party solicitors (namely, Douglas Stuve of Burstall Winger LLP, Mr. Van Vliet of Macleod Dixon LLP, or Mr. Stapon of Bennett Jones LLP) directly to obtain information that it had been seeking which was either not in the Respondent's possession or solely within his control.

(w) The Respondent accepts the IDA statement that on or about September 14, 2006 the Association received a letter from another lawyer in the Respondent's counsel's firm advising that the Respondent's counsel was out of the office until September 26,2006.

(x) On November 28, 2006, Ms. Charlene L. McLaughlin wrote to Mr. Bahcheli advising that she had been appointed the new Enforcement Counsel-. Over the course of November and December, 2006 and January, 2007, Ms. McLaughlin, Mr. Coad and the Respondent were actively engaged in drafting and analyzing factums for submission to the Court of Appeal of Alberta on a point of law between the IDA and the Respondent.

(y) On December 14, 2006, Ms. Barbara Lohrnann wrote to Mr. Coad advising that she had been appointed the new Enforcement Counsel.

(z) On January 17,2007, Mr. Coad spoke with Ms. Lohmann by telephone during which Ms. Lohmann discussed possible hearing dates.

(aa) On January 19, 2007, Mr. Coad received a Notice indicating that a hearing was scheduled for May 8 , 9 and 10,2007.

(bb) On or about January 23, 2007, Mr. Coad called Ms. Lohmann and left a message; this message affirmed Mr. Coad's understanding that she was on vacation at the time, and that the Respondent had convinced the lender to approve the release of the loan documentation in the matter of the personal loan between the lender and the Respondent. The lender, who was not a client, wished the matter to remain private and discrete.

(cc) On January 30, 2007, Mr. Coad delivered to Ms. Lohmann and Mr. Douglas a number of documents relating to the Respondent's personal loan.

(dd) On January 30, 2007, Mr. Coad called Ms. Lohmann. During this telephone conversation, Ms. Lohmann indicated that the IDA would not then be pursuing Disciplinary Proceedings against the Respondent on the understanding that the Respondent would be making further inquiries and obtain additional information, including a response directly from Douglas Stuve of Burstall Winger LLP to the IDA.

(ee) On or about February 2, 2007, Mr. Coad spoke with Mr. Douglas and advised him that the Respondent was obtaining additional documentation, including a response directly from Douglas Stuve of Burstall Winger LLP to the IDA.

(ff) On or about February 5, 2007, Mr. Coad spoke with Mr. Douglas. Mr. Douglas and Mr. Coad agreed that the IDA would conduct a further interview of the Respondent on February 16, 2007.

(gg) On February 6, 2007, Mr. Coad wrote to Ms. Lohmann, copied to Mr. Douglas. The letter repeated that, in particular, the Respondent has never received nor been shown the documentation of the InBusiness debenture and the documentation remains confidential to unrelated third parties and subject to protection as solicitor-client privilege and that the RSX shares were unrelated to the InBusiness transaction but for the unfortunate drafting of a closing agenda document that lumped together outstanding matters.

(hh) On February 6, 2007, Ms. L o h a m served upon Mr. Coad a copy of the Notice of Hearing, which was dated January 22,2007.

(ii) On February 8, 2007, Mr. Douglas Stuve of Burstall Winger LLP wrote to Mr. Douglas, copies to the Respondent, outlining his firm's relationship with the Respondent and advising among other things that Burstall Winger LLP had no retention agreement with the Respondent, stating that the InBusiness information is privileged to his client, and confirming that the InBusiness debenture agreement was never provided to or reviewed by the Respondent.

10. In particular response to paragraph 18 of the Notice of Hearing, the Respondent states that he has co-operated hl ly with the Association, provided to the IDA all of the requested information and documentation in his possession and control and has used best efforts to obtain the outstanding information that is in the possession of various third parties. The Respondent has always remained available for interviews to review the documentation and provide explanation where necessary regarding two transactions that are devoid of any wrongdoing or culpability.

1 I . The Respondent states that the Notice of Hearing was not instituted reasonably and in good faith by the IDA, and that the IDA has failed to conduct the investigation in a reasonable manner.

WEREFORE Mr. Bahcheli requests that the within proceedings against him be dismissed with costs to Mr. Bahcheli.

3. PERTINENT REGULATIONS, INTERPRETATION GUIDELINES AND DISCIPLINARY SANCTION GUILDELINES

The Notice of Hearing alleges that the Respondent's failure to provide information and

documents required by the Association in the course of an investigation, was "contrary to

Association By-law 19.5 and/or By-law 29.1". Those By-laws are:

BY-LAW NO. 19

EXAMINATIONS AND INVESTIGATIONS

Investigatory Powers

19.5 For the purpose of any examination or investigation pursuant to this By-law 19, a Member, registered representative, investment representative, sales manager, branch manager, assistant or co-branch manager, partner, director, officer, investor or employee of a Member or any other person approved or seeking approval or under the jurisdiction of the Association pursuant to the By-laws and Regulations, may be required by the Senior Vice-President, Member regulation, his or her staff, or any other person designated by the Board of Directors:

(a) To submit a report in writing with regard to any matter involved in any such investigation;

(b) To produce for inspection and provide copies of any books, records, accounts and documents, that are in the possession or control of the Member or the person, that the Association determines may be relevant to a matter under examination or investigation and such

information, books, records and documents shall be provided in such manner and form, including electronically, as may be required by the Association; and

(c) To attend and give information respecting any such matters;

And the person shall be obligated to submit such report, to permit such inspection, provide such copies and to attend, accordingly. Any person subject to an investigation conducted pursuant to this By-law 19 shall be advised in writing of the matters under investigation and may be invited to make subnlission by statement in writing, by producing for inspection books, records and accounts and by attending before the persons conducting the investigation. The person conducting the investigation may, in his or her discretion, require that any statement given by any person in the course of an investigation be recorded by means of an electronic recording device or otherwise and may require that any statement be given under oath.

BY-LAW NO. 29

BUSINESS CONDUCT

29.1 Members and each partner, director, officer, sales manager, branch manager, assistant or co-branch manager, registered representative, investment representative and employee of a Member (i) shall observe high standards of ethics and conduct in the transaction of their business, (ii) shall not engage in any business conduct or practice which is unbecoming or detrimental to the public interest, and (iii) shall be of such character and business repute and have such experience and training as is consistent with the standards described in clauses (i) and (ii) or as may be prescribed by the Board of Directors.

For the purposes of disciplinary proceedings pursuant to the By-laws, each Member shall be responsibIe for all acts and omissions of each partner, director, officer, sales manager, branch manager, assistant or co-branch manager, registered representative, investment representative and employee of a Member; and each of the foregoing individuals shall comply with all By-laws, Regulations and Policies required to be complied with by the Member.

Notice from the Association dated January 24,2002 includes:

NOTICE FROM THE ASSOCIATION DATED JANUARY 24,2002

Interpretation of Amendments to By-Law 19: Enforcement Action for Non-Compliance With Document Production

Without limiting the generality of the By-law and to assist Members (registrants and Member firms), the Enforcement Department is providing guidelines that set out its interpretation of Members' responsibilities and its expectations regarding compliance with By-law 19.5.

Amendments to By-law 19

The amendments to By-law 19 seek to ensure that investigation and enforcement action is completed in a timely fashion so as to create confidence in the self-regulatory regime and the capita1 markets. It is fundamental to the functioning of the self-regulatory regime that the subject of an investigation provide full cooperation in producing requested documentation.

Enforcement Procedures for Document Production

The following enforcement procedures should serve as a guideline. Unique circumstances may warrant a departure from the general procedure.

Letters requesting documentation from a Member will provide 10 business days for production of the documents. Within 10 business days the Member must produce the documents or communicate to the Association, in writing, the reasons for not being able to comply with the document production request. Enforcement staff seized with the particular investigation may provide extensions for the production of documents where there is reason to believe that bona fide attempts have been made to comply with the document request. For the production of standard documentation, the extension will be 5 business days. For more complex matters, Enforcement staff will determine a timetable for production of the documents that is appropriate in relation to the circumstances.

If the documents are not produced or there is no response within the 10 business days or the documents are not produced within the extended period of time, a letter demanding compliance within 2 business days will be sent by Enforcement staff. If the documents are not produced or no acceptable bona fide response is received within the 2 business days, the matter will be immediately referred to enforcement counsel for assessment of regulatory action.

Members are required to make full and complete disclosure of documents requested. Members are also encouraged to take a purposive approach to requests and not a black letter response to documentation requests. Failure to do so may be interpreted as non-compliance.

[The Notice then refers to the decision of the IDA Pacific District Council in IDA and Robb (below at p. 29).]

Enforcement Procedures Where a Member had Retained Counsel

All originai correspondence will be directed to the Member and copies of the correspondence will be provided to the Member's counsel. The Member bears the responsibility to comply with By-law 19 and thus bears the onus to instruct their counsel appropriately. Any failure to comply and associated liability rests with the Member.

DISCIPLINARY SANCTION GUIDELINES

5.1 Failure to Cooperate - By-laws 19.5 and 19.6

By-law 19.5 provides that any person under the jurisdiction of the Association is obliged to submit a report in writing with regard to any matter being investigated by the Association, to

produce for inspection and to provide copies of the books, records and accounts relevant to such an investigation, and to meet and give information respecting the investigation. Once an examination or investigation is initiated, the Association's staff is entitled to free access to any and all records of the Member or person concerned, who is prohibited from withholding or concealing any documents reasonably required for the purpose of the examination or investigation (By-law 19.6).

Consequently, failure to cooperate/impeding an IDA investigation, whether by a Member firm or a registered representative, is serious misconduct because it subverts the Association's ability to perform its regulatory function. This category of misconduct is broad enough to include the following:

failure to cooperate or respond in a timely manner.

failure to respond truthfblly

failure to cooperate or respond completely

Considerations in Addition to General Principles

1. The disciplinary history of the Respondent.

2. Was the contravention intentional or inadvertent?

3. Was there complete or only partial non- compliance?

4. The impact that the non-compliance had on the investigation.

5. Whether the Respondent can demonstrate that his or her refusal to cooperate was based on reasonable reliance on competent legal advice?

6 . What is the nature of the document/information requested? Were they of material importance to the pending investigationhearing?

Recommended Sanctions

Fine: Minimum of $10,000 Approved Persons and $50,000 for a Member firm.

Immediate suspension for 30 days to 90 days pending compliance with By-law 19.5.

Expulsion of Member or permanent ban from approval in any capacity of an Approved Person if the respondent still fails to cooperate at the end of the temporary suspension.

4. FURTHER EVIDENCE

Richard Douglas, Senior Investigator with IDA of Canada ("the Association") testified on behalf

of the Association. Mr. Bahcheli, the Respondent, also testified.

Mr. Douglas has been a Senior Investigator with the Association since September, 2005. He was

previously with the Association between 1998 and 2002. He referred to the Respondent's

"Uniform Application for Registration/Approval", as a Registered Representative Trainee, dated

February 27, 1990 (Exhibit 3). He also referred to other documentation being primarily the

correspondence between himself and Mr. Coad, Counsel for the Respondent.

The letter which initiated the investigation by the Association was a letter from Orion Securities

Inc. dated November 24, 2004 (Exhibit 4, Tab 1). In cross-examination Mr. Douglas

acknowledged that Yorkton (predecessor of Orion) was the Respondent's former employer who

had terminated the Respondent's employment over the present private placement issue. Asked

whether the Association took into consideration the fact that there was "bad blood" between the

Respondent and Orion, who were in litigation, he responded: "I can't comment on Orion's

motivation". Mr. Douglas was asked about the termination by Yorkton and the investigation

(proceedings) by the Association. He stated: "I believe that (the Respondent) was acquitted of

the allegation". I-Ie agreed that the Association had appealed the Panel Decision to the Queen's

Bench of Alberta; the appeal was dismissed and the Association is now appealing to the Alberta

Court of Appeal.

The only interview of the Respondent regarding the present matter was conducted on September

20, 2005, by Mr. Ng, Senior Investigator and predecessor to Mr. Douglas on this file. (The

transcript is Exhibit 7). At the outset of the interview Mr. Coad, Counsel for the Respondent, put

on the record (p.2):

... I mentioned the aspect of solicitorlclient privilege, and some of the materials that we have seen are protected by solicitor/client privilege, and we're not waiving solicitorlclient privilege in the context of this interview.

However, no issue of solicitorlclient privilege was raised during the interview. In the interview

the Respondent advised that Yorkton, through himself, had taken InBusiness Solutions Inc.

"public by way of a junior capital pool"; the company subsequently went on the Toronto Stock

Exchange. Yorkton raised further funds for InBusiness by way of private placement secondary

financing, to the extent of "probably over $8 million". With respect to the $1 million private

placement debenture, the Respondent said that the R family, who are clients of the Respondent,

"wanted to look at an investment that paid more than what the bank was paying at the time". He

recalled the interest rate on the debenture being 12% paid monthly over two years. There was

the following question and answer in the interview (at p.6):

Q: . . .Did you receive any payment of any kind for facilitating this transaction between the R. Family and InBusiness?

A: No, I did not.

The Respondent was then referred to the Settlement Agreement (Exhibit 4, Tabs 4 and 6)

between the Respondent and P.P. (of Quebec) which includes:

WHEREAS Bahcheli and (P.P.) have agreed to give full and final authorization to a $1 million convertible debenture investment transaction by (the R Family) in InBusiness Solutions Inc. (the "Transaction") based on the satisfactory completion of certain events described herein;

NOW THEREFORE.. ..the parties hereto covenant and agree with each other as follows:

1. Final Authorization of Transaction. Each of (P.P.) and Bahcheli agree, upon the satisfaction of the deliveries and conditions below, to give full and final authorization to the Transaction, without any further rights, obligations or costs.

2. Closing Deliveries. No later than September 14, 2001, or as otherwise agreed by the parties hereto, (the "Delivery Date"):

(a) (P.P.) and Bahcheli shall each deliver two duly executed copies of this Agreement;

(b) (P.P.) shall deliver share certificates, duly endorsed in blank for transfer, for a total of 200,000 shares of Royal Sovereign Exploration Inc. ("RSX Shares");

(c) (P.P.) shall deliver, and shall cause (EC) Corporation and (CI) Inc. to deliver, duly executed releases requiring their signature in the forms attached hereto as Schedules "A" to schedule "F" (the "Bahcheli Releases");

(d) Bahcheli shall deliver, and shall cause (F.O.) to deliver, duly executed Bahcheli Releases requiring their signature;

(e) Bahcheli shall deliver written authorization and direction of Blakes that the Transaction be closed, in satisfaction of the terms of the escrow agreement relating to the Transaction; and

( f ) (P.P.) shall deliver written authorization and direction to Blakes that the Transaction be closed, in satisfaction of the terms of the escrow agreement relating to the Transaction.

All deliveries in t h s Section 2 shall be made to Blakes at 45 07Connor Street, 20' Floor, Ottawa, Ontario KIP 1A4 to be held in escrow until all deliveries have been completed.. . .

4. Closing. The satisfaction of conditions in Section 2 and the delivery of all of the abovementioned documentation without written protest to Blakes will be conclusive evidence of the closing of the transaction and the termination of escrow. Upon such closing, Blakes is authorized and directed by the parties to:

(a) release the Bahcheli Releases and RSX Shares to Bahcheli, at and

(b) release the (P.P.) Releases to (P.P.), c/o.

The Respondent said in the interview that Burstall Winger LLP were "acting more on behalf of

the (R Family) and "he did represent me as well as far as this agreement went, yes" (pp. 6 and 7

of interview). [He later took the position that Burstall Winger LLP did not act for him, which

Burstall Winger LLP confirmed (Exhibit 4, Tab 33).] He said it was Burstall Winger LLP who

received the 200,000 shares of RSX endorsed in blank for transfer. [Other evidence of which the

Association was aware (Exhibit 6 ) establishes that the 200,000 shares of RSX were transferred to

F.O. on October 1, 2001 and F.O. transferred the shares to the Respondent on July 11, 2002

(Exhibit 6; Exhibit 4, Tabs 17 and 24 and Exhibit 8).] The Respondent used the RSX shares are

part of the security for the $1.2 million loan from a non-arms length individual ("the lender"). In

any event, the shares were eventually transferred back to F.O. after being held in trust by

Macleod Dixon LLP (Exhibit 6 and Exhibit 4, Tab 23).

Mr. Ng then asked the Respondent, in the interview, whether the R Family was aware that their

lawyers, Burstall Winger LLP, were receiving the 200,000 RSX shares; he responded: "It's so

long ago, I don't recall". There were then the following questions and answers (Exhibit 7, pp. 7

and 8):

Q 1 ... Then why would the 200,000 shares be part of the settlement agreement?

A: This - I'm trying to remember everything that happened at that time. RSX was another junior capital pool that I did.

The Respondent went on to say (Exhibit 7, pp. 7, 8):

A: P.P. and his group were unable to facilitate a transaction within the time permitted for the CPC.. ..they had owned a majority of the escrow shares.

200,000 of the shares were transferred to F.O. The Respondent said that F.O. is not involved

with InBusiness other than with respect to the 200,000 shares. There was then the following

exchange between Mr. Ng and the Respondent (Exhibit 7, p. 8):

Q: Okay. Now, maybe I'm confused here, now, this appears in the settlement agreement between InBusiness, (P.P.) and yourself, and (the R. Family) for the I -million convertible debenture. Now, why would they put in this 200,000 shares involvement to deliver through you, through your Counsel? Maybe I'm not understanding this. Can you shed some light?

A: It's so long ago, um ... it was just one of, you know, timing. We were doing the debenture, RSX escrow shares were being transferred, get it all done at once.

In the cross-examination of Mr. Douglas at the Hearing he said: "We were concentrating on one

aspect regarding InBusiness". He was asked whether he had not been advised by Mr. Coad that

the Respondent did not have any documents relating to the InBusiness private placement. He

responded: "(The Respondent) was involved in the private placement, we got no information".

He then acknowledged that Mr. Ng had not asked any further questions at the interview

regarding that matter.

The Respondent was asked in the interview if there was any policy at Yorkton, in September,

2001, regarding brokers and "outside business dealings". He responded (Exhibit 7, p. 10):

A: Well, I, I think the policy would be, if you're receiving a commission outside Yorkton, then that wouldn't, that would be against the policy.

He went on to say that he did not recall "anything formal" for representatives of Yorkton "who

want to do private placements outside of Yorkton". There was then the following exchange

(Exhibit 7, p. 11):

Q: Okay. Now, did you advise anyone at Yorkton management that you were engaging or facilitating this private placement with the R. Family in InBusiness?

A: You know, I may have, I, I don't really recall. Um, as you see, you know, the, the million dollars came out of their account at Yorkton. Such a significant amount required, you know, approvals, so, um, management would have had to ask why a million dollars is going out.. ..I don't recall, but I think in passing I may have mentioned it, I mean, this was a time where, you know, everyone was looking to have an instrument that paid better than the banks, so, um, certainly Yorkton was aware of me looking at such instruments. Whether they, you know, specifically knew the details of this, I---

The Respondent explained that companies which signed the form of Release regarding the

private placement were a holding company of P.P. and "another company that has some

relationship to P.P.".

He said he did "many private placements" with the R. Family, one of which "would be RSX". It

was a private placement through Yorkton. He said the R. Family received back the $1 million

but "they also continued on with another debenture is what I believe".

On April 11, 2006, Mr. Verhelst, Chief Compliance Officer at Jennings Capital Inc. (formerly

Compliance Officer at Leede Financial Markets Inc.) wrote the following letter to Mr. Douglas

(Exhibit 8):

As per your request and letter dated April 10, 2006 please find the following responses to your questions:

1 & 2. There would have been general printed andlor electronic notes at Leede Financial Markets Inc. As former compliance of Leede Financial Markets Inc., unfortunately I no longer have access to such notes. Therefore, I will voluntarily respond to the best of my ability from memory and the content of your letter:

As per your letter Tumer Bahcheli (Bahcheli) had advised that his brother (F.O.) was prepared to allow Bahcheli to use his shares as a security for a loan. As per your letter these shares are now recalled to be 200,000 RSX shares. Bahcheli was questioned to ensure that no conflict existed with (F.O.) who was both family and client, and Bahcheli as Investment Advisor at Leede Financial Markets Inc. To eliminate any perceived or potential conflict, Bahcheli either offered or was asked to place the shares in trust with a third party. Bahcheli had stated this was a one occasion family matter and it was approved on that basis.

Bahcheli either volunteered or was told the shares must be returned to (F.O.) at some fbture date such as termination of the loan. The third party verified the share security arrangement and confirmed the shares would be held in trust. It should be noted that I cannot specifically recall if the third party was a bank, trust company or law firm.

3. (F.O.) confirmed the arrangement with me via a short telephone call arranged by Bahcheli.

4. Several weeks after Bahcheli was employed at Jennings on October 12, 2004. Bahcheli very briefly reminded me he had an outstanding security arrangement with a family member from years earlier.

5 . Bahcheli had advised Jennings some time ago (copy of IDA letter and request for an interview) that a general investigation had begun from when he was previously employed as an Investment Advisor with Orion Securities Inc. formerly Yorkton Securities Inc. (Orion).

It appears that Bahcheli's recent travel schedule and subsequent illness have not afforded him the time nor opportunity to share the specifics of your recent investigation. We believe t h ~ s to be an unintended consequence and look forward to an update.

6. (F.O.) NCAF is attached.

Mr. Douglas testified that the first he had heard of a "personal loan" was the April 5 , 2006 letter

from Mr. Coad (Exhibit 4, Tab 15).

On May 15,2006 Mr. Coad advised Mr. Douglas by letter (Exhibit 4, Tab 2 1):

In response to your inquiry to my client in the letter dated April 21, 2006, we would like to state the following:

On your request for written confirmation from the lender confirming that the lender had requested Mr. Bahcheli re-register the 200,000 RSX Energy Inc. Shares from (F.O.) to himself, we have asked that the lender or its counsel respond to you directly at the earliest opportunity.

With regard to your concern about Burstall Winger's role, we would like to clarify that Burstall Winger represented Mr. Bahcheli only in regard to the issue of the releases. We apologize for any confusion that may have arisen.

On your request for Mr. Bahcheli to provide all documents and/or information pertaining to the personal loan, we requested from the lender but have been

rehsed permission to share the documentation since the lender has deemed the information to be private and personal.

With regard to your request to provide all documents andlor information pertaining to the InBusiness Solutions Inc. private placement, Mr. Bahcheli is not in possession of any documentation.

We look forward to bringing this matter to a conclusion.

The "lender" is a non-arms length individual. F.O. is the Respondent's half brother. In his April

5,2006 letter to Mr. Douglas (Exhibit 4, Tab 15) Mr. Coad stated:

.... Because (F.O.) was Mr. Bahcheli's half brother and a client of Leede in July 2002, Mr. Bahcheli obtained verbal approval for the loan security arrangement from Leede Compliance Officer, Mr. Robert Verhelst. At the time Mr. Verhelst advised that he would provide approval on the understanding that no conflict existed with (F.O.) as a Leede client, (F.O.) had been in possession of the shares for a relevant period of time as beneficial owner, it was a one-time event (family related loan) and that the RSX shares would be held in trust with a named third party (Macleod Dixon) for the duration of the loan. The RSX shares were also to be returned to (F.O.) as beneficiary once Mr. Bahcheli's loan was fully paid.

Mr. Douglas testified that he contacted F.O. on April 10, followed by an email on April 18,

requesting information regarding the 200,000 RSX shares transferred to F.O. and in turn to the

Respondent. F.O. had advised Mr. Douglas that the Respondent was his financial advisor. By a

fax dated May 17,2006, F.O. advised Mr. Douglas (Exhibit 4, Tab 23):

I would like to apologize for taking so long to respond to your questions but I have been traveling abroad and about to leave again this Friday.

My responses to your questions in the email dated April 18, 2006 are:

Question 1 : Yes I did receive the physical possession of the 200,000 RSX Energy Inc. shares. Unfortunately, I cannot recall the exact date due to the amount of time that has passed.

Question 2: The reason the shares were transferred to me was because I purchased the shares.

Question 3: Yes I did know the person from whom I purchased the shares. I do not remember exactly how I met the seller from 5 years ago.

Question 4: I became the beneficial owner at time of purchase and still remain the beneficial owner. My shares have been held at the law firm of Macleod Dixon in trust as security for a loan.

Mr. Van Vliet of Macleod Dixon LLP wrote to Mr. Douglas on June 26, 2006 (Exhibit 4, Tab

24):

We are writing this letter at the request of Mr. Tumer S. Bahcheli to confirm that we act on behalf of the lender, which had previously lent money to Mr. Bahcheli. The loan has been paid in full.

We also confirm that as partial security, we asked that the 200,000 RSX Energy Inc. shares that we originally registered to (F.O.) be changed fiom (F.O.) to Tumer Bahcheli.

The lender considers this transaction to be private and personal and is not prepared to waive privilege.

A letter from Coad to Mr. Douglas dated July 1 I , 2006 (Exhibit 4, Tab 26) included:

In response to your letter dated May 16, 2006, we would like to state that we disagree with your conclusions that Mr. Bahcheli has failed to cooperate with the investigation.

Mr. Bahcheli participated in the IDA interview regarding these matters and answered all questions. Mr. Bahcheli has exhausted his avenues to colIect the requested documentation from third parties. We are at a loss to understand how By-law 19.5 appiies to failing to have disinterested third parties cooperating with this investigation.

We are disappointed with the Enforcement Department decision to refer the matter to Enforcement Counsel with a recommendation against Mr. Bahcheli. We remain available for questions or concerns.

Accompanying the July 11, 2006 letter from Mr. Coad was a letter from Mr. Stapon of Bennett

Jones LLP (who became counsel for the R. Family because of a conflict which arose involving

Burstall Winger LLP, their previous counsel) to the Respondent dated June 20, 2006 (Exhibit 4,

Tab 26):

You have asked the writer whether or not we are able to search our files and provide you with copies of certain debenture information to respond to an IDA request for information.

We are not in a position to assist you in connection with your inquiry. Although we have not searched our file to determine what we have and do not have, we can advise you that you are not the client in connection with the work we performed

concerning the debenture. As such, our files are protected by solicitor and own client privilege. We also understand that our client is not interested in becoming involved in this case and is therefore not prepared to waive privilege.

In cross-examination Mr. Douglas was asked whether he had contacted either the clients (the R.

Family) or their solicitors, or InBusiness Solutions Inc. regarding the InBusiness private

placement; he responded that the Association was "not investigating them, (we are) investigating

the private placement, releases, etc.". He agreed that the R. Family have never complained to the

Association about the InBusiness private placement and the Respondent's involvement. He

acknowledged that he had contacted one of the parties (P.P.), or his counsel, involved in the

releases, but he did not ask P.P. for other documents.

Mr. Douglas, in cross-examination, was asked whether, in the September 20, 2005 interview of

the Respondent, the Respondent had answered all the questions asked by Mr. Ng. He said he

"would not consider that he (the Respondent) answered all questions". He agreed that the

Respondent or his counsel, Mr. Coad, had not objected to any questions and that all that had

remained from the interview was for the Respondent to provide copies of documents (Settlement

Agreement, other documentation regarding the private placement and documentation regarding

the 200,000 shares of RSX). Mr. Coad wrote to Mr. Ng on October 1 I, 2005 (Exhibit 4, Tab 11)

regarding the undertakings and advising:

We confirm that Mr. Bahcheli performed such searches and did not find any of these items. In fact, when he was dismissed from Yorkton on March 8, 2002, he was i~nmediately escorted to the door.

Mr. Douglas agreed that Mr. Ng did not ask again for documents but said that he (Mr. Douglas)

had later requested further documents from the Respondent (e.g. letter of July 1 1, 2006: Exhibit

4, Tab 25). He acknowledged that he had written to the Alberta Securities Commission on April

13, 2006 (Exhibit 6 ) explaining the situation regarding the 200,000 shares, and the fact that the

Respondent was now taking the position through Mr. Coad that Burstall Winger LLP did not

represent the Respondent. The letter included:

As a result, we request your assistance in exercising your powers to obtain any documents aldfor information that Burstall Winger possesses that relates to the Settlement Agreement and the 200,000 RSX Energy Inc. shares.

Asked if he thought he could "get around privilege", he said: "We weren't thinking about

privilege". ASC advised the Association they could not get the information.

Referring to Mr. Coad's opening statement at the interview about not waiving privilege (above,

p.15), and asked whether he knew from his training that lawyers do not turn over anything

involving privilege to police or anyone, Mr. Douglas responded: "Yes".

Asked in cross-examination whether he now has (since January and February, 2007: see below)

all the information regarding the personal loan from the lender, Mr. Douglas said: "We (still)

don't know why the loan was taken out .... and we're just looking for (the

Respondent's)involvement in the private placement". Counsel for the Respondent suggested that

Mr. Douglas had not said that in his correspondence and he asked Mr. Douglas:

Did you ever phone Mr. Coad and say this is what we are really trying to get at, can we meet with you and your client?

He responded: "No". Asked if he ever attempted to set up another interview with the

Respondent and his counsel, or had written afier February, 2007 to state that "these matters are

still outstanding", he responded: "No". He said "the questions are still the same" and have not

been h l ly answered. He said he had not asked the questions again "because we are doing this

Hearing".

The Respondent was asked, in direct examination, whether he understood the importance of

cooperating with the Association. He responded: "Yes, very much so". He said he did cooperate

"following legal advice". The Respondent described his difficulty in disclosing any further

information regarding the loan from the lender. The lender had told him it was a very private

and personal matter and he did not want the Respondent to tell other family members about it.

The Respondent testified:

(The lender) is a very private person. It is very difficult for me to ask him for a loan in the first place and he wanted it kept private. I felt if (the loan was) properly documented and approved, I didn't want to break his privacy.

The Respondent testified that he had asked his counsel, Mr. Coad, whether the lender's wishes

could be followed or whether "he (the Respondent) was offside". (He obviously was told he was

not "offside".) He left it with Mr. Coad to have discussions with the Association.

The Respondent was referred to the Association's letter to Mr. Coad of July 1 1, 2006 (Exhibit 4,

Tab 25, p.4 above). He said his reaction was that he had already answered a lot of the questions,

but he had approached Burstall Winger LLP and was advised that all the documents had been

sent to Bennett Jones LLP "because of the conflict". He also went to Bennett Jones LLP (their

letter to him is Exhibit 4, Tab 26, p. 3, quoted at pp.22, 23 above). He said he did not approve

the wording in Mr. Coad's response of July 26, 2006 (Exhibit 4, Tab 27). When he received a

copy of the Association's letter to Mr. Coad of August 3, 2006 (Exhibit 4, Tab 28) he sent the

following email to Mr. Coad and received the following response (Exhibit 9):

Hi Ray,

Did you respond to the IDA? If so would you please email the copy

(From Mr. Coad)

I did not send a letter to the IDA. My view is that we are simply aiding its investigation. I believe the IDA is going to proceed against you in any event. Please call.

The Respondent said he did not instruct Mr. Coad not to respond. When he spoke to Mr. Coad

and asked why he was not responding to the Association, Mr. Coad advised him:

Wait until it gets to a person with a legal background so wc can determine what has to be produced or not.

He said he and Mr. Coad were "very relieved" because Ms. McLaughiin took over the matter as

counsel on behalf of the Association (Exhibit 10) because she had handled a previous case and

she and Mr. Coad had a very good relationship. However, the next correspondence from the

Association was from Ms. Lohmann, Enforce~nent Counsel at the Vancouver IDA office dated

December 14, 2006 (Exhibit 11). She advised that she was taking over the matter and would be

reviewing the file. The Respondent said that Mr. Coad had indicated to him that he would "be

able to clean up the privacy/privilege issues we were having". He said he then got an email from

Mr. Coad advising that a Hearing date was being set. He said he was "shocked".

Mr. Lohmann wrote to Mr. Coad on January 17, 2007 (Exhibit 12) confirming a telephone

discussion with him regarding dates for the Hearing. The Respondent said he was again

surprised and on January 23,2007, sent the following email to Mr. Coad (Exhibit 13):

What is your understanding as to why the IDA is after me? I believe we have a good case on the InBusiness and (R Family) and the fact that we do not have any of the documentation but how strong is our case regarding the loan agreement. The loan is with (the lender) who (has) asked that we do not give anything out to anyone, but what is your understanding of the law regarding privacy and what is your understanding of the IDA latitude when it comes to requiring an RR to produce such documents. Especially when requested in relation to an IDA investigation. Are there existing precedents or previous guidance with respect to the IDA'S latitude.

The Respondent testified:

Upon receiving the Hearing documents I talked to Mr. Coad and said I think we should have a discussion with the lawyer. I begged (the lender) to release (the information) and he agreed. I told (Mr. Coad) that I'd be getting the documents. I never thought it would become such an issue and (Mr. Coad) didn't understand why. I told him I have to produce documents.. . .Mr. Douglas said the loan should have been (paid) in 2004 but the shares were still in (my) name in 2006. He (the lender) gave me an extension, I couldn't pay it off then. (I went to the lawyer at Burstall Winger) and begged him. I said this is very serious, it is going to a Hearing, please help me with the IDA.

Mr. Coad wrote to Ms. Lohmann on January 30, 2007 (Exhibit 4, Tab 31), with delivery by

courier and a copy to Mr. Douglas:

We refer to our recent telephone discussions with respect to this matter and prior correspondence from your senior investigator, Richard Douglas, and, in particular, the letter of July 1 lth, 2006 from Mr. Douglas.

In respect of this matter, we enclose copies of the following:

1. May 30, 2002 Offering Letter from (the lender) to Turner S. Bahcheli Re: Loan from (the lender) to Tuner S. Bahcheli;

2. Promissory Note, dated June 6, 2002;

3. Personal Guarantee, dated June 7,2002;

4. Collateral Mortgage, dated June 6, 2002;

5. Certified Copy of Certificate of Title, Southern Alberta Land Registration District, dated July 18,2002;

6. (a) Province of British Columbia, Mortgage, dated Jun 21,2002;

(b) British Columbia Land Title Act, State of Title Certificate;

7. (a) Prescribed Standard Mortgage Terms, Mortgage Terms - Part 2, dated June 1 1,2002;

(b) Land Title Act, Acknowledgement of Receipt, dated June 1 1, 2002;

8. Statement of Independent Legal Advice, dated June 1 1, 2002;

9. Collateral Mortgage, dated June 6,2002;

10. Certified Copy of Certificate of Title, Southern Alberta Land Registration District, dated June 19,2002;

11. Hypothecation of Securities, dated June 6,2002;

12. General Security Agreement, dated June 6,2002.

The enclosed documentation deals primarily with the first item in Mr. Douglas's letter of July 1 lth, 2006.

With respect to all other items referenced in Mr. Douglas's letter of July I lth, 2006, these will be addressed in separate correspondence to you before the end of the week.

Mr. Bahcheli, through the undersigned, wishes to apologize for his delay in getting the requested materials to the IDA. Our client has stressed to (the lender), the importance of these matters from the perspective of the IDA. (The lender) has waived confidentiality and privilege over the enclosed documentation so as to satisfjr the IDA. Upon review of the enclosed documentation, our client would be more than happy to offer any further explanation required by the IDA.

The Respondent said he knew Mr. Coad was attempting to set up a meeting of Mr. Douglas, Mr.

Coad and the Respondent, following Mr. Coad's return from a sabbatical (May, 2007?) "to

clarify some of the information". The next he heard from Mr. Coad was that the meeting was

cancelled, with no reason given to him. He testified that he believes he has provided everything

requested by the Association and the only time (in 2007) he has heard that the Association

requires anything further was during Mr. Douglas' testimony at this Hearing.

In cross-examination the Respondent was referred to his Application for Registration dated

February 27, 1990 (Exhibit 3). He acknowledged that he had agreed to be bound by the By-laws

and Regulations of the Association and that the responsibility was his and not that of his lawyer.

Regarding the loan from the lender he said the only thing he wanted to conceal was the lender's

name. It was suggested to him that he could have provided his copies of the loan documents

@resumably with the name of the lender obscured as had been suggested by the Association)

and/or a statement regarding the loan, the security, and the reason for it. He responded:

But we were led to believe he (Mr. Douglas) wanted the actual loan documents, not just the information.

He was then referred to letters from Mr. Douglas (Exhibit 4, Tab 16 and 18) in which Mr.

Douglas requested "documents andlor information". He responded:

Mr. Coad always thought he was asking for everything.. . .I never said I don't have the (loan) documents.. ..I said I didn't have the private placement documents.

The Respondent acknowledged that he had received, from Mr. Coad, copies of the

correspondence throughout.

5. ARGUMENT OF THE ASSOCIATION

Ms. Lohmann, Counsel for the Association, made the following submissions:

1 . The Respondent clearly failed to provide information which was properly requested on

numerous occasions, and for which ample opportunity was given to respond. The Association

was accommodating in offering the Respondent the opportunity to obscure or blackout the name

which he wished to keep private. There was no response by the Respondent or his counsel to

this suggested process. (Ms. L o h m m reviewed the pertinent documents in the correspondence

between Mr. Douglas and Mr. Coad, above.)

2. A Registered Representative cannot, by relying on legal advice, avoid his contractual duty

prescribed in the Application for Registration (Exhibit 3) and the Association's By-laws. As the

decisions of IDA Hearing Panels establish, reliance on legal advice is not a defence, although it

may be a mitigating factor regarding penalty. It is the Respondent's obligation to instruct

counsel in accordance with the Respondent's responsibilities, which he frnally did, belatedly, in

January, 2007, nine months after the initial request for information and only after the Hearing

had been scheduled.

Douglas Bruce Robb (Pacific District Council, December 4,2001)

Credzjinance Securities Limited; (Ontario District Council, October, 2006; Decision respecting penalty, November, 2006)

(Hearing Panel Note: Counsel in the present case agreed, subsequent to the Hearing, that we should be advised of the outcome of an appeal by Credzfinance to the Ontario District Council, in Appeal. By a decision issued in July, 2007, the Appeal Panel allowed the appeal and dismissed the case against CrediJinance.)

Aubrey HarveyKatz (Ontario District Council, April 5, 2002)

James Kelly Bettzar [(2003) I.D.A.C.D. No. 32, Pacific District Council, May 14, 2003 (Jurisdiction); June 16, 2003 (Liability and Penalty)]

Naeema Crittall[(2004) I.D.A.C.D. No. 5 1 (Alberta District Council, June 15,2004)]

Brian Stephen Bassett [(2005) I.D.A.C.D. No. 26 (Pacific District Council, July 6,2005)]

3. The replies from the Respondent's counsel were often not timely and the Respondent was

accom~nodated numerous tirnes by the Association waiting for further information. It is not

compliance to have counsel advising, on July 26,2006 (Exhibit 4, Tab 27), after many months of

the Association requesting information, that "we will get back to you when we are in a position

to advise when we will be able to respond". As characterized in the initial Cred~jinance decision

(above), that type of response is, at the least, "troubling" (13.9).

4. The Respondent's behaviour, and lack of compliance with his required duty, specifically the

important and critical tool of By-law 19.5 undermines the integrity of the operation of the

Association. Alternatively the Respondent's conduct is conduct unbecoming, under By-law

29.1, which hampered the ability of the Association to determine whether it should proceed with

disciplinary action against the Respondent.

6. ARGUMENT OF THE RESPONDENT

Mr. Blair, Counsel for the Respondent, made the following submissioi~s:

1. Charges of failing to cooperate and conduct unbecoming are extremely serious. If upheld, the

stigma will affect the livelihood and reputation of the Respondent for the rest of his life, as well

as imposing financial penalties. Therefore it is well established in the Hearing Panel Decisions

that the onus of proof on the Association is extremely high, requiring clear and convincing

evidence. The Association has clearly not met the onus.

Roger Ancil Rumbizajan (Ontario District Council, June 3, 2002)

Turner Sulilz Baizcheli [(2004) I.D.A.C.D. No. 12 (Alberta District Council, November 19, 2003)]

Roche Securities Limited and Francis Roche (Alberta Securities Commission, March 19,2004)

2. The Respondent does not take issue with the necessity of cooperation by Registered

Representatives and Members nor with the principles expressed in decisions of the Hearing

Panels relied upon by the Association (above). But the facts in those cases are "apples and

oranges" compared to the present case. Generally speaking there was a complete refusal of

cooperation in those cases, over extended periods of time, including in some cases a refusal to

attend an interview or hearing, notably in Robb upon which Counsel for the Association placed

so much reliance.

3. As the decisions establish, legal advice about avoiding self-incrimination cannot shield a

Registered Respondent from breach of the duty to cooperate and provide information. However,

the cases relied upon by the Association, such as Kutz, involved complete non compliance

including not attending the interview. The Respondent attended the interview and answered all

the questions.

4. Even if it might be considered that there was a technical breach by the Respondent, which the

Respondent disputes, his conduct was certainly not "conduct unbecoming". Mr. Douglas was

seeking a standard of perfection. The Respondent met a standard of reasonableness which is the

accepted standard (as in Cred~jinance, p.3). In Credifinance (successfully appealed, see note at

p.29 above) there was a similar situation to the present. The Respondent has been far more

cooperative than Credijinance which was, in the end, completely acquitted of the charges.

5. In fairness to Mr. Douglas, he is not a lawyer and obviously did not fully understand the

concept of solicitor/client privilege. His relentless requests for documentation including the

request that the Respondent seek documents from Burstall Winger LLP, Macleod Dixon LLP

and Bennett Jones LLP, none of whom were his lawyers, were not proper requests.

Union Securities Ltd. (Ontario District Council, June 6 , 2005)

Nevertheless the Respondent complied and asked them to provide the information, with varying

success. The attempt by Mr. Douglas to get the assistance of the Alberta Securities Commission

was also not a proper request and was met with the expected response of the ASC not being able

to provide assistance. Privilege remains sacrosanct. Despite the Respondent's efforts, beyond

what he was required or entitled to do, Mr. Douglas was still not satisfied. The Respondent

should not have been subject to this Disciplinary Hearing process.

6. Similarly, privacy legislation is extremely complicated. Mr. Douglas knew about the

legislation. The privacy issue should have been resolved. Instead the Respondent was forced in

the end to collvince the lender to allow the information to be released; the Respondent should not

have had to take that step. The By-law, as a legitimate enforcement tool, should not become a

threat or duress of "agree with us or else". The Respondent went beyond what he was required

to do to cooperate. This Panel should issue guidelines as to what is cooperation. The

Association should not be allowed to act as a tool for a disgruntled employer. Members and

Registered Representatives must have confidence they will be treated fairly by the Association.

7. Mr. Coad, in his letter of July 11, 2006 (Exhibit 4, Tab 26) expressed his "disappointment"

with the Association's decision to refer the matter of Enforcement Counsel and said he and the

Respondent remained available for questions or concerns. Meeting the impossible demands of

the Association, without resolution of the significant issues of privilege and privacy, resulted in

an impasse which should have been resolved. Mr. Coad was advising the Respondent that he

expected the issues to be discussed and resolved once the matter was referred to an Association

lawyer. Instead he and the Respondent were met with advice that the file was being "reviewed".

There seems to have been no review, at least of the impasse issues, and the Association simply

issued the Notice of Hearing. The Respondent was "shocked" at thls turn of events. This

conduct on the part of the Association should be very troublesome for this Hearing Panel.

8. Under the threat of a Hearing, without resolution of the legal issues, the Respondent felt

forced to request the lender to relent and allow him to turn over the documents. He also felt

forced to make another approach to Burstall Winger LLP to have them write to the Association.

The documents confirm what the Respondent has said all along; there is no "smoking gun".

There has still been no consideration of the legal issues by the Association or an indication (at

least until the Hearing) of whether they are requiring further information and, if so, the specific

information required. The Hearing should have been adjourned and a further interview

conducted.

7. REPLY OF' THE ASSOCIATION

Ms. Lohrnann made the following submissions in reply:

1. The Respondent submits that the consequences are serious for him. That is a two-way street.

The consequences of a failure to cooperate are serious for the Association and its duty to protect

the public.

2. The breaches by the Respondent are not merely "technical".

3. The legal issues, upon which the Respondent's position is based, did not have to be

addressed. The Association suggested that the documents be provided with the lender's name

obscured. The Respondent failed to do that or to respond to that suggested process.

4. Timeliness is a very important factor for the Association. The Respondent failed to comply in

a timely fashion, or at all, on remaining requests for information. The Association was much

more acconu~~odating in this case than it had been in the Credijinance case.

5. The reference to a disgruntled former employer is a "red herring". The Association has an

obligation to look at matters referred to it regardless of the source.

6. It was the Respondent's obligation to provide the documents and information. He should

have instructed his lawyer that he was going to provide the information (with lender's name

obscured) and answer any questions. That appropriate response was not forthcoming until it was

necessary for the Association to proceed with the Notice of Hearing.

8. DECISION

This is a very unfortunate case which, in our view, should never have reached this stage. We

suspect that, in retrospect, both the Association and the Respondent recognize that they could

have addressed their seeming impasse differently. We believe that both parties have to accept

responsibility for what has become a needlessly protracted process.

In our view Mr. Douglas acted in a thorough, professional manner, and we believe that he would

have been extremely frustrated by the seeming roadblocks. On the other hand, the Respondent

was put in a position where he was "between a rock and hard place". He should have gone along

with Mr. Douglas' compromise solution of obscuring the name of the lender on the loan

documents in his possession, which would have addressed the concern about privacy. Once the

documents were produced another interview, or answers by him to any remaining questions,

would probably have ended the matter. However he had been assured by his counsel that his

doing so would not satisfy the Association and that once Association counsel became involved

the privacy and privilege issues could be sorted out. As Mr. Coad probably recognizes, having

said in his letter of July 26,2006 (Exhibit 4, Tab 27, p.4 above) that he would respond hrther, he

should have written advising that he expected to meet in an attempt to resolve the legal issues

and have the Respondent answer hrther questions. Apparently there were discussions in

February, 2007 between Mr. Coad and Mr. Douglas about meeting andlor a hrther interview of

the Respondent but unfortunately nothing transpired.

For whatever reason, the Association chose not to address those legal issues, either before or

after, the Notice of Hearing. It is unfortunate the Association felt compelled to issue the Notice

of Hearing but we can understand why they might do so in the face of no response for several

months from the Respondent or his Counsel. However, Mr. Coad made his position quite clear

in his letter of July 11, 2006 (Exhibit 4, Tab 26, p.9 above) and advised that he and the

Respondent "remain available for questions or concerns". He referenced both the legal issues. It

was, in our opinion, not unreasonable for Mr. Coad and the Respondent to expect that a lawyer

with the Association would be prepared to attempt to address the issues before moving on to

disciplinary proceedings. There was no explanation as to why the Association elected to press

on with this Hearing after Ms. Lohmann had advised Mr. Coad on January 30, 2007 that the

Association would not be proceeding further at that point providing that the Respondent made

further inquiries and obtained additional information (Response to Notice of Hearing, p.10

above).

Obviously the level of frustration on the part of the Association led them to not only issue the

Notice of Hearing but to proceed to hearing despite the Respondent finally producing the loan

documents which the Association had been seeking. The Respondent went so far as to get a

letter (Exhibit 4, Tab 33, p.11 above) from the original lawyers for the R Family, which the

lawyers could have continued to resist providing. That letter provided considerable explanation

of the circumstances. None of those answers was inconsistent with the information provided by

the Respondent. [There has still been no full explanation as to why the 200,000 RSX shares

were included in the Settlement Agreement regarding the private placement, which is a strange

circumstance. However, Mr. Coad advised Ms. Lohmann in a letter dated February 6, 2007 (see

Response to Notice of Hearing, para. (gg) at p. 10 above) that "the RSX shares were unrelated to

the InBusiness transaction but for the unfortunate drafting of a closing agenda document that

lumped together outstanding matters". Additionally there has been, so far as we are aware, no

explanation of the purpose of the $1.2 million loan and whether it was in any way related to the

private placement. Presumably a further brief interview of the Respondent could provide that

information.]

It was the Respondent who finally submitted to the Association's demands and did exactly as the

Association says he should have done earlier, i.e, instruct his counsel to release the loan

documents despite the privacy issue.

We will now examine the foregoing somewhat convoluted facts in the legal framework of the

Association's By-laws and Guidelines and the jurisprudence.

There can be no dispute with the opening position taken by the Association in this case, as

articulated in the decision of the Ontario District Council in IDA v. Derivative Services Inc.

(2000) I.D.A.C.D. No. 26 at p.12 (quoted with approval in the 2006 Panel Decision in

Credifinance, above p.29):

Membership in the Association and employment by a member firm carry with them obligations to comply with the Association's By-laws, Regulations and other rules, including paragraph 19.5 of the By-laws, which is a key element of the Association's investigation powers. Full cooperation with a request under it is necessary if the Association is to be able to fulfill its self-regulatory supervisory functions with respect to its members and their approved persons. Failure to

provide information requested in an investigation undermines the integrity of the self-regulatory system and the effectiveness of its operations.

The following paragraphs in the initial Credifnance decision, at pp.3, 4, are also pertinent to the

circumstances of this case:

Important as an investigation is, it must be remembered that not only must the investigation be instituted reasonably and in good faith but it must also be conducted reasonably. See In Re Derivative Services Inc., [ I 9991 I.D.A.C.D. No. 29 and In Re Rambhajan, [2000] I.D.A.C.D. No. 37. The requirement of reasonableness necessitates the granting of reasonable time to a Member to enable it to respond. It is necessary, as well, that the response of the Member be judged by a standard of reasonableness, not one of perfection.

The Enforcement Department is the prosecutorial arm of the IDA. What is essential to keep in mind is that guidelines issued by the prosecution are not the law. They are not by-laws. The ultimate responsibility to determine what is reasonable notice and what is a reasonable response rests with hearing panels on a case-by-case basis. That responsibility rests with no one else.

The privacy and solicitor/client issues were probably legitimate barriers to release most of the

infomiation being sought by the Association. Those issues needed to be addressed, preferably by

the parties, failing which they will have to be addressed at the time of a final Disciplinary

Hearing if that is to occur. We agree with counsel for the Association, and the decisions of

Hearing Panels make it clear, that a Registered Representative (or a Member) cannot avoid his or

her duty to cooperate and provide information to the Association by simply claiming he or she

was relying on legal advice. We are guided by the rationale of the Panel in the Union Securities

decision (above, p.3 1) at pp. 13, 15:

While in British Columbia Securities v. Branch, supra, the Supreme Court of Canada said that individuals, such as Mr. Frangos, have a low expectation of privacy in records produced in the course of business activity, that expectation is not non-existent. A balancing of interests is required.. . .

Subject to what will be said about solicitor-client privilege, we have reached the conclusion that when Union Securities declined to provide all of the material required by the November 3, 2004 demand, other than the material over which solicitor-client privilege was claimed, it withheld information reasonably required for the investigation. In doing so, its conduct constituted a breach of By-law 19.6.

Union Securities withheld communications over which Mr. Frangos claims solicitor-client privilege. Because we have held that, apart from the solicitor- client communications, there has been a breach by Union Securities of By-law 19.6, it is unnecessary for this hearing panel to rule whether the claim for solicitor-client privilege is well founded. The wise course, when a claim of solicitor-client privilege is raised, is to segregate, secure and seal the material until that issue is resolved. The evidence in Mr. Frangos' affidavit is sufficient to call for that prudence.

If, as a result of this investigation, charges are laid against Union Securities andlor Mr. Frangos, the hearing panel charged with presiding over those charges will be the appropriate body to pass upon the claim of solicitor-client privilege.. . .

The Disciplinary Sanction Guidelines of the Association (Exhibit 4, Tab 5) provide critical

guidance in the present circunlstances. We will examine each of the six "Considerations in

Addition to General Principles":

1. The disciplinary history of the Respondent.

We are not aware of the Respondent having any disciplinary history.

2. Was the contravention intentional or inadvertent?

The alleged contravention was intentional, in part based on competent legal advice (item 5,

below) and in part because the Respondent was expecting to have the legal issues resolved so he

would know how he should proceed.

3. Was there complete or only partial non-compliance?

There was only partial non-compliance for the same reasons as in item 2.

4. The impact that the non-compliance had on the investigation.

The loan documents which were finally produced in January, 2007 did not materially enhance

the information which had previously been received by the Association. The Association already

knew, as of April 5, 2006 (Exhibit 4, Tab 15) that the loan was "a one-time event (non-arms

length loan )". The loan documents were simply the legal documents securing the loan.

5. Whether the respondent can demonstrate that his or her refusal to cooperate was based

on reasonable reliance on competent legal advice?

We have no doubt that the Respondent's refusal to provide the loan documents was "based on

reasonable reliance on competent legal advice". As was stated in Bulletin No. 3449 regarding

the Bassett case (above) at p.2:

In its decision, the Hearing Panel stated that the reliance upon legal advice consideration is not intended to permit a respondent to fail utterly in the requirement to comply with By-law 19.5 merely because his or her lawyer recommends that total non-compliance is in the respondent's best interest. Rather, this consideration is intended to account for the limited situation where a Respondent has refused to answer a particular question or to produce a particular document based upon competent legal advice.

6. What is the nature of the documentlinformation requested? Were they of material

importance to the pending investigationlhearing?

For the same reasons stated in item 4 we do not believe that the loan documents were "of

material importance to the pending investigation/hearingV. As to any other

documentslinformation requested, the legal issue of solicitorlclient privilege required resolution.

As mentioned earlier in this Decision, counsel agreed that the recent decision of the Ontario

District Council, in Appeal, in the Credijinance case should be referred to this Panel since the

original 2006 decision of the Hearing Panel had been relied upon by counsel for the Association

in her argument. The original Hearing Panel stated, at p.8:

Looking broadly at all of the evidence relating to the period from November 10, 2004 to November 3, 2005, we see evidence of very good compliance with demands. We see evidence of some sloppiness, indeed perhaps negligence. We see evidence of confusion. We see evidence of misunderstandings. We see evidence of missed deadlines, generally by a very few days. We see evidence of deadlines imposed which may not have been entirely fair. And we see evidence of complete cooperation. The responses and Credifinance's conduct were not entirely satisfactory in the eyes of the Enforcement Department. However, we are unable to say that the evidence demonstrates that Credifinance did not "take the requests and deadlines seriously". The evidence of what transpired up until November 3, 2005 would leave us in a state of real doubt about whether Credifinance failed to respond reasonably to reasonable demands.

The Panel went on to find that of all the information required, almost all of which was produced,

Credifinance had failed to "even try" to get the backs (endorsements) of cheques, which it had

ability to obtain. On that one alleged breach of duty the Panel found that Credifinance was guilty

of the charge of failing to provide information and documents as required by the Association.

In some respects the Credtj.inunce case was similar to the present case given what can be

characterized in this case as "misunderstandings", "complete cooperation", "tak(ing) the request

seriously", and the failure to provide specific information. The difference is that the Respondent

in the present case was relying on competent legal advice regarding privacy and solicitor/client

privilege issues. That strikes us as a better reason for non compliance than the complete failure

of Credifinance to respond regarding the production of backs of cheques. The decision of the

Appeal Panel in CredtIfinunce then becomes all the more supportive of the Respondent's position

in the present case. The Appeal Panel asked the question "whether one incident out of a great

many is sufficient to sustain the charge". They commented that "the Appellant could have done

a great deal more to comply" but the Appeal Panel concluded, at p.26:

The question, then, is this: accepting that the failure to cooperate was based on what enforcement counsel callcd "the cumulative nature of the conduct," can it be said that the Appellant's failure to deal with the final request in a timely and effective manner suffices to bring it within the ambit of the charge. In our respectful view it does not.

The appeal is therefore allowed and the case against Credifinance is hereby dismissed.

Applying that and all the foregoing reasoning to the present case leads us strongly to the

conclusion that in the circumstances of the unaddressed privacy and privilege legal issues, and

the Respondent's efforts to satisfjr the Association's demands, the Respondent should not be

found guilty of failing to cooperate with the Association.

Accordingly we find that the Respondent did not commit the contraventions alleged by the

Association.

We reserve jurisdiction to hear arguments with respect to costs if that remains an issue between

the parties.

September 12, 2007 A6n V.M. Beattie

Bruce N. Calvin

Peter MeWilliams