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News Release

Securities Commission Releases Hunter Decision

  • Date:

    1995-11-10

  • Number:

    95/27

Released: November 9, 1995  Contact: Ron Messent  660-4800 or 1-800-373-6393

The British Columbia Securities Commission has imposed a 10-year prohibition from trading securities and from being a director or officer of a company on James Jonathan Hunter. The orders are based on his trading activities in the shares of Cal Graphite Corporation in 1987 and 1988. Hunter was also ordered to pay the costs of the hearing.

The penalties were announced today in a decision by the Commission following a hearing held in February 1994. Two other parties entered into settlement agreements prior to the hearing. John Murray Stirling, former president of Cal, paid a penalty of $5,000. He also consented to orders prohibiting him from trading for one year and from being a director or officer of a reporting issuer for five years. Anker Bank, a Swiss Bank formerly known as Handelskredit Bank AG, paid a penalty of $20,000.

In 1987, Cal Graphite, whose shares were listed on the Vancouver Stock Exchange, was developing a high grade graphite deposit in Ontario. Cal required immediate financing to continue work on the site and avoid a shut down of the project.

To obtain financing, Stirling approached Hunter, a newsletter publisher who promoted speculative investments. Hunter agreed to arrange a private placement with Handelskredit and promote trading in Cal shares. Hunter was to receive compensation of 300,000 free trading shares from Stirling when two million Cal shares had been traded through the Exchange. The agreement was not generally disclosed.

Hunter arranged a private placement of 500,000 Cal shares with Handelskredit at $6.00 per share. Hunter also obtained an option to acquire the 500,000 shares from Handelskredit at $6.50 per share. The option was not generally disclosed.

As Handelskredit took delivery of the 500,000 private placement shares, they were immediately purchased by and delivered to Hunter under his option. Hunter sold all 500,000 private placement shares in the market for a substantial gain.

In its decision released today, the Commission found that:

· Hunter engaged in illegal insider trading in Cal shares, by selling shares with knowledge of undisclosed material facts, namely his agreement with Stirling and his option with Handelskredit;

· Hunter's agreement with Stirling, which required Hunter to generate a specific volume of trading, led directly to abusive promotion and trading in Cal's shares and was prejudicial to the public interest;

· Hunter conducted an illegal distribution of Cal shares to the public through the Exchange, with no prospectus disclosure concerning Cal and no disclosure that the shares were being sold.

The Commission said

"This is a classic case of the type of abusive promotional activities that damage the integrity of the market and harm investor confidence. Hunter published investor newsletters praising the prospects of Cal's business while he had an undisclosed agreement committing him to generate more trading volume and an undisclosed block of shares that he was selling into the demand generated by his promotion.

"Hunter says that his activities saved Cal and its project and argues that the survival of a a solid Canadian junior resource company' was in the public interest. In our view this is merely an argument that the end justifies the means'. The fact that Cal was a real company with a real business prospect does not excuse abusive and illegal trading and promotional conduct in respect of its shares. Investors are entitled to fair treatment and a level playing field whatever the business prospects of the issuer."

The British Columbia Securities Commission is a provincial government agency responsible for regulating trading in securities and exchange contracts.

Copies of the Commission's decision (15 pages) may be obtained in person at 1100 - 865 Hornby Street, Vancouver, British Columbia.