Settlements
RONALD OSCAR KLASSEN [Agreed Stmt]
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BCSECCOM #:
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Document Type:
Agreed Stmt
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Published Date:
1998-02-27
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Effective Date:
1997-10-22
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Details:
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IN THE MATTER OF THE SECURITIES ACT
R.S.B.C. 1996, c. 418
AND
IN THE MATTER OF RONALD OSCAR KLASSEN
Agreed Statement of Facts and Undertaking
The following agreement has been reached between Ronald Oscar Klassen (“Klassen”) and the Executive Director.
1. As the basis for the orders referred to in paragraph two and the undertakings in paragraph three of this agreement, Klassen acknowledges the following facts as correct:
- (a) Klassen is a solicitor who resides and maintains an office in Vancouver, British Columbia.
(b) Klassen was invited to participate in an investment group (the “Investment Group”) by another solicitor and former law school classmate, Oliver Barry Holmes (“Holmes”). Klassen was informed by Holmes that trading for the Investment Group was to be directed by Michael L. Mitton (“Mitton”).
(c) Holmes advised Klassen that Mitton had a regulatory history and that Mitton could not trade in securities in his own name. Holmes assured Klassen that he had made inquiries in this regard and that he was satisfied that there would be no impediment to Mitton’s proposed role in the activities of the Investment Group. Klassen, relying upon these assurances and due to his past association with Holmes, decided to participate in the Investment Group.
(d) Klassen had a cash account McDermid St. Lawrence Securities Ltd. (the “McDermid Account”). During the period from April 10 to 17, 1996, Klassen effected 23 trades in the McDermid Account including 15 sell orders for a total of 561,400 shares at a value of $1,164,655.
- (e) Klassen did not own the securities at the time he made the respective sell orders. However, Klassen believed that the securities were owned by the Investment Group and were held in an offshore account (the “Group Account”).
(f) Klassen represents that he effected the respective sell orders in the McDermid Account upon the instructions of Mitton on behalf of the Investment Group.
(g) Klassen believed that he owned a beneficial interest in securities held in the Group Account. When Klassen entered the respective sell orders in the McDermid Account, he failed to advise the registered representative that he believed that he owned only a beneficial interest in the securities, not a legal interest, and that the securities were not under his immediate direction or control.
(h) Klassen made delivery of securities to cover only one of the 15 sell orders and the only explanation he provided for his failure to make delivery of the securities within the normal time for delivery was that the securities were not forthcoming from the Group Account, despite assurances to the contrary from Mitton. Klassen believed that the securities would be made available from the Group Account to cover these sell orders in the McDermid Account.
(i) McDermid made demands upon Klassen for delivery of sufficient securities or cash to cover the transactions effected in the McDermid Account. On April 17, 1996 McDermid commenced sell out and buy-in activities to reduce the debit in Klassen’s account leaving a final debit in the McDermid Account of approximately $270,000.
(j) Prior to the commencement of sell-out of securities in the McDermid Account on April 17, 1996, Klassen received from the registered representative an estimate that, based upon prevailing market values, the McDermid Account would not be in a debit position after the sell-out was completed.
(k) On or about April 17, 1996, Klassen opened a second cash account at Global Securities Corporation (the “Global Account”) on behalf of the Investment Group.
(l) During the period from April 17 to 19, 1996, Klassen effected 9 trades in the Global Account including 6 sell orders for a total of 64,000 shares at a value of $129,224 on behalf of the Investment Group and upon the instructions of Mitton.
(m) Klassen believed that he owned a beneficial interest in securities held in the Group Account. When Klassen entered the respective sell orders in the Global Account, he failed to advise the registered representative that he believed that he owned only a beneficial interest in the securities, not a legal interest, and that the securities were not under his immediate direction or control.
(n) Klassen made delivery of securities to cover only 2 of the 6 sell orders and the only explanation he provided for his failure to make delivery of the securities within the normal time for delivery was that the securities were not forthcoming from the Group Account, despite assurances to the contrary from Mitton. Klassen believed that the securities would be made available from the Group Account to cover these sell orders in the Global Account.
(o) Global made demands upon Klassen for delivery of sufficient securities or cash to cover the transactions effected in the Global Account. In early May 1996, Global commenced sell out and buy-in activities to reduce the debit in Klassen’s account leaving a final debit in the Global Account of approximately $40,000. In October 1996, Klassen settled the debit with Global.
(p) Klassen only learned of Mitton’s significant criminal and regulatory history after the problems arose with respect to the trading in the Global Account and the McDermid Account.
(q) Despite the explanation contained in paragraphs (g) & (m), Klassen ought to have known that the sell orders he effected in the McDermid Account and the Global Account represented undeclared short sales, contrary to section 56 of the Securities Act, R.S.B.C. 1996, c. 418 (the “Act”).
- (a) under section 161(1)(c) of the Act, the exemptions described in sections 45 to 47, 74, 75, 98 or 99 of the Act do not apply to Klassen for a period of five years from the date of the Order except that Klassen shall be permitted to utilize the exemption under section 45(7) of the Act solely for the purposes of disposition of the securities he holds at the date of the Order. The following conditions shall apply to any dispositions made by Klassen:
- (i) prior to any securities being sold, Klassen must deliver to the Executive Director a list of the securities he is holding as of the date of the Order;
(ii) all dispositions by Klassen must be made through one registered dealer and prior to any securities being sold, Klassen must advise the Executive Director of the name of the registered dealer and the name and account number through which the dispositions will be made by Klassen;
(iii) Klassen shall make arrangements with the registered dealer to ensure that the Executive Director receives copies of the confirmation slips for each disposition on a timely basis;
(iv) that no unusual effort is made to prepare the market or to create a demand for the securities;
(v) that no extraordinary commission or other consideration is paid in respect of trades of the securities; and
(vi) that none of the securities may be sold before 2 days or after 180 days of the date of the Order; and
- (i) Klassen has successfully completed a course of study satisfactory to the Executive Director concerning the duties and officers of reporting issuers;
(ii) Klassen has made full payment of the amount set out in paragraph three of this agreement; and
(iii) at least five years have elapsed from the date of the Order.
4. Klassen waives any right he may have, under the Act or otherwise, to a hearing, hearing and review, judicial review or appeal related to, in connection with or incidental to this agreement and any related orders.
DATED at Vancouver, British Columbia on October 16, 1997.
| Robert James King_____________ | ) |  |
| Witness | ) | |
| 1800 - 999 West Hastings Street | ) | |
| Vancouver, B.C. V6C 2W2_____ | ) | |
| Address | ) | |
| ) | _________________________ |
| Barrister and Solicitor__________ | ) | Ronald Oscar Klassen |
| Occupation | ) | |
DATED at Vancouver, British Columbia, on October 22, 1997.
Paul C. Bourque
Executive Director