OCMT 2005

Following a decision on the merits finding that the respondent engaged in illegal distributions of securities, failed to ascertain client suitability, and made misleading statements to Staff, the Ontario Securities Commission held a sanctions hearing.

The Commission rejected the respondent's motion for reconsideration and his argument that new exemptions under NI 45-106 mitigated his conduct.

Finding the respondent's past conduct abusive and detrimental to the capital markets, the Commission ordered the termination of his registration, a permanent cease trade order with limited exceptions, permanent director and officer bans, a reprimand, and costs of $94,618.75.

The Ontario Securities Commission held a hearing to consider a settlement agreement between staff and the respondents regarding repeated failures to file annual and interim financial statements and related certificates on time.

The respondents admitted their conduct was contrary to the public interest and Ontario securities laws.

The Commission approved the settlement, ordering the corporate respondents to institute procedural changes and each pay a $5,000 administrative penalty, and reprimanding all respondents, including the individual respondent.

The Applicants sought a hearing and review of a decision by the Director of the Investment Funds Branch, which approved a merger of six labour sponsored investment funds but required that the costs of the merger not be borne by the Funds.

The Applicants argued that the merger would benefit investors and that the Funds should bear the costs.

The Ontario Securities Commission confirmed the Director's decision, holding that it is generally inappropriate for merger costs to be charged to the funds, and the Applicants failed to provide compelling reasons to depart from this approach.

The respondent, a former principal of Eron Mortgage Corporation, was convicted of securities-related fraud and theft in British Columbia for his role in a massive scheme that caused $170 million in investor losses.

Staff of the Ontario Securities Commission sought permanent market prohibitions against him under s. 127 of the Securities Act, citing evidence that he intended to return to Ontario to promote a poker company upon his release from prison.

The Commission held that it had jurisdiction to make the order despite the conduct occurring in British Columbia, as an Ontario nexus is not a strict pre-condition but a factor to consider.

Given the egregious nature of the respondent's past conduct, his criminal convictions, and the reasonable apprehension of future harm to Ontario capital markets, the Commission ordered permanent trading and director/officer bans.

No costs were ordered due to the respondent's bankruptcy.

Staff of the Ontario Securities Commission alleged that the respondents, K.Y. Ho and Betty Ho, engaged in insider trading contrary to subsection 76(1) of the Securities Act by disposing of ATI shares prior to a public announcement that ATI would fall short of its forecasted revenue and earnings for Q3-2000.

The Commission dismissed the allegations, finding that Staff failed to establish that the revenue shortfall was a known fact at the time the shares were disposed of, and consequently, the respondents could not have had actual knowledge of it.

Furthermore, the Commission held that K.Y. Ho's charitable donations of shares were gifts made in good faith and did not constitute 'sales' for the purposes of the insider trading provisions.

Staff of the Ontario Securities Commission alleged that the Respondents engaged in unregistered trading, illegal distribution of securities, failure to disclose commissions, and made prohibited representations using high-pressure sales tactics.

The Commission found that the Respondents acted as market intermediaries and traded in securities of Andromeda without registration, and distributed securities to non-accredited investors without a prospectus or exemption.

The Commission also found that Allen failed to disclose his 60% commission to investors.

The allegations regarding prohibited representations and high-pressure sales tactics were dismissed due to insufficient evidence.

A hearing on sanctions was ordered.

The respondent, a U.S.-based internet securities firm, traded U.S. securities on behalf of Canadian residents without being registered in any Canadian jurisdiction.

The respondent acknowledged the breach, which it claimed was due to a good faith but erroneous belief that its non-solicitation of Canadian residents exempted it from registration.

A joint hearing of multiple provincial securities commissions was held to consider a settlement agreement.

The commissions approved the settlement agreement, which included a payment of $550,000 CAD and an undertaking by the respondent's Canadian affiliate to seek registration, finding the sanctions to be in the public interest and proportionate to the misconduct.

Staff of the Ontario Securities Commission brought a motion to extend a temporary cease trade order against Momentas Corporation and its principals.

Momentas had been raising capital by selling convertible debentures to accredited investors to fund its automated equity trading system and foreign currency trading.

The Commission found that Momentas was acting as a market intermediary because it employed a significant sales force to sell its own securities and used the proceeds to trade professionally for the indirect benefit of its investors.

As a market intermediary, Momentas could not rely on the accredited investor exemption and was required to be registered.

The Commission extended the temporary cease trade order pending the hearing on the merits, with limited carve-outs allowing Momentas to continue developing its trading system and to close out foreign currency positions.

The Ontario Securities Commission held a hearing regarding Brian Peter Verbeek's involvement in schemes offering loans to individuals wishing to access funds in their locked-in RRSPs.

Verbeek facilitated the purchase of shares in Canadian Controlled Private Corporations (CCPCs) using the investors' locked-in RRSP funds, which were then used as collateral for loans.

The Commission found that Verbeek participated in illegal distributions of securities without a prospectus exemption, failed to ascertain the suitability of the investments for his clients, acted contrary to the public interest by participating in the scheme and receiving compensation, improperly referenced a brokerage firm without being registered there, and made misleading statements to Commission Staff during the investigation.

The Ontario Securities Commission held a hearing to consider whether to approve settlement agreements between Staff and the respondents, Gregory and Walter Hryniw.

The respondents admitted to providing false and misleading statements to Staff during an investigation into trading in a Bermuda account.

The Commission approved the settlement agreements, which included a three-year trading ban, a three-year prohibition on acting as an officer or director, a reprimand, and a payment of $2,500 each towards costs.

The Commission also permitted the hearing to proceed electronically via telephone conference, despite the reprimand sanction, due to the respondents' out-of-province residency and impecuniosity.

Staff of the Ontario Securities Commission and the respondent mining company entered into a settlement agreement regarding the respondent's failure to make timely disclosure of a material change related to a rock fall and resulting gold production shortfall.

The Commission approved the settlement, finding it to be in the public interest given the respondent's cooperation, voluntary remedial steps, and lack of prior disciplinary history.

The settlement required the respondent to fund an independent review of its disclosure practices and implement approved recommendations.

The respondent brought a motion for a nonsuit at the close of Staff's case, arguing that Staff failed to establish a prima facie case of insider trading.

The Commission held that a nonsuit motion is available in its proceedings and exercised its discretion not to put the respondent to an election on whether to call evidence.

Applying the test of whether there is any evidence which, taken at its highest, establishes a reasonable inference in favour of Staff, the Commission found that a prima facie case had been made out.

The motion for a nonsuit was dismissed.

One Commissioner dissented on the issue of election, finding that the respondent should have been required to elect whether to call evidence.

The respondent, president of a reporting issuer, failed to file insider reports for 21 trades within the required 10-day period, breaching section 107(2) of the Securities Act.

Staff of the Commission and the respondent entered into a settlement agreement proposing a $5,000 administrative penalty and $3,500 in costs.

The Commission approved the settlement agreement, finding it to be in the public interest, proportionately appropriate, and a sufficient specific and general deterrent.

The Ontario Securities Commission held a hearing to determine whether it was in the public interest to impose sanctions against Pierre Alfred Montpellier and his companies under section 127 of the Securities Act.

Montpellier had previously pleaded guilty to criminal fraud and theft for operating a Ponzi scheme that defrauded 128 investors of over $5.3 million.

The Commission found that Montpellier's egregious conduct demonstrated he could not be trusted to participate in the capital markets.

The Commission ordered that Montpellier's registration be terminated, that he and his companies permanently cease trading in securities (with no RRSP carve-out), and that he be permanently prohibited from acting as a director or officer of any issuer.

The applicants sought to vary management cease trade orders (MCTOs) under section 144 of the Securities Act to permit trading in connection with a proposed going private transaction by Hollinger Inc. The Commission found that the applicants failed to demonstrate that varying the MCTOs would not be prejudicial to the public interest.

The Commission cited concerns regarding the lack of current audited financial statements, the adequacy of the independent valuation, the potential conflicts of interest in the proposed litigation trust, and evidence of undue influence exerted by related parties on the independent committee and valuator.

The applications were denied.

The Special Committee of Financial Models Company Inc. applied for orders under sections 104(1) and 127(1) of the Securities Act to cease-trade a take-over bid by a significant shareholder, Katotakis.

The Special Committee alleged the bid did not comply with Part XX of the Act and was contrary to the public interest because it relied on locked-up shares to meet minority approval thresholds for a follow-on transaction and improperly relied on a valuation exemption.

The Ontario Securities Commission dismissed the application, finding no technical breach of Rule 61-501 and no abuse of the capital markets, as the transaction was not artificial and did not defeat the reasonable expectations of shareholders given the prior disclosure of the shareholder agreement.

The Ontario Securities Commission approved a settlement agreement with the respondent.

The respondent acknowledged engaging in insider trading contrary to s. 76(1) of the Securities Act, failing to file required insider reports under s. 107, and failing to correct a Management Information Circular that incorrectly stated his share ownership.

The Commission found the sanctions, which included a reprimand, fairly reflected the gravity of the conduct and approved the settlement as being in the public interest.

Staff of the Ontario Securities Commission brought a settlement hearing regarding Wells Fargo Financial Canada Corporation's failure to file prospectus supplements on time on four occasions.

The Commission approved the settlement agreement, noting that inadvertence and reliance on outside counsel were not valid excuses for late filings.

The Commission imposed an administrative penalty of $20,000, emphasizing that this novel use of an administrative penalty serves as a specific deterrent to the respondent and a general warning to market participants about the importance of timely filings.