Yawrenko (Re), 2019 ONSEC 15

Ontario Securities Commission Commission des valeurs mobilières de l’Ontario 22nd Floor 20 Queen Street West Toronto ON M5H 3S8 22e étage 20, rue queen ouest Toronto ON M5H 3S8

Citation: Yawrenko (Re), 2019 ONSEC 15 Date: 2019-05-15 File No. 2019-17

IN THE MATTER OF SHANE DAVID YAWRENKO and UMBRELLA MERCHANT SERVICES INC.

REASONS AND DECISION (Subsections 127(1) and 127(10) of the Securities Act, RSO 1990, c S.5)

Hearing: In Writing

Decision: May 15, 2019

Panel: M. Cecilia Williams, Commissioner

Submissions: Alvin Qian, For Staff of the Commission Patrick Robinson, For Shane David Yawrenko and Umbrella Merchant Services Inc.

REASONS AND DECISION

I. introduction

1On August 17, 2018, Shane David Yawrenko (Yawrenko) and Umbrella Merchant Services Inc. (Umbrella) (together, the Respondents) entered into a Settlement Agreement and Undertaking with the Alberta Securities Commission (ASC) (the Settlement Agreement).

2Pursuant to the Settlement Agreement, the Respondents each agreed to be made subject to sanctions, conditions, restrictions or requirements within the province of Alberta.

3On May 2, 2019, Staff of the Ontario Securities Commission (Staff) elected to proceed with a hearing in writing¹ for an inter-jurisdictional enforcement proceeding under subsection 127(10) of the Ontario Securities Act, RSO 1990, c S.5 (the Act) to request that a protective order be issued in the public interest under subsection 127(1).

4As set out in the Affidavit of Service of Lee Crann, sworn May 10, 2019,² on May 6, 2019, the Respondents were served by email with the Notice of Hearing issued May 6, 2019, the Statement of Allegations dated May 2, 2019, Staff’s written submissions, hearing brief³ and book of authorities.

5On May 6, 2019, counsel, representing both Respondents, sent an email informing the Registrar of the Ontario Securities Commission (OSC) that the Respondents consented to Staff’s requested order in this matter. Correspondence was sent from the Registrar on May 10, 2019 asking that (1) each of the Respondents provide a signed written consent to Staff’s order, and (2) the Corporation indicate who has signing authority on behalf of the dissolved corporation to consent to the order. Signed consents were provided by the Respondents by email on May 14, 2019.⁴

6The issues for me to consider are whether one of the circumstances under subsection 127(10) of the Act applies to the Respondents, specifically, have they agreed with a securities regulatory authority to be made subject to sanctions, conditions, restrictions or requirements (s. 127(10)5), and if so, whether the OSC should exercise it’s jurisdiction to make a protective order in the public interest pursuant to subsection 127(1) of the Act.

II. aSC SETTLEMENT AND ORDER

7In the Settlement Agreement, the Respondents acknowledged and admitted that they breached subsection 110(1) of the Alberta Securities Act, RSA 2000 c S-4 by distributing securities without having filed and received a receipt for a preliminary prospectus or a prospectus, and without an exemption from that requirement for some of those distributions.

8The Respondents agreed to be subject to the following sanctions:

(a) Yawrenko agreed and undertook to refrain for a period of five years from the date of the Settlement Agreement from:

i. trading in and purchasing securities or derivatives, except trades made through a registrant who has first been given a copy of the Settlement Agreement;

ii. using any of the exemptions contained in Alberta securities laws;

iii. becoming or acting as a director or officer (or both) of any issuer, registrant or investment fund manager in Alberta or elsewhere in Canada and to resign any positions he has as a director or officer, or both, of any issuer, registrant, or investment fund manager;

iv. becoming or acting as a registrant, investment fund manager or promoter; and

v. acting in a management or consultative capacity in connection with activities in the securities market; and

(b) Umbrella undertook and agreed to refrain from using any of the prospectus and registration exemptions contained in Alberta securities laws for a period of five years from the date of the Settlement Agreement.

9In addition, the Respondents agreed and undertook to jointly and severally pay the ASC $55,000 in settlement of all of the allegations against them.

10In the Settlement Agreement, the Respondents also acknowledged that the Settlement Agreement may form the basis for securities-related orders in other jurisdictions in Canada.

III. CONSENT ORDER

11Staff requests, and the Respondents consent to, an order in the public interest in Ontario that imposes terms similar to the non-monetary sanctions imposed by the ASC, to the extent possible under the Act.

IV. ORDER

12Since both Staff and the Respondents consent to the granting of an order under subsection 127(1) in the public interest, and the requirements of subsection 127(10) of the Act are satisfied, I will issue the following order against the Respondents:

(a) against Yawrenko that:

i. pursuant to paragraphs 2 and 2.1 of subsection 127(1) of the Act, trading in any securities or derivatives, or acquisition of any securities, by Yawrenko cease until August 17, 2023, except that he may trade in securities or derivatives through a registrant who has first been given copies of the Settlement Agreement and a copy of this Order;

ii. pursuant to paragraph 3 of subsection 127(1) of the Act, all exemptions contained in Ontario securities law do not apply to Yawrenko until August 17, 2023;

iii. pursuant to paragraphs 7 and 8.1 of subsection 127(1) of the Act, Yawrenko resign any positions that he holds as a director or officer of any issuer or registrant;

iv. pursuant to paragraphs 8 and 8.2 of subsection 127(1) of the Act, Yawrenko is prohibited from becoming or acting as a director or officer of any issuer or registrant until August 17, 2023; and

v. pursuant to paragraph 8.5 of subsection 127(1) of the Act, Yawrenko is prohibited until August 17, 2023 from becoming or acting as a registrant or promoter; and

(b) against Umbrella that:

i. pursuant to paragraph 3 of subsection 127(1) of the Act, all exemptions contained in Ontario securities law do not apply to Umbrella until August 17, 2023.

Footnotes

1. 1Staff brought this inter-jurisdictional enforcement proceeding under the expedited procedure provided in Rule 11(3) of the OSC's Rules of Procedure and Forms (2017), 40 OSCB 8988.
2. 2The Affidavit of Service of Lee Crann, sworn May 10, 2019 is marked as Exhibit 1.
3. 3Staff’s Hearing Brief is marked as Exhibit 2.
4. 4The signed consents of the Respondents are marked as Exhibit 3.