Settlements
Commodity Contract Act, et al. [Agreed Statement]
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BCSECCOM #:
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Document Type:
Agreed Statement
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Published Date:
1996-02-16
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Effective Date:
1996-02-08
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Details:
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IN THE MATTER OF The Securities Act, S.B.C. 1985, c. 83
AND IN THE MATTER OF The Commodity Contract Act, R.S.B.C.
AND IN THE MATTER OF Brian Douglas Kinmond
Agreed Statement of Facts and Undertaking
D.E. Holley
February 8, 1996
AGREED STATEMENT OF FACTS AND UNDERTAKING:-- The following agreement has been reached between Brian Douglas Kinmond and the Executive Director:
| 1. |  | As the basis for the order referred to in paragraph two and the undertaking in paragraph three of this agreement, Kinmond acknowledges the following facts as correct: | |
| (a) | | Continental Futures Inc. was registered as a securities dealer under section 20 of the Securities Act, S.B.C. 1985, c. 83 (the "Act") from March 28, 1994 to February 10, 1995 and as a commodity contract dealer under section 13 of the Commodity Contract Act, R.S.B.C. 1979, Ch.56 (the "CCA") from April 13, 1987 to February 10, 1995; | |
| (b) | | several conditions were attached, by consent, to Continental's registration as a securities dealer under the Act, including conditions that: | |
| (i) | | trading was restricted solely to foreign exchange contracts and no other securities; | |
| (ii) | | all client funds were to be held in trust (the "Trust Account") in a financial institution acceptable to the Executive Director. No changes to the location of the account or the authorized signatories were to be made without the prior written approval of the Executive Director; and | |
| (iii) | | a report in a form acceptable to the Executive Director reconciling the dealer's records of client positions to the balance held in the Trust Account was to be submitted to the Commission Staff on a weekly basis; | |
| (c) | | Kinmond was at all material times the president and a director of Continental, the registered trading director of Continental under the Act and its trading officer under the CCA; | |
| (d) | | Gold Merchant Management Ltd. ("GMM") is a company incorporated in Hong Kong and currently based in Singapore, which is in the business of trading foreign exchange contracts; | |
| (e) | | Continental and GMM had an arrangement whereby Continental's clients traded and settled foreign exchange contracts through GMM; | |
| (f) | | Kinmond was responsible for supervising the employees of Continental and ensuring that Continental met its regulatory obligations including satisfying the conditions of its registration; | |
| (g) | | Continental represented to Commission Staff that: | |
| (i) | | the Trust Account was located at the Hong Kong Bank of Canada at 999 West Hasting Street , Vancouver; | |
| (ii) | | Kinmond was one of three signing authorities for the Trust Account; and | |
| (iii) | | Kinmond was jointly responsible for ensuring the weekly Trust Account reconciliation reports were prepared and filed with Commission Staff; | |
| (h) | | during the period from August 22, 1994 through December, 1994 without Kinmond's knowledge, funds were improperly transferred or withdrawn from the Trust Account; | |
| (i) | | these improper transfers and withdrawals cumulatively resulted in a shortfall in excess of $500,000 (US) in the Trust Account (the "Shortfall"); | |
| (j) | | without Kinmond's knowledge during the period August 25, 1994 to December 1994, the weekly Trust Account reconciliation reports filed by Continental with Commission Staff materially misrepresented the balance and location of the Trust Account; | |
| (l) | | Kinmond's supervision failed to detect the Shortfall and failed to detect the errors in the weekly Trust reconciliation reports filed with Commission Staff; | |
| (m) | | the Shortfall was detected by Commission Staff on January 18, 1995 during an examination and review of Continental's operations and records; | |
| (n) | | after Commission Staff identified the Shortfall, Continental arranged for the deposit of funds sufficient to cove the Shortfall in the Trust Account; | |
| (o) | | on January 30, 1995, Continental agreed to voluntarily wind-up its operations including payment to clients in full of all amounts owed to clients from the Trust Account and payment of the costs of a review of the trust liability to clients by an independent accounting firm; | |
| (p) | | Continental has represented that on February 10, 1995, cheques were distributed for all amounts owing to clients form the Trust Account; and | |
| on February 13, 1995, Arthur Andersen was appointed as Continental's trustee in bankruptcy. | |
| 2. | | Kinmond consents to an order (the "Order") of the Executive Director that pursuant to section 144(1)(d) of the Act, Kinmond be prohibited from becoming or acting as a director or officer of any reporting issuer for a period expiring January 31, 1998. | |
| 3. | | Kinmond undertakes not to apply for registration in any capacity under the Act prior to January 31, 1998. | |
| 4. | | Kinmond agrees to pay to the British Columbia Securities Commission $4,000. | |
| 5. | | Kinmond waives any right he may have, under the Act, or otherwise, to a hearing, hearing and review, judicial review or appeal related to, in connection with or incidental to this agreement and the related Order. | |
| Douglas W. Scheving ) | | | |
| Witness (Please Print) | ) | | |
| ) | | |
| 2103 - 808 Nelson Street | ) | | |
| Vancouver, British Columbia | ) | Brian Douglas Kinmond | |
| Address | ) | | |
| Administrator | ) | | |
| Occupation | ) | | |
D.E. HOLLEY, Executive Director