Notices of Hearing & Temporary Orders
EXCEL ASSET MANAGEMENT INC., et. al. [Sec. 161]
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BCSECCOM #:
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Document Type:
Sec. 161
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Published Date:
1998-09-18
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Effective Date:
1998-09-10
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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 EXCEL ASSET MANAGEMENT INC.,
EXCELL ASSET MANAGEMENT INC., EXCEL FUNDING INC.,
EXCEL INTERNATIONAL INVESTMENT CORP.,
DIOMONDMARK INVESTMENTS LIMITED, GARY STANHISER,
DEL KNOWLTON AND LINDA KNOWLTON
AND
IN THE MATTER OF THE LOMA TRUST
(collectively the “Respondents”)
Amended Notice of Hearing Under Section 161
1. TAKE NOTICE that a hearing will be held at the 7th Floor Hearing, 865 Hornby Street, Vancouver, British Columbia on October 9, 1998, at 10:00 a.m. (the “Hearing”) before the British Columbia Securities Commission (the “Commission”). At the Hearing the Commission will be asked by the Staff of the Commission to make the following orders in the public interest that:
- 1.1 any or all of the exemptions described in sections 44 to 47, 74, 75, 98 and 99 of the Securities Act, R.S.B.C. 1996, c. 418 (the “Act”) do not apply to the Respondents;
1.2 Gary Stanhiser (“Stanhiser”), Del Knowlton (“Del”) and Linda Knowlton (“Linda”) (collectively, the “Individual Respondents”) resign as and be prohibited from becoming a director or officer of any issuer pursuant to section 161(1)(d) of the Act for a specified period of time;
1.3 the Individual Respondents be prohibited from engaging in investor relations activities pursuant to section 161(1)(d) of the Act for a specified period of time;
1.4 an application be made to the Supreme Court of British Columbia for an order that the Individual Respondents pay into the consolidated revenue fund any monies obtained by the Individual Respondents directly or indirectly as a result of their failure to comply with the Act pursuant to section 157(1)(b) of the Act;
1.5 an administrative penalty be paid by the Respondents pursuant to section 162 of the Act;
1.6 the Respondents pay the prescribed fees or charges for the costs of or related to the Hearing pursuant to section 174 of the Act; and
1.7 any other order that may be appropriate in the circumstances;
- 2.1 Excel Asset Management Inc. (“Excel Asset”) is not incorporated in British Columbia, and is not a reporting issuer under the Act;
2.2 Excell Asset Management Inc. (“Excell Asset”) is a company incorporated pursuant to the laws of the Province of British Columbia on January 10, 1994, is not a reporting issuer under the Act, and conducted its business under the name of Excel Asset;
2.3 Excel Funding Inc. (“Excel Funding”) is a company incorporated pursuant to the laws of Grand Cayman, British West Indies on July 25, 1996, with an office in Jersey, Channel Islands, and is not a reporting issuer under the Act;
2.4 Excel International Investment Corp. (“Excel International”) is a company incorporated pursuant to the laws of the British Virgin Islands on July 7, 1995, with an office on the Isle of Man, and is not a reporting issuer under the Act;
2.5 Diomondmark Investments Limited (“Diomondmark”) is a company incorporated pursuant to the laws of the British Virgin Islands on September 27, 1995, with an office in Jersey, Channel Islands, and is not a reporting issuer under the Act;
2.6The Loma Trust (“Loma”) is a trust formed in the Isle of Man, is not a reporting issuer under the Act, and has an office in the Isle of Man;
2.7 none of Excel Asset, Excell Asset, Excel Funding, Excel International, Diomondmark or Loma (collectively, the “Corporate Respondents”) are presently or have at any time been registered to trade in securities under the Act;
2.8 Stanhiser is the sole director and officer of Excell Asset and is a resident of California;
2.9 Del is a former salesperson employed by Excel Asset from the summer of 1995 until approximately the end of 1997, and is a resident of British Columbia;
2.10 Linda is a former salesperson for Excel Asset and was employed by Excel Asset from in or about the fall of 1995 until in or about the spring of 1997. Linda is a resident of British Columbia;
2.11 none of the Individual Respondents are, or at any time have been, registered to trade in or advise in securities under the Act;
2.12 the Respondents operated a scheme of investment in British Columbia from in or about 1995 through in or about 1997 (the “Scheme”);
2.13 pursuant to the Scheme, individual investors in British Columbia and elsewhere were solicited on behalf of Excel Asset or Excell Asset to invest in private placements through one of the Corporate Respondents;
2.14 the solicitation of investment was made on the basis that an individual investor would lend money to one of Excel Funding, Diomondmark, Excel International or Loma (collectively, the “Offshore Pooling Companies”). The cash collected from investors was pooled together to invest in private placements issued by companies (the “Issuing Companies”) selected by Stanhiser;
2.15 the investments were solicited from individual investors without a prospectus or offering memorandum, in amounts from $1,000 and up, in breach of sections 34 and 61 of the Act;
2.16 the Offshore Pooling Companies purported to purchase shares from the Issuing Companies as principals pursuant to private placements, relying upon the exemptions contained in sections 45(2)(5) and 74(2)(4) of the Act (formerly sections 31(2)(5) and 55(2)(4) of the Securities Act, S.B.C. 1985, c. 83 (the “Former Act”)). The Offshore Pooling Companies were not in fact purchasing as principals, and therefore the exemptions were not available for the private placements;
2.17 the manner in which funds from individual investors were pooled pursuant to the Scheme purportedly allowed the investors to participate in a private placement even if an investor did not invest the amount prescribed by sections 90 and 129 of the Securities Rules, B.C. Reg. 194/97 (the “Securities Rules”) (formerly sections 77 and 128 of the Securities Regulation, B.C. Reg. 270/86 (the “Securities Regulation”)). As the prescribed amount for the purposes of the exemptions purportedly relied upon were not met, the exemptions set out in sections 45(2)(5) and 74(2)(4) of the Act (sections 31(2)(5) and 55(2)(4) of the Former Act) were not available for the distributions to the investors;
2.18 the loans made by the individual investors were to be repaid by the Offshore Pooling Companies through the allotment of pro-rata distributions to the individual investors of the securities sold to the Offshore Pooling Companies by the Issuing Companies;
2.19 the individual investors were not in fact lending money to the Offshore Pooling Companies, but were in fact expecting to invest in particular investments, and the Scheme was an attempt to avoid the prospectus and registration provisions of the Act. The Respondents, by establishing or operating the Scheme, were trading in securities of the Issuing Companies, contrary to sections 34 and 61 of the Act (sections 20 and 42 of the Former Act).
2.20 in the alternative, if the loans made by investors to the Offshore Pooling Companies are seen as loan transactions evidenced by promissory notes or debentures, issued by the Corporate Respondents to the investors (the “Debt Instruments”), then the Debt Instruments issued by the Offshore Pooling Companies are a security as that term is defined in section 1 of the Act. The Offshore Pooling Companies have not filed a prospectus with the Executive Director qualifying the Debt Instruments for distribution to the public, and any distributions of the Debt Instruments by the Respondents to investors were made in breach of sections 34 and 61 of the Act (sections 20 and 42 of the Former Act) as no exemption from the registration and prospectus requirements of the Act was available to the Respondents for the distributions; and
2.21 between 1995 and 1997, private placements costing in excess of $12 million were purchased pursuant to the Scheme;
2.22 none of the Corporate Respondents have filed prospectuses and the distributions to individual investors were made in breach of sections 34 and 61 of the Act (sections 20 and 42 of the Former Act);
2.23 the Scheme involved the Issuing Companies issuing shares contrary to sections 34 and 61 of the Act (sections 20 and 42 of the Former Act), as the Corporate Respondents were purchasing securities as principals;
2.24 Stanhiser is responsible for organizing and operating the Scheme. By his participation in the Scheme, Stanhiser has perpetrated a fraud on persons in British Columbia, contrary to section 57 of the Act (section 41.1 of the Former Act) as a number of investors neither received their shares in the Issuing Companies nor their money back;
2.25 by participating in the Scheme, the Corporate Respondents and Stanhiser were undertaking activities that would require registration as a securities dealer under the Act. The fraudulent nature of the Scheme has been aided by the failure of the Corporate Respondents and Stanhiser to keep proper records such as those required of a registrant pursuant to Division 5 of the Securities Rules (formerly Division 5 of the Securities Regulation);
3. AND TAKE NOTICE that the Respondents may be represented by counsel at the Hearing and may make representations and lead evidence. The Respondents are requested to advise the Commission of their intention to attend the Hearing by contacting the Secretary of the Commission, at 1200 - 865 Hornby Street, Vancouver, British Columbia, V6Z 2H4;
4. AND TAKE NOTICE that determinations may be made in this matter if the Respondents or their counsel do not appear at the Hearing;
5. AND TAKE NOTICE that the Respondents or their counsel are required to attend at the 7th Floor Hearing Room, 865 Hornby Street, Vancouver, B.C., on October 9, 13, 14, 19-23, November 3 and 5, 1998, at 10:00 a.m., if they wish to be heard at the Hearing of this matter.
DATED at Vancouver, British Columbia, on September 10, 1998.
Michael J. Watson
A/Executive Director