Pariak-Lukic (Re), an investments adviser, suggested second mortgages to long time clients through  a private company (Lakepoint). Her husband was the promoter and owner of Lakepoint. She did not advise her  dealer of this activity.

Lukic’s husband received advice from a lawyer acting for Lake Point that the mortgages would not be  required to be qualified by prospectus because of the availability of an exemption.

It was found that Lukic had engaged in conduct unbecoming contrary to IIROC ByLaw 29.1 by making  recommendations to clients regarding Lake Point and without reasonable inquiries that the issuance  of the Lake Point investments were prospectus exempt.

Penalty to be Decided Separately

The Evidence – Good Notes, Good Witness, Caution Provided

Lukic was found to have kept “meticulous and impressively full notes made more or less  contemporaneously with events as they occurred giving details of meetings, suggestions, possible  motivations and disclaimers and cautions given by her to clients regarding her not being licenced  to deal in second mortgages”.

It was found that in many cases she also noted suggestions by her or her husband that the clients  seek independent legal advice. She was found to be forthright and straightforward in her testimony as was her husband. Most of the  clients were her longstanding clients at the time of the events in question.

Disclosure

Lukic told clients that she was not licenced to deal in second mortgages and that they should look  to her husband who had a mortgagebroker licence. Her husband was not registered or otherwise  licenced to advise or deal in securities, but Lukic was.

Lukic advised clients that her husband was her husband, that he was mortgagebroker, that he was  owner, promoter and director of Lake Point and that he would earn 1% for managing Lake Point. She  also disclosed any other management fees to be earned by others, all of which was reflected in the  documentation provided to clients.

Compensation

Lukic received no compensation for these activities or any benefit from clients investing in Lake  Point. The benefit her husband received was disclosed to clients.

Reporting

Several clients requested Lukic to include their investments in Lake Point and periodic statements  of financial position she prepared for the purpose of discussing their investments and financial  planning. These statements were prepared by her on the letterhead of her dealer because it was a  requirement that any statement of assets provided to clients had to be attached on such letterhead.

Recommending or Facilitating

It was found that Lukic did more than provide factual information about Lake Point but rather  discussed the opportunity to invest in portfolio reviews with their clients, shared her husband’s  enthusiasm for the investment and advised them of her personal investments including anticipated  yield, and cash flow. She contrasted and compared the investments to other options available  including her unfavourable views of the stock market at the time.

The inclusion of Lake Point investments in periodic financial reports prepared by Lukic would  incline a reasonable person to conclude that Lake Point was among the investments that she was  advising on. This might not otherwise have been a clear conclusion.