COR #93/132

	Heard:	August 13, 1992; August 19, 1992; January 5, 1993
		Reasons:  July 20, 1993

	Kathleen Reilly for Commission Staff;
	Douglas H. Christie for Mervin Derrick Holoboff, Jane Elizabeth Holoboff and Katheryn Elizabeth Louise McKinney.

This is a hearing under section 144(1) of the Securities Act, S.B.C. 1985, c. 83.  On May 28, 1992, the Superintendent of Brokers issued temporary orders under section 144(2), removing the exemptions under the Act of Mervin Derrick Holoboff, Jane Elizabeth Holoboff and Katheryn Elizabeth Louise McKinney and prohibiting each of them from becoming or acting as a director or an officer of any reporting issuer or of any issuer that provides management, administrative, promotional or consulting services to a reporting issuer.  On June 9, 1992, the temporary orders were extended pending the hearing and this decision.

The notice sets out the history of proceedings that were taken against the respondents in Alberta and alleges that the respondents intend to engage in the same line of business in British Columbia as that which led to the Alberta proceedings. The notice asks the Commission to determine whether it is in the public interest to make further orders against the respondents under sections 144(1) and 154.2 of the Act.

2.  BACKGROUND

On April 5, 1989, the Alberta Securities Commission Board ("ASC") issued a decision under the Securities Act, S.A. 1981, c. S-6.1, in the matter of CRS Industries Ltd., Control Roll Shutters Ltd., Mervin Derrick Holoboff, Jane Elizabeth Holoboff and Katheryn Elizabeth Louise McKinney.  The ASC found as follows:

Evidence as a whole established a pattern of conduct on the part of the Respondents.  Katheryn McKinney or Mervin Holoboff would go door to door selling home renovations. The evidence established that the home renovations were done, although it appeared that the prices in some cases were excessive.  Having obtained the confidence of the homeowners, who in all cases were senior citizens, the Respondents Katheryn McKinney and Mervin Holoboff would then return and invite the homeowner to invest in the corporate Respondents, 328365 Alberta Ltd., or some other unspecified investment.  In all cases, the Respondents would befriend the homeowner, in some cases sending them gifts and cards.

... the Board is satisfied that the allegations in the Notice of Continuation of Hearing respecting trading in securities with the three complainants have been established.  This trading was characterized by misrepresentation to the investors, and substantial financial losses to the persons involved.  All the complainants are elderly women who are unsophisticated in business matters. The Board is satisfied that none of the exemptions in the Act apply to any of these transactions.

An appeal of these orders to the Alberta Court of Appeal was dismissed on May 22, 1991.

On January 18, 1990, Mervin Holoboff and McKinney were each convicted under the Alberta Act of seven counts of trading without registration and seven counts of distributing securities without having filed a prospectus.  These convictions were based on the same facts as the ASC proceedings.  Mervin Holoboff and McKinney were each sentenced to fines totalling $12,600 or, in default of payment, to imprisonment for 21 months.

On July 6, 1990, the Saskatchewan Securities Commission (the "SSC") issued notice of a hearing to consider whether to make orders against Mervin Holoboff and McKinney.  The notice alleged that they had traded in securities in Saskatchewan without being registered, had obtained funds from certain residents of Saskatchewan as a result of false representations concerning the securities and had converted the funds obtained to their own use.  Following a series of adjournments of the hearing, the SSC imposed temporary cease trading and removal of exemption orders on December 11, 1990.  The hearing has not been held.

On April 15, 1992, Mervin Holoboff applied for a business licence in the City of Victoria for Intex Home Improvements Ltd., which was described in the application as a "Building Contractor, Siding Fencing & Stone".  Intex was incorporated in Alberta on January 26, 1990, and registered as an extraprovincial company in British Columbia on April 15, 1992, giving a Victoria address for its head office within the province.  On May 28, 1992, Mervin Holoboff attended a city council meeting to consider the application.  He was initially accompanied at the meeting by McKinney.  Victoria City Council decided to refuse the application.  Mervin Holoboff and McKinney have petitioned the Supreme Court of British Columbia to set aside that decision and to direct the City of Victoria to issue a business licence to them.

3.  DECISION

Commission staff argue that the conduct previously demonstrated by the respondents in Alberta, as reflected in the decision of the ASC and the convictions under the Alberta Act, together with the evidence that Mervin Holoboff and McKinney plan to establish a home improvement business in British Columbia, the same type of business as that which they carried on in Alberta in connection with their illegal and abusive securities trading activities, indicates a threat to the investing public in British Columbia which should be removed through administrative orders.

The respondents complain of double jeopardy, in that they have already been sanctioned in Alberta for their "mistakes" and there is no evidence of improper conduct in British Columbia.  They suggest the Commission proceeding is being used by the City of Victoria to prevent the issuance of a business licence.  With respect to Jane Holoboff, they argue that there is no evidence that she has come to British Columbia, that she still lives with Mervin Holoboff or that she has any involvement with his companies.

The evidence from the Alberta proceedings shows that Mervin Holoboff and McKinney engaged in securities trading that was contrary to the Alberta Act and extremely abusive of elderly, unsophisticated investors.  Their pattern of conduct was to gain the confidence of these investors through home improvement work done on the investors' homes and then to raise money from the investors for issuers controlled by Mervin Holoboff and McKinney.  They did this by selling securities to the investors through trading that was characterized by misrepresentation. The investors suffered substantial financial losses from these investments.

Mervin Holoboff and McKinney now seek to set up a home improvement business in British Columbia.  It is not for us to decide whether they should be given a business licence that would permit them to do so.  Nor is it our role to determine whether they should be able to earn a livelihood in British Columbia.  The question before us is whether it is in the public interest to make orders under the Act to prevent the respondents from participating in the securities market.

The responsibility of the Commission is to regulate trading in securities in the public interest for the purpose of ensuring there is a fair and efficient securities market that warrants the confidence of investors.  The integrity of the securities market and the confidence of investors can be damaged by persons who contravene the Act and engage in abusive trading activity.  On the basis of the evidence of their past conduct in Alberta and of their intention to carry on a home improvement business in British Columbia, we find that Mervin Holoboff and McKinney represent a threat to investors in this province.

We therefore consider it to be in the public interest to restrict the participation of Mervin Holoboff and McKinney in the British Columbia securities market by preventing them from raising capital for or managing the business and affairs of issuers in the province.

Jane Holoboff was described by the ASC as having a lesser role in the securities trading activities and was not charged with any offence in Alberta.  There is no evidence that she has moved to British Columbia with Mervin Holoboff or that she has any involvement with the proposed business in Victoria. Accordingly, we make no order against her at this time.

Commission staff asked that we make an order under section 154.2 requiring the respondents to pay the costs of the investigation and hearing.  We do not consider an order for costs appropriate in this case.

We order

1.		under section 144(1)(c) of the Act, that the exemptions described in sections 30 to 32, 55, 58, 80 and 81 of the Act do not apply to Mervin Holoboff or McKinney for a period of 25 years from the date of this order, except that Mervin Holoboff or McKinney may trade securities through a registered dealer under the exemption in section 31(2)(7) of the Act provided that they advise Commission staff of any dealers through whom they trade, and
2.		under section 144(1)(d) of the Act, that each of Mervin Holoboff and McKinney is prohibited from becoming or acting as a director or officer of any issuer, other than a private issuer, all of whose securities are held by Mervin Holoboff, McKinney or both of them, for a period of 25 years from the date of this order.