Notices of Hearing & Temporary Orders

NORAM CAPITAL MANAGEMENT INC. [Amended Sec. 161]

BCSECCOM #:
Document Type:
Amended Sec. 161
Published Date:
2000-01-21
Effective Date:
2000-01-18
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.

Further Amended Notice of Hearing Under Section 161

A Notice of Hearing was issued in this matter on September 15, 1999. On October 4, 1999, an Amended Notice of Hearing was issued, amending paragraphs 1.1 and 2.10, and adding paragraphs 2.8.6, 2.15, 2.16, 2.17, 2.18, 2.19 and 2.20. This Further Amended Notice of Hearing amends paragraphs 1.1, 1.3, 2.4, and 2.8, and adds paragraphs 1.4 and 2.21
1. TAKE NOTICE that a hearing will be held at the 7th Floor Hearing Room, 865 Hornby Street, Vancouver, British Columbia, on January 20, 2000, at 10:00 a.m., to give Noram Capital Management Inc. (“Noram”) an opportunity to be heard before the British Columbia Securities Commission (the “Commission”) considers whether it is in the public interest to:
      1.1 make an order 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”);

      1.2 make an order under section 162 of the Act that Noram pay an administrative penalty;

      1.3 make an order under section 174 of the Act that Noram pay for the costs of the hearing; and

      1.4 make any other orders 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.

      2.3 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.

      2.4 Noram is also required, pursuant to section 69 of the Rules, to file its annual financial statements with Staff on or before the 90th day after the end of its latest financial year. Noram’s financial year ends on June 30 in each year, and its financial statements are due on or before September 28 in any given year.

      2.5 Noram filed its annual financial statements, for the financial year ending June 30, 1998, with the Staff on June 4, 1999, and was therefore in breach of section 69 of the Rules.

      2.6 In its June 30, 1998, financial statements 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 $16,025;
      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 Staff received a statement for July 31, 1999, on August 24, 1999.

      2.11 The statement for July 31, 1999, showed a deficiency of $927,974, although that 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.

      2.12 The July 31, 1999, statement adds into Noram’s capital position certain “encumbered amounts”, which had not been included in previous filings.

      2.13 The encumbered amounts should have been included as part of the information referred to in paragraph 2.8 above, in order to ensure that the information provided was accurate.

      2.14 As a result, Noram failed to state properly the full nature of its capital deficiency, in breach of section 168.1 of the Act (as amended, section 155(1)(c) otherwise).

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

      2.16 The unaudited 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.

      2.17 Even with the elimination of the liability to the Noram Health & Welfare Trust, Noram is still undercapitalized as set out in paragraph 2.15 of this Amended Notice of Hearing.

      2.18 Noram failed to eliminate its capital deficiency and therefore continues to be in breach of section 20 of the Rules.

      2.19 Noram has failed to file its audited financial statements for the year ended June 30, 1999, within 90 days of the year end, and has therefore further breached s. 69 of the Rules.

      2.20 The unaudited financial statements dated as of August 31, 1999, 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 ended June 30, 1998:
          2.20.1 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 s. 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 2.15 of this Notice of Hearing.
      2.21Noram filed its audited financial statements for the year ended June 30, 1999, on January 5, 2000, in breach of section 69 of the Rules. Those financial statements disclose a continued capital deficiency, without considering the issue of subordination of debt as set out in paragraph 2.20.1, in breach of section 20 of the Rules.
3. AND TAKE NOTICE that Noram may be represented by counsel at the hearing and may make representations and lead evidence. Noram is requested to advise the Commission of its intention to attend the hearing by contacting the Secretary to the Commission at 1200 – 865 Hornby Street, Vancouver, BC, V6Z 2H4, telephone: (604) 899-6500;

5. AND TAKE NOTICE that determination may be made in this matter if Noram or its counsel do not appear at the Hearing.


DATED at Vancouver, British Columbia, on January 18, 2000.





Steve Wilson
Executive Director
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