John H. Frank, for Commission staff. Anthony Beruschi, for Thomas Skimming.

      This is a hearing under sections 144(1) and 144.1 of the Securities Act, S.B.C. 1985, c. 83.  A Notice of Hearing was issued by the Superintendent of Brokers on July 17, 1995.  The Notice of Hearing alleged that Thomas Skimming failed to file insider reports relating to his direct or indirect beneficial ownership of, or control or direction over, the securities of Score Athletic Products Inc., as required under section 70 of the Act.

      The hearing commenced on August 22, 1995.  At that time, Skimming applied for an adjournment because he had retained counsel only that morning.  We granted his application for an adjournment and the hearing was held on August 31, 1995.

2.   BACKGROUND

      Score became a reporting issuer on October 28, 1986. Score's shares were listed and posted for trading on the Vancouver Stock Exchange but, by the date of the hearing, had been cease traded due to the company's failure to file financial statements.  Skimming became a director of Score on November 6, 1992 and remained a director at the date of the hearing.

      In a Material Change Report dated May 13, 1994, Score disclosed that the company had distributed to Skimming 175,000 units of Score, each unit consisting of one share and one warrant.  In an Information Circular dated May 20, 1994, Score disclosed that: Skimming owned, or exercised control or direction over, 482,000 shares; Skimming held options to purchase 25,000 shares; and Score had distributed to Skimming on January 31, 1994, and May 13, 1994, 250,000 units and 175,000 units respectively, each unit consisting of one share and one warrant.  Skimming had not filed any insider reports respecting his holdings of Score.  On the basis of this, the Superintendent issued an order under section 146 of the Act on November 28, 1994, that Skimming cease trading in the securities of Score until he files the insider reports required under section 70 of the Act in a form satisfactory to the Superintendent.

      On August 30, 1995, the day before the hearing was held, Skimming submitted for filing an initial insider report dated April 23, 1993, and eight subsequent insider reports for various months between May 1993 and November 1994.  The reports were found to be acceptable, but were not accompanied by the late filing fee of $50 per report set out in section 183(1) Item 35 of the Securities Regulation, B.C. Reg. 270/86.

      The insider reports reveal that, during the 20 month period covered by the reports, Skimming acquired 802,000 shares, valued at $208,980, and disposed of 270,000 shares, valued at $66,110.  He also acquired 425,000 warrants and acquired, and exercised, options to purchase 25,000 shares. The acquisition of shares on exercise of the options is included in the 802,000 figure above.  Therefore, Skimming traded 1,072,000 shares, valued at $275,090, during this period.  These shares were traded in 18 transactions, most of which were made on the Exchange.

      In his testimony, Skimming provided the following explanations.  He had understood that Score's counsel was going to file Skimming's initial insider report and set up a triggering mechanism in Skimming's office for filing of subsequent reports.  He also understood that his common-law wife and business partner would be making those subsequent filings  on his behalf and he provided her with blank, signed insider report forms if he was to be away on business for an extended period.  He did not discover that his reports had not been filed until November 1994, when he received the section 146 order.  As he was under considerable personal and business stress at that time, and was busy travelling a great deal, he did not contact the Commission with respect to these reports until July 1995.  However, he was not able to file the reports before he left for Bulgaria that month.  When he returned on August 15, 1995, he found the Notice of Hearing, contacted counsel and arranged to have the reports filed.  He remains active in Score's affairs and is working to reorganize the company.

The relevant provisions of the Act are as follows:

1(1)		"insider" means, where used in relation to an issuer, (a)  a director or senior officer of the issuer.
70(2)		A person who is an insider of a reporting issuer shall, within 10 days of becoming an insider, file an insider report in the required form effective the date on which he became an insider, disclosing any direct or indirect beneficial ownership of, or control or direction over, securities of the reporting issuer.
70(4)		Where a person (a)  has filed or is required to file an insider report under subsection (2) or under a former enactment, and (b)  whose direct or indirect beneficial ownership of, or control or direction over, securities of the reporting issuer changes from that shown or required to be shown in the latest insider report filed by him, he shall, within 10 days after the end of the month in which the change takes place, file an insider report in the required form disclosing (c)  his direct or indirect beneficial ownership of, or control or direction over, securities of the reporting issuer at the end of that month, and (d)  the change or changes in his ownership in securities of the reporting issuer that occurred during the month so long as he was an insider of the reporting issuer at any time that month.

      Skimming was a director of Score and, pursuant to section 1(1) of the Act, an insider of Score from November 6, 1992 to the present.  Score has been a reporting issuer since October 28, 1986.

      During the period from April 1993 to November 1994, there were eight months in which Skimming acquired or disposed of securities of Score. The April 1993 initial insider report and the eight subsequent insider reports were not submitted for filing and found acceptable by the Commission until August 30, 1995, more than two years after the date of the initial report.  Therefore, we find that Skimming contravened section 70(2) of the Act on one occasion, and section 70(4) of the Act on eight occasions, by failing to file the insider reports required to be filed under that section within the time periods set out in that section.

      The Commission has noted in several decisions, including In the Matter of Robert Theodore Slavik, (1990) BCSC Weekly Summary, Vol. 90:28, and  In the Matter of Seven Mile High Group Inc. [1991] 47 BCSC Weekly Summary 7, that disclosure of trading by insiders is a key element in the continuous disclosure regime for reporting issuers.  As the Commission stated in the  Seven Mile High decision at page 36:

The information provided by insider reports is important market information, as it discloses to market participants the trading activities of the persons most closely connected to, and therefore in a position to be most knowledgeable about, a reporting issuer.  Timely reporting is particularly important where, as in this case, the insider is an active trader

      We find neither of these reasons compelling.  With respect to the first, it is the responsibility of the insider to ensure that insider reports are properly filed.  Providing another person with blank, signed forms and relying upon that person to make the necessary filings is an entirely unacceptable delegation of the insider's responsibilities. With respect to the second reason, that the insider has been under stress or too busy does not relieve him or her of the obligation to file insider reports.

      We consider Skimming's conduct to have fallen considerably below the standard expected of an insider and director of a reporting issuer.  Skimming argued that his continued involvement with Score is critical to the company's reorganization, though we were presented with no evidence in this regard.  However, even if this were the case, we do not consider it, in these circumstances, to be in the interest of the public, including Score's shareholders, that Skimming continue that involvement as a director.  Therefore, we consider it to be in the public interest to order:

1.		under section 144(1)(a) of the Act that Skimming comply with the requirement to pay $450 for filing nine insider reports outside the required time period, as provided in section 183(1) Item 35 of the Securities Regulation, B.C. Reg. 270/86 (since January 1, 1996, section 22(1) Item 41 of the Securities Regulation, B.C. Reg. 478/95);
2.		under section 144(1)(c) of the Act that the exemptions described in sections 30 to 32.1, 55, 58, 80 and 81 of the Act do not apply to Skimming for a period of two years from the date of this decision ;
3.		under section 144(1)(d) of the Act that Skimming is prohibited from becoming or acting as a director or officer of a reporting issuer

(a)		until he has successfully completed a course of study satisfactory to the Executive Director concerning the duties and responsibilities of directors and officers, and
(b)		a period of two years has elapsed from the date of this decision;

4.		under section 144.1 of the Act that Skimming pay within 30 days from the date of this decision an administrative penalty of $5,000; and
5.		under section 154.2 of the Act that Skimming pay prescribed fees and charges for the costs of or related to the hearing incurred by the Commission and the Executive Director, the amounts to be determined following further submissions from the parties.