Notices of Hearing & Temporary Orders

NORAM CAPITAL MANAGEMENT INC., et. al. [Amended Sec. 161]

BCSECCOM #:
Document Type:
Amended Sec. 161
Published Date:
2000-02-04
Effective Date:
2000-01-27
Details:


IN THE MATTER OF THE SECURITIES ACT
R.S.B.C. 1996, c. 418, as am. S.B.C. 1998, c. 42, s. 47; 1999, c. 20

AND

IN THE MATTER OF NORAM CAPITAL MANAGEMENT INC.,
ANDREW WILLMAN AND SUZAN KHAN

Amended Notice of Hearing Under Section 161

A Notice of Hearing was issued in this matter on September 15, 1999 and amended on October 4, 1999 and January 18, 2000. This is a further amendment of that Notice of Hearing.

1. TAKE NOTICE that a hearing will be held at the 7th Floor Hearing Room, 865 Hornby Street, Vancouver, British Columbia, to give Noram Capital Management Inc. (“Noram”), Andrew Willman (“Willman”) and Suzan Khan (“Khan”) an opportunity to be heard (the “Hearing”) before the British Columbia Securities Commission (the “Commission”) considers whether it is in the public interest to make an order:
      1.1 under section 161(1)(f) of the Securities Act, R.S.B.C. 1996, c. 418, as am. S.B.C. 1998, c. 42, s. 47; 1999, c. 20 (the “Act”) that Noram’s registration be cancelled or, in the alternative, its registration be suspended and that it confirm by the delivery of audited financial statements acceptable to the Executive Director that its working capital is equal to or greater than the requirements of section 20 of the Securities Rules, B.C. Reg. 195/97 (the “Rules”);

      1.2under section 162 of the Act that Noram, Willman and Khan each pay an administrative penalty;

      1.3under section 161(1)(d) of the Act that Willman and Khan resign, and be prohibited from becoming or acting, as directors or officers of any issuer in British Columbia;

      1.4under section 161(1)(d) of the Act that Willman and Khan be prohibited from engaging in investor relations activities in British Columbia;

      1.5under section 161(1)(f) of the Act that Willman’s registration be cancelled;

      1.6under section 174 of the Act that Noram, Willman and Khan, jointly and severally, pay for the costs of the Hearing; and

      1.7 any other orders as that the Commission deems appropriate in the circumstances.
2. AND TAKE NOTICE that the Commission will be asked to consider the following facts and allegations in making its determinations:
      2.1 Noram is a company incorporated in the province of Ontario and extra-provincially registered in British Columbia, with its address for service, c/o McCarthy Tetrault, 1300 – 777 Dunsmuir Street, Vancouver, British Columbia.

      2.2 Noram is registered as a Portfolio Manager under the Act, and must comply with all the requirements of the Act and the Rules and regulations made under the Act.

      2.3Willman is a resident of Ontario and has been, since July 1995, a director and the president of Noram. Willman is registered as an advising director or officer. His registration is currently suspended.

      2.4Khan is also a resident of Ontario and was, from July 1995 to September 17, 1999, a director of Noram.

      Minimum Working Capital Requirement

      2.5 One of the requirements applicable to Noram, pursuant to section 20 of the Rules, is that it maintains working capital of a minimum of $25,000 plus the $10,000 deductible under the bond required under section 21 of the Rules.

      2.6 In its financial statements for the year ending June 30, 1998 (the “1998 financial statements”), which Staff received on June 4, 1999, Noram reported a capital deficiency in the amount of $847,662 and therefore was in breach of section 20 of the Rules.

      2.7 Subsequent to June 1999, Staff requested Noram to provide to Staff, on a monthly basis, the monthly capital records required under section 41 of the Rules, in order to allow Staff to monitor the elimination of the capital deficiency.

      2.8 Noram provided unaudited monthly capital records, which showed that the working capital of Noram fluctuated as follows:

      2.8.1as at January 31, 1999:a surplus of $16,095;
      2.8.2as at February 28, 1999:a surplus of $2,341;
      2.8.3as at March 31, 1999:a surplus of $22,262;
      2.8.4as at April 30, 1999:a deficit of $19,039;
      2.8.5as at May 31, 1999:a deficit of $10,589; and
      2.8.6as at June 30, 1999a deficit of $42,386.

      2.9 On August 12, 1999, Staff informed Noram in writing that if the capital deficiency was not eliminated by the end of August 1999, the company’s registration may be suspended until such time as the deficiency had been eliminated.

      2.10 On August 24, 1999 Staff received the financial statements for Noram as at July 31, 1999, (the "July 1999 financial statements") showing a deficiency of $927,974. This figure did not include the capital requirement of $35,000 under section 20 of the Rules, which would have the effect of increasing the deficiency to $962,974.

      2.11 On September 29, 1999, Noram filed with Staff of the Commission its unaudited financial statements as at August 31, 1999 (the “August 1999 financial statements”), which disclosed a deficiency in its working capital of $520,872, including its capital requirement of $35,000.

      2.12 The August 1999 financial statements include a forgiveness of debt in the amount of $1,096,784, which appears to be an adjustment of the liability for the Noram Health and Welfare Trust and which became an item subject to income tax.

      2.13 Even with the elimination of the liability to the Noram Health & Welfare Trust, Noram is still undercapitalized.

      2.14 The August 1999 financial statements, show as a liability of Noram an amount due to shareholders of $131,899, which has been a liability of Noram’s since at least the financial year that ended June 30, 1998. Noram has provided Staff of the Commission with an undated and partly completed document purporting to subordinate the amount of $131,899 to other creditors of Noram generally, which is not in the form required by section 25 of the Rules, does not provide essential information about the purported subordination, and may not be enforceable, meaning that Noram’s capital deficiency could increase by $131,899 over and above the amount of $520,872 set out in paragraph 2.11 of this notice of hearing.

      2.15 Noram filed its audited financial statements for the year ended June 30, 1999 (the “1999 financial statements”), on January 5, 2000. These financial statements disclose a continued capital deficiency, without considering the issue of subordination of debt referred to in paragraph 2.14 of this notice of hearing.

      2.16 To date Noram has failed to eliminate its capital deficiency and therefore continues to be in breach of section 20 of the Rules.

      Financial Statements Filed Late

      2.17 Noram is also required, pursuant to section 69 of the Rules, to file its annual financial statements with Staff within 90 days from the end of each financial year. Noram’s financial year ends on June 30, and its financial statements are due on or before September 28 of the same year.

      2.18Noram is in breach of section 69 of the Rules in that it:
          2.18.1filed its 1998 financial statements with Staff on June 4, 1999; and

          2.18.2filed its 1999 financial statements with Staff on January 5, 2000.
      2.19As a result Noram contravened section 155(1)(a) of the Act twice.

      Misleading Financial Statements

      2.20In its July 1999 financial statements Noram, for the first time, disclosed that $926,523 of its current assets are encumbered. As a consequence, this amount should not form part of Noram’s working capital and not declaring it has created the impression of a smaller capital deficiency than actually existed.

      2.21These encumbrances have been in existence, and were known to Willman and Khan, since at least November 1998.

      2.22As a result, Noram failed to state properly the full nature of its capital deficiency, in breach of section 168.1 of the Act and contravenes section 155(1)(b) of the Act [formerly section 155(1)(c)].

      Bond Expired

      2.23Noram is required, under section 21 of the Rules, to maintain bonding in a form and amount considered necessary by the Executive Director.

      2.24Noram’s bond expired on January 18, 2000 and it advised its insurer not to renew it. As a result, Noram is now in breach of section 21 and not eligible for further registration.

      Willman and Khan

      2.25Willman and Khan, jointly and individually:
          2.25.1caused Noram to breach section 20 of the Rules by incurring and maintaining a capital deficiency as referred to in paragraphs 2.5 to 2.16 of this notice of hearing;

          2.25.2contravened section 155(1)(ii) of the Act, by authorizing, permitting or acquiescing in Noram’s late filing of financial statements as referred to in paragraphs 2.17 to 2.19 of this notice of hearing; and

          2.25.3contravened section 155(1)(b) of the Act, by authorizing, permitting or acquiescing in Noram filing misleading financial statements in breach of section 168.1 of the Act as referred to in paragraphs 2.20 to 2.22 of this notice of hearing.
3.AND TAKE NOTICE that Noram, Willman and Khan, or their counsel, are required to attend at the 7th floor Hearing Room, 865 Hornby Street, Vancouver, British Columbia on February 17, 2000, at 11:00 a.m., if they wish to be heard before the Commission fixes a date for the Hearing (the “Set Date Hearing”).

4. AND TAKE NOTICE that determinations may be made in this matter if Noram, Willman, Khan or their counsel do not appear at the Set Date Hearing or Hearing.


DATED at Vancouver, British Columbia, on January 27, 2000.





Wayne Redwick
A/Executive Director
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