Decisions
BARCLAY LAS VEGAS LIMITED PARTNERSHIP et. al. [Decision]
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BCSECCOM #:
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Document Type:
Decision
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Published Date:
2000-02-25
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Effective Date:
2000-02-23
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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 BARCLAY LAS VEGAS LIMITED PARTNERSHIP, CLOVERLEAF MANAGEMENT LTD., REGIS CAPITAL CORPORATION, ANDREW GABOR AND ADRIEN GOETZ
HEARING
PANEL: ADRIENNE R. WANSTALL MEMBER
DIANE K. WOLCH MEMBER
DATE OF HEARING: SEPTEMBER 24, 1999
DATE OF DECISION: FEBRUARY 23, 2000
APPEARING: PATRICK ROBITAILLE FOR COMMISSION
STAFF
H. RODERICK ANDERSON FOR REGIS CAPITAL
CORPORATION AND
ANDREW GABOR
HENNING WIEBACH FOR CLOVERLEAF
MANAGEMENT LTD.
AND ADRIEN GOETZ
DECISION OF THE COMMISSION
We released our findings in this matter on March 4, 1999. On September 24, we reconvened to hear submissions with respect to the orders to be made by the Commission under sections 161 and 162 of the Securities Act, R.S.B.C. 1996, c. 418. This decision should be read in conjunction with our findings of March 4, 1999.
The Respondents had purported to sell securities of Barclay Las Vegas Limited Partnership under the “sophisticated purchaser” exemptions from the registration and prospectus requirements of the Act. Those exemptions permit sales to “sophisticated purchasers” provided that an offering memorandum is given to the purchasers and that the cost of the securities is $25,000 or greater.
The Barclay securities were sold with an offering memorandum at a cost of $25,000, $10,000 in cash and $15,000 by way of promissory note. The investment was designed so that the investor would have a reasonable expectation that the investment would generate sufficient profits before the due date of the promissory note to satisfy the obligation under the note.
We found that the exemptions could not be used for the Barclay securities for two reasons. First, the offering memorandum provided to some of the purchasers contained untrue statements of material facts in that it did not disclose that Barclay was selling 220 additional securities or that the interest payments on the promissory notes would be accrued, rather than paid on an ongoing basis as originally contemplated. Second, in our view, the investment did not meet the $25,000 cost requirement.
Consequently, we found that all of the Respondents traded in the securities of Barclay without being registered, contrary to section 34(1) of the Act, and distributed those securities without filing and obtaining a receipt for a prospectus, contrary to section 61(1) of the Act.
Commission staff argue that we should issue orders against both Andrew Gabor and Adrien Goetz to remove certain exemptions available to them under the Act, to prohibit them from acting as directors and officers of specified issuers and to require them to pay administrative penalties and costs. Commission staff also seek an order prohibiting further distribution of the Barclay securities that were the subject of this matter. However, Commission staff do not seek orders against the other two corporate Respondents.
Commission staff submit that significant sanctions are required in order to act as a deterrent, not only to the Respondents, but to participants in the exempt market in general.
Like Commission staff, we recognize the need to deal severely with abuses in the exempt market. As the Commission does not regularly review transactions carried out in the exempt market, we must rely on the participants in that market to familiarize themselves with, and abide by, the rules governing those transactions. Respondents whom we find to have contravened those rules will, in general, be subject to significant sanctions.
The matter before us, however, presents some unique factors.
The Respondents submit, and Commission staff concede, that the Respondents and their professional advisors believed that the exemptions in question were available to them. They point to two exemption orders, the first issued in 1997 by Commission staff and the second issued in 1998 by the Commission, permitting offerings structured in a manner similar to the Barclay distribution.
In addition, the Respondents argue that their contravention of the Act caused no harm to the public. As noted above, the Commission has permitted similarly structured offerings pursuant to exemption orders. As well, the two untrue statements in the offering memorandum, in effect, almost cancelled each other out; the loss of the ongoing interest payments to Barclay was almost offset by the cash generated from the sale of the 220 additional securities. Further, there is no evidence that the Respondents misappropriated any of the funds raised.
Finally, the Respondents have been subject to temporary orders in this matter since June 19, 1997, a period of almost three years; these orders have prohibited them from doing any further real estate developments involving the raising of funds from the public in the exempt market. They have cooperated fully with Commission staff and, prior to the hearing, signed an Agreed Statement of Facts in order to expedite these proceedings.
On the basis of the submissions, we consider it to be in the public interest to revoke the temporary orders in this matter and to issue no further orders.
DATED on February 23, 2000.
FOR THE COMMISSION
Adrienne R. Wanstall Diane K. Wolch
Member Member