Settlements

DAVID LYALL [Agreed Stmt]

BCSECCOM #:
Document Type:
Agreed Stmt
Published Date:
1999-04-16
Effective Date:
1999-04-06
Details:


IN THE MATTER OF THE SECURITIES ACT
R.S.B.C. 1996, c. 418

AND

IN THE MATTER OF DAVID LYALL


Agreed Statement of Facts and Undertaking

1. The following agreement has been reached between David Lyall (“Lyall”) and the Executive Director:

FACTS

2. Lyall acknowledges the following facts as correct:
      2.1 between June 1, 1994 and June 30, 1996, (the “Relevant Period”) Lyall, Robert Hartvikson, Blayne Johnson, Eric Savics and Robert Disbrow (the “Brokers”) were registered representatives, registered pursuant to the Securities Act, R.S.B.C. 1996, c. 418 (the “Act”) and were employees of FMSL, working in FMSL’s Vancouver branch office;

      2.2 First Marathon Securities Limited (“FMSL”) is an investment dealer registered pursuant to the Act,, has its head office in Ontario and is a member of the Vancouver Stock Exchange, Alberta Stock Exchange (the “ASE”), and the Toronto Stock Exchange;

      2.3 Cartaway Resources Corporation (“Cartaway”) is a company incorporated under the laws of the Province of Alberta, under the name Cambridge Ventures Corporation on June 5, 1986. It changed its name to Cartaway Container Corporation on September 29, 1989, and was registered extra-provincially in British Columbia on July 25, 1995. It changed its name to Cartaway Resources Corporation on July 29, 1996. Cartaway was at all material times a reporting issuer in Alberta trading on the ASE, and became a reporting issuer in British Columbia on November 3, 1995;

      2.4 Disbrow was the Branch Manager of FMSL in Vancouver, and was a director and a Vice-Chairman of FMSL. He was at all material times the person who had the responsibility of supervising the FMSL employees in the Vancouver office;

      2.5 Larry Birchall, Michael Stuart, Charles Fraser and Matt Aufricht were registered representatives and were employees of FMSL working in FMSL’s Calgary office;

      2.6 by an agreement in writing dated September 1, 1994, Birchall, Stuart, Hartvikson, Johnson, Lyall, Savics, Aufricht, and Fraser acquired an interest in Cartaway through the purchase of 45.5% of the issued and outstanding shares of Cartaway for $0.10 per share;

      2.7 Lyall acquired 370,000 shares pursuant to the agreement;

      2.8 Stuart was at all material times a vice president of corporate finance of FMSL in Calgary and became president, director and secretary of Cartaway on October 17, 1994;

      2.9 on April 19, 1995, Cartaway issued a press release announcing a brokered private placement of up to seven million (7,000,000) units of Cartaway securities priced at $0.125 per unit, each unit consisting of one common share and one share purchase warrant entitling the holder to purchase an additional common share at $0.20 for a period of two years from the date of closing on May 5, 1995 (the “Private Placement”);

      2.10 FMSL acted as agent for the Private Placement, pursuant to a written agreement dated May 5, 1995, between FMSL and Cartaway. Stuart signed the agreement for both contracting parties;

      2.11 at the conclusion of the Private Placement, FMSL employees and their families owned approximately 66% of the issued and outstanding common shares of Cartaway;

      2.12 Lyall purchased 1,180,000 units pursuant to the private placement;

      2.13 on or about May 12, 1995, trading in the shares of Cartaway was halted on the ASE at the request of the company, pending an announcement;

      2.14 trading in the shares of Cartaway did not resume until July 4, 1995; and

      2.15 during the period of the trading halt:
          2.15.1 Cartaway engaged in a distribution, by way of an offering memorandum dated June 23, 1995, (the “Offering Memorandum”) of 4,000,000 special warrants at $1 per share for Series A warrants and $1.50 per share for Series B warrants. The Offering Memorandum was filed with the British Columbia Securities Commission and the offering completed on July 11, 1995;

          2.15.2 FMSL acted as underwriter for the distribution;
          2.15.3 Lyall sold a number of shares to his clients pursuant to the distribution;

          2.15.4 on June 29, 1995, Cartaway issued a press release disclosing that John Ivany had joined the company as President and a director and Walter Nash had joined as Vice President in charge of exploration and as a director. Stuart resigned as President but remained a director; and

          2.15.5 on June 29, 1995, Cartaway announced the acquisition of a number of mining claims and a change in business direction for Cartaway into mining.

ACKNOWLEDGMENTS

3. Lyall acknowledges the following:
      3.1 Lyall purchased 1,180,000 units pursuant to the Private Placement;

      3.2 Lyall purchased those units on the understanding third parties would pay for some of the units and be the beneficial owners of the units;

      3.3 the effect of the transaction described in paragraphs 3.1 and 3.2 (the “Transaction”) was that Cartaway was able to issue units to individuals without providing a prospectus and without the benefit of an exemption from prospectus requirements in breach of section 61 of the Act;

      3.4 by participating in the Transaction Lyall facilitated a breach of section 61 of the Act;

      3.5 in June, 1995, Lyall knew or ought to have known that Hartvikson and Johnson were acting as promoters for Cartaway;

      3.6 the Offering Memorandum failed to disclose that Hartvikson and Johnson were acting as promoters for Cartaway as required by Form 43, therefore the Offering Memorandum was not in the proper form;

      3.7 because the Offering Memorandum was not in the proper form the distribution of securities pursuant to the Offering Memorandum breached section 61 of the Act;

      3.8 by selling shares of Cartaway to his clients pursuant to the Offering Memorandum Lyall participated in a breach of section 61 of the Act;

      3.9 by participating in the group that controlled Cartaway and subsequently acting as a broker in transactions where his clients purchased shares of Cartaway, Lyall created a potential conflict of interest which he did not properly address. Lyall represents that he endeavoured to ameliorate the conflict by advising his clients of his own share holdings;

      3.10 the facts contained in paragraphs 2 (2.1 - 2.15) and 3 (3.1 - 3.9) describe a set of circumstances that damaged the integrity of the public market. Lyall, in his role as a “gatekeeper”, should have refused to participate in those activities; and

      3.11 Lyall is aware that FMSL has developed and implemented an internal policy referred to as “The First Marathon Employee Investment Policy” which is designed to address, among other things, the potential conflicts that arise in circumstances where employees of FMSL either individually or collectively own a significant percentage of the securities of any issuer. Among the policies outlined are the following:
          3.11.1 no employee of FMSL will act in the legal role of a promoter for any issuer;

          3.11.2 no employee of FMSL will, individually or with others purchase or otherwise acquire, directly or indirectly, a corporate shell to be used to obtain access to public market financing;

          3.11.3 employees of FMSL are required to notify the Vice President of Compliance of FMSL when their holdings of any public company reaches five per cent of the issued and outstanding shares; and
          3.11.4 the collective holdings of FMSL employees of the issued and outstanding shares of any public company must not exceed 19.9% without the written consent of the Vice President of Compliance of FMSL.
UNDERTAKINGS

4. Lyall undertakes and agrees to:
      4.1 pay $25,000 to the British Columbia Securities Commission (the “Commission”), of which $10,000 is a contribution to costs and the balance is a contribution to the Industry Education Fund at the Commission; and

      4.2 Lyall undertakes to comply fully with the provisions of the Act and the Securities Rules, B.C. Reg. 194/94 and, while he remains an employee of FMSL, to comply with the provisions of the First Marathon Employee Investment Policy.

5. Lyall 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.


DATED at Vancouver, British Columbia, on April 6, 1999.


“R.C. Blanchard”______________)
Witness Signature)
Robert C. Blanchard___________)
Witness Name)_________________________
#2105-555 Jervis Street________)"DAVID LYALL”
Vancouver, BC V6E 4N1_______)
Address)
Administrator_________________)
Occupation)

DATED at Vancouver, British Columbia, on April 9, 1999.





Martin D. Eady, C.A., CFE
A/Executive Director
©2024 British Columbia Securities Commission