Decisions
MICHAEL PAUL OLSEN, et. al. [Decision]
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BCSECCOM #:
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Document Type:
Decision
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Published Date:
1999-04-09
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Effective Date:
1999-03-30
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Details:
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COR#99/049
IN THE MATTER OF THE SECURITIES ACT
R.S.B.C. 1996, c. 418
AND
IN THE MATTER OF MICHAEL PAUL OLSEN, 3538397 CANADA LTD., (DOING
BUSINESS AS WEALTH MANAGEMENT GROUP), OLSEN FINANCIAL
CONSULTANTS INC., TALKSTAR, INC., INSTANT VISION, INC. AND SYNNOVA
CAPITAL CORPORATION
HEARING
| PANEL: | ADRIENNE R. WANSTAL | MEMBER |
 | JOAN L. BROCKMAN | MEMBER |
| JOHN K. GRAF | MEMBER |
| DATE OF HEARING: | MARCH 3, 1999 |
| DATE OF DECISION: | MARCH 30, 1999 |
| APPEARING: | PATRICIA A.A. TAYLOR | FOR COMMISSION STAFF |
| THOMAS MANSON | FOR MICHAEL PAUL OLSEN, |
| | 3538397 CANADA LTD (doing |
| | business as WEALTH |
| | MANAGEMENT GROUP), AND |
| | OLSEN FINANCIAL |
| | CONSULTANTS INC. |
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| | |
DECISION OF THE COMMISSION
1. INTRODUCTION
This is an application by Commission staff to adjourn the hearing and an application by Michael Paul Olsen, 3538397 Canada Ltd. (doing business as Wealth Management Group) and Olsen Financial Consultants Inc. to adjourn the hearing and vary the temporary orders in this matter.
On January 8, 1999, the Executive Director issued a notice of hearing under section 161(1) of the Securities Act, R.S.B.C. 1996, c. 418, to be held on January 15, 1999, alleging that Olsen distributed securities of Wealth Management, Olsen Financial, Talkstar, Inc. and Instant Vision, Inc. without a prospectus, contrary to section 61(1) of the Act, and, in certain circumstances, without registration, contrary to section 34(1) of the Act. The notice of hearing also alleges that Olsen acted on behalf of or in association with Synnova Capital Corporation in making those distributions.
The notice of hearing was accompanied by temporary orders under section 161(2) of the Act that Olsen cease trading in any securities, and that any trading in securities of Wealth Management and Olsen Financial cease.
On January 14, 1999, the Commission ordered, under section 161(3) of the Act, by consent, that the hearing be adjourned and the temporary orders be extended until January 22, 1999. On January 21, 1999, the Commission ordered under section 161(3) of the Act, by consent, that the hearing be adjourned generally and that the temporary orders be extended until the hearing is held and the decision is rendered.
The hearing commenced on March 3, 1999, at which time Commission staff applied to adjourn the hearing for 60 days, pending completion of its investigation. Talkstar, Instant Vision and Synnova took no position on the adjournment application. Olsen, Wealth Management and Olsen Financial applied to adjourn the hearing for 90 days and to vary the temporary orders to allow them to structure a transaction with a sophisticated investor under which the sophisticated investor either would offer to purchase some or all of the outstanding securities of Wealth Management and Olsen Financial or would provide funding to enable Wealth Management and Olsen Financial to make rescission offers to their current security holders. The sophisticated investor would also provide funding to Wealth Management to develop its business.
2. BACKGROUND
Olsen was registered under the Act for over eleven years. Throughout most of the period between February 10, 1987 and October 6, 1997, Olsen was registered as a mutual fund salesperson. From October 6, 1997 to April 27, 1998, Olsen was employed by Vantage Securities Inc. and registered as a salesperson. Since then, Olsen has not been registered under the Act.
Olsen is the sole director of Wealth Management and the president, secretary and sole director of Olsen Financial. Neither company has filed a prospectus in British Columbia or is a reporting issuer in the province.
Commission staff were advised by Graeme Webster that she had been a client of Olsen’s since December 1997 and that she had purchased through him mutual funds as well as limited partnerships and other more speculative investments. One of those investments, made in December 1997, was $25,000 in bonds issued by Olsen Financial. The bonds bore an interest rate of 14%, with interest payable quarterly. She received one interest payment in March 1998, but nothing further until a partial payment of interest in November 1998.
Webster also advised Commission staff that Olsen approached her, in May 1998, to purchase debentures of Instant Vision and, in September 1998, to purchase shares in Talkstar. Though she invested US$20,000 in Instant Vision and US$5,040 in Talkstar, at the times she invested she received neither a prospectus nor an offering memorandum with respect to either. Synnova acted as an agent for the Instant Vision offering.
Further, Webster advised Commission staff that, on November 2, 1998, she attended Olsen’s office in Vancouver. Olsen’s office is also the office of Synnova, whose name is displayed on the door. At that time, Olsen persuaded her to execute an agreement converting her $25,000 investment in Olsen Financial bonds into 72,333 preferred shares of Wealth Management.
Commission staff were advised by Ted Merkl that he had consulted Olsen as a financial adviser for approximately two years and that he had purchased mutual funds and other investments through Olsen. In September 1998, Olsen met with Merkl at Merkl’s home, at which time Olsen arranged a conference call with a representative of Talkstar. Olsen also provided Merkl with a “corporate profile” and a “business plan” of Talkstar. Merkl was not given a prospectus or offering memorandum. On October 5, 1998, Merkl invested US$3000 in Talkstar shares.
During the hearing, Olsen submitted an affidavit in which he stated that there are approximately $281,000 in Wealth Management preferred shares and approximately $120,000 in Olsen Financial bonds outstanding.
In his affidavit, Olsen also stated that he has had discussions with “a sophisticated investor” and is “endeavouring to structure” a transaction whereby the sophisticated investor will either offer to purchase some or all of the outstanding Wealth Management preferred shares and Olsen Financial bonds or will provide funding to enable Wealth Management and Olsen Financial to make rescission offers to their current security holders. According to Olsen, the sophisticated investor would also provide funding to Wealth Management to develop its business.
Olsen provided no current financial statements or business plan respecting either Wealth Management or Olsen Financial. The only financial statement before us was a balance sheet of Wealth Management as at October 15, 1998, showing the company’s only assets as $100.00 in cash. As well, Olsen did not provide information respecting the use to which the approximately $400,000 invested in Wealth Management and Olsen Financial had been put or how much, if any, of those funds remain.
3. DECISION
Commission staff seek an adjournment of the hearing for 60 days. Olsen, Wealth Management and Olsen Financial seek an adjournment of the hearing for 90 days and a variation of the temporary orders to allow them to rely on exemptions from the registration and prospectus requirements to negotiate and complete the transaction with the sophisticated investor described above.
We will deal first with the request for a variation. Section 171 of the Act authorizes the Commission to revoke or vary a decision it has made if the Commission considers that to do so would not be prejudicial to the public interest. In general, the Commission will vary a decision only if there is new material or a significant change in circumstances that would lead the Commission to conclude that it would not be prejudicial to the public interest to make the variation.
We are of the view that there is new material before us, namely Olsen’s representation that he has had discussions with a sophisticated investor that could lead to the current investors in Wealth Management and Olsen Financial getting back the money they invested. Consequently, we must consider whether it would not be prejudicial to the public interest to vary the decision in light of this new material.
Olsen is alleged to have distributed securities in four companies in contravention of sections 34(1) and 61(1) of the Act. Section 1(1) of the Act defines a distribution to include a trade in a security that has not been previously issued. Section 1(1) of the Act defines a trade as a disposition of a security for valuable consideration and includes any act, advertisement, solicitation, conduct or negotiation directly or indirectly in furtherance of such a disposition.
Section 34(1) of the Act provides that a person must not trade in a security unless the person is registered. Sections 45 and 46 of the Act provide exemptions from this registration requirement. Olsen has not been registered under section 34(1) since April 27, 1998, and none of the exemptions in sections 45 and 46 appear to be available to him.
Section 61(1) of the Act provides that a person must not distribute a security unless a preliminary prospectus and a prospectus have been filed with, and receipts for them obtained from, the Executive Director. Sections 74 and 75 of the Act provide exemptions from this prospectus requirement. No preliminary prospectus or prospectus respecting either Wealth Management or Olsen Financial has been filed with the Executive Director and none of the exemptions in sections 45 and 46 appear to be available for distributions of their securities.
Webster advised Commission staff that, after April 27, 1998 and through Olsen, she purchased Instant Vision debentures, Talkstar shares and, by converting her Olsen Financial bonds, Wealth Management preferred shares. Merkl advised Commission staff that, in September 1998 and through Olsen, he purchased Talkstar shares. The Respondents tendered no evidence contradicting the information provided to Commission staff by Webster and Merkl.
Although we have outlined the evidence before us, we emphasize that we have made no final determinations with respect to the allegations in the notice of hearing and that we cannot do so until the hearing is held and a decision is rendered.
Having said that, we are of the view that there is prima facie evidence that Olsen distributed securities in contravention of sections 34(1) and 61(1) of the Act. On the basis of that evidence, we are concerned that Olsen will continue to distribute securities in contravention of the Act, which could result in additional investments by members of the public. Therefore, we consider that it would be prejudicial to the public interest to revoke the temporary orders in their entirety.
We are sympathetic to the possibility raised by Olsen that varying the order in the manner he requests could result in the current investors in Wealth Management and Olsen Financial getting back the money they invested in those companies. However, several factors raise significant concerns for us. Despite the fact that Olsen was a registrant under the Act for the better part of eleven years, and should therefore have been familiar with its requirements, we have concluded that there is prima facie evidence that he distributed securities in contravention of the Act. It appears that he raised approximately $400,000 through these distributions, yet he has provided us with no information as to what these funds were used for or how much remains. He has put before us no current financial statements or business plan with respect to either Wealth Management or Olsen Financial. All we know is that he is “endeavouring to structure” a transaction with an unnamed “sophisticated investor”. We have no idea as to the status or feasibility of this proposed transaction.
On the basis of the evidence before us, we are unable to conclude that varying the temporary orders in the manner requested by Olsen, Wealth Management and Olsen Financial would not be prejudicial to the public interest. Therefore, we deny their application to vary the temporary orders under section 171 of the Act.
There remain the applications for an adjournment. Considering it to be in the public interest, we order that the hearing be adjourned generally. However, we request the parties to contact the Secretary to the Commission to set a date for the hearing as soon as possible after June 1, 1999.
DATED on March 30, 1999.
FOR THE COMMISSION
| Adrienne R. Wanstall | Joan L. Brockman |
| Member | Member |
| John K. Graf |
| Member |