Decisions
ADAMO GUERRINI [Decision]
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BCSECCOM #:
2001 BCSECCOM 1144
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Document Type:
Decision
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Published Date:
2001-12-06
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Effective Date:
2001-12-04
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Details:
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2001 BCSECCOM 1144
COR#01/126
IN THE MATTER OF THE SECURITIES ACT
R.S.B.C. 1996, c. 418
AND
IN THE MATTER OF ADAMO GUERRINI
PANEL
Joyce C. Maykut, Q.C.
Joan L. Brockman
Roy Wares
DATE OF HEARING
October 26, 2001
DATE OF DECISION
December 4, 2001
APPEARING FOR COMMISSION STAFF
Chilwin C. Cheng
DECISION [para 1]
These are our findings and decision in a hearing under section 161 of the Securities Act, R.S.B.C. 1996, c. 418, against Adamo Guerrini.
Allegations and preliminary matters
[para 2]
Guerrini did not attend the hearing. On October 20, 2001, Commissioner Salvail-Lopez ruled that Guerrini was deemed to have received notice of the hearing in accordance with section 180 of the Act.
[para 3]
Commission staff issued a notice of hearing on September 18, 2001. Staff alleged that Guerrini was convicted in British Columbia provincial court of theft of US $10,000 relating to an investment in securities and that this conduct was contrary to the public interest.
[para 4]
Commission staff seek an order against Guerrini prohibiting him from using the exemptions under the Act, acting as a director or officer of any issuer and engaging in investor relations activities for 10 years. Staff also seek an order for costs of the hearing.
[para 5]
In determining what orders should be made in the public interest, staff ask us to consider conduct that was not alleged in the notice of hearing. They say Guerrini failed to comply with an order under the Act to attend an interview and produce documents. This is a serious allegation. Guerrini should be given notice of this allegation before we consider the conduct in a section 161(1) hearing. Until that is done, we do not intend to consider this allegation further.
The facts
[para 6]
From 1996 to April 1997, Guerrini was registered as a salesperson with a local brokerage firm. After April 1997 he was not registered under the Act to trade in securities in British Columbia.
[para 7]
Guerrini subsequently joined Synergy Equity Capital Corp., an investor relations firm, and began promoting the shares of Ultimate Cigar Company, a company based in the United States.
[para 8]
In August 1997, Guerrini told his friend Svetoslav Ivanov, a resident of British Columbia, to buy some Ultimate Cigar shares. Guerrini offered to arrange Ivanov’s purchase of 40,000 Ultimate Cigar shares at US$0.25 per share. On August 7, 1997, Ivanov wrote a cheque for US$10,000 made payable to Synergy and gave it to Guerrini so that Guerrini could purchase the Ultimate Cigar shares for him. Guerrini told Ivanov that the shares would be deposited into an account in Ivanov’s name at a local brokerage firm. On Guerrini’s advice, Ivanov opened an account at that firm in August 1997.
[para 9]
Instead, Guerrini withdrew some of the funds from the Synergy account for his own personal use and transferred some of the funds into an account for Ultimate Cigar. Guerrini did not purchase any Ultimate Cigar shares for Ivanov.
[para 10]
On September 16, 1997, Ivanov demanded the return of his money, but Guerrini did not return it.
[para 11]
On June 23, 1998, Guerrini was charged with theft of US$10,000 from Ivanov contrary to section 334(a) of the Criminal Code and with defrauding Ivanov by falsely representing to him that the US$10,000 would be used to purchase 40,000 United Cigar Company shares for him, contrary to section 380(1)(a) of the Criminal Code.
[para 12]
On June 8, 1999, Guerrini pled guilty to theft and was sentenced on September 13, 1999, in British Columbia provincial court to one day in jail and a $5,000 fine. The fraud charge was stayed. Just before he was sentenced on September 13, 1999, Guerrini repaid Ivanov the US$10,000.
Discussion and findings
[para 13]
In deciding what orders to make in the public interest under section 161(1) we considered the Supreme Court of Canada’s recent decision in Committee for Equal Treatment of Asbestos Minority Shareholders v. Ontario (Securities Commission), 2001 SCC 37, which was followed by our Court of Appeal in Johnson v. British Columbia Securities Commission, 2001 BCCA 597.
[para 14]
The Asbestos and Johnson decisions make clear that public interest sanctions made under provisions like section 161(1) of the Act should be preventative in nature and prospective in orientation.
[para 15]
In the even more recent case of Orr 2001 BCSECCOM 1106, the Commission reconsidered its public interest jurisdiction in light of the comments in Asbestos and its own decision in Re Eron Mortgage Corp., [2000] 7 BCSC Weekly Summary 22. In Orr, the Commission concluded that the Commission’s public interest jurisdiction as articulated by the court in Asbestos, was consistent with the Supreme Court of Canada’s previous decisions and with the approach taken by the Commission in Eron.
[para 16]
In Orr, the Commission observed in paras. 15-16 that the case law makes:
“…. clear that the purpose of orders made under section 161 is to protect the integrity of the securities markets in the public interest, not to punish those who have contravened the legislation or acted contrary to the public interest.
“In making orders within this public interest framework, we consider whether the individual respondent’s past conduct raises sufficient concern to warrant orders restricting that individual’s future conduct in order to protect the market. Our responsibility to protect the public interest does not end there, however. As Asbestos makes clear, our responsibility is to make orders “for the protection of investors, and the efficiency of, and the public confidence in, capital markets generally”. ”
[para 17]
The Commission in Orr went on to state that all the factors listed in Eron are relevant when considering what orders should be made in the public interest under section 161(1).
[para 18]
What are the relevant factors in this case?
[para 19]
In our view any conduct relating to trading in securities that results in a criminal conviction is a very serious matter that necessarily undermines the integrity of our capital markets. Having said that, we must look at the particular facts of each case to determine how far the section 161(1) sanctions must go to be effective in preventing future conduct that is likely to be prejudicial to the public interest in fair and efficient capital markets.
[para 20]
Although Guerrini was not a registrant at the time he committed the theft, he was still involved in the local securities market by working for a company that provided issuers with investor relation services. He offered to sell shares of Ultimate Cigars that he was promoting to a British Columbia resident. He admitted he did not buy the shares as he promised and instead kept the money. His conduct was deceitful and he did not pay Ivanov back until he faced sentencing in criminal court.
[para 21]
Nonetheless, we recognize that Guerrini did not benefit financially and indeed paid the heavy price of having a criminal conviction on his record. We disagree with staff that Guerrini’s last minute restitution payment should not be considered as a mitigating factor. Actual losses suffered by investors as a result of a respondent’s conduct are always relevant. Guerrini’s repayment in large part returned Ivanov to his original position.
[para 22]
Guerrini’s conduct demonstrates to us that his continued participation in the capital markets of British Columbia would pose a real risk to the integrity of these markets. The question now is – what orders are necessary to effectively diminish this risk?
[para 23]
Commission staff cited several past cases, as precedents, in which the Commission sanctioned individuals who pled guilty to securities related criminal conduct. While we have considered all of these cases, we intend to refer to only one – Persiani [2000] 14 Weekly Summary 14.Persiani involved a conviction of fraud and bears the closest relationship to the circumstances of this case.
[para 24]
Persiani took approximately $26,000 from four investors on the pretext that he would purchase securities on their behalf. Persiani pled guilty to three counts of theft for which he received a six month conditional sentence and three years probation. He made partial restitution of $10,500 and was ordered to pay the balance of $15,000 to the investors. Under a settlement agreement with the Executive Director, Persiani was banned from the markets for the later of 10 years or the production of affidavit proving complete restitution to his victims. The agreed statement of facts indicates that the Executive Director considered the three counts of theft and Persiani’s admissions that he mademisrepresentations contrary to sections 50(1)(d) of the Act to induce his victims to invest.
[para 25]
In our view Guerrini’s conduct was not as serious as Persiani’s. Having said that, we are of the view that it is necessary to remove him from participating in our capital markets for a significant period of time.
Order
[para 26]
Therefore, considering it to be in the public interest to do so, we order:
1. under section 161(1)(c) of the Act that the exemptions described in sections 44 to 47, 74, 75, 98 and 99 of the Act do not apply to Guerrini for five years, except that Guerrini may trade solely through a registered dealer and only for his own account under section 45(2)(7) of the Act;
2. under section 161(1)(d)(ii) of the Act that Guerrini is prohibited from becoming or acting as a director or officer of any issuer for five years; and
3. under section 161(1)(d)(iii) of the Act that Guerrini is prohibited from engaging in investor relations activities for five years;
[para 27]
We direct Commission staff to file their bill of costs in this matter within two weeks of this decision.
[para 28]
December 4, 2001
FOR THE COMMISSION
Joyce C. Maykut, Q.C., Vice Chair
Joan L. Brockman, Commissioner
Roy Wares, Commissioner