Decisions

Robert Anthony Donas [Decision]

BCSECCOM #:
Document Type:
Decision
Published Date:
1995-04-07
Effective Date:
1995-04-04
Details:

COR#95/059
Donas (Re)
IN THE MATTER OF The Securities Act, S.B.C. 1985, c. 83
AND IN THE MATTER OF Robert Anthony Donas
Decision
D.M. Hyndman, H.D. Browne and Adrienne R. Wanstall
Heard:  January 12 and 13, 1994.
Reasons:  April 4, 1995.

Counsel:

Kathleen A. Reilly, for Commission Staff;
David Lunny, Brian C. Markus and Peter Jensen, for Robert Anthony Donas.
DECISION OF THE COMMISSION

1.  INTRODUCTION

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 on June 30, 1993.  The hearing was adjourned twice by consent, and was ultimately held on January 12 and 13, 1994.

The notice of hearing alleges that Robert A. Donas acted as an adviser without being registered, contrary to section 20 of the Act, and that Donas made a written representation that the shares of A & A Foods Ltd. would be listed on the Philadelphia Stock Exchange and The Toronto Stock Exchange, contrary to section 35 of the Act.

Donas denies both allegations and makes two additional submissions.  The first is that these proceedings should be stayed due to abuse of process, caused primarily by inordinate delay.  The second is that sections 20, 30(2) and 35 of the Act violate section 2(b) of the Charter of Rights and Freedoms in that they deny Donas the right of freedom of opinion and freedom of expression.

2.  BACKGROUND

Donas was registered under the Securities Act as a salesman of a registered dealer from 1965 to September 1985. In September 1985, his registration was suspended for one year and he was fined $10,000 in connection with his activities during a distribution of securities.  Donas was again registered under the Securities Act in October 1986.  He surrendered that registration in June 1990.  He has not been registered under the Act in any capacity since that date.

After June 1990, Donas pursued alternative career plans that ultimately fell through.  In April 1991, Donas prepared and had printed two newsletters respecting A & A Foods - the Bob Donas "Red Alert" Newsletter, which was published on April 16, 1991, and the Bob Donas "Yellow Banana Alert" Newsletter, which was published in late April 1991.  He distributed approximately 400 copies of each newsletter to registered dealers, friends, business associates and promoters.

Donas prepared the newsletters using information obtained from news releases or directly from A & A Foods, which is a reporting issuer based in British Columbia.  A & A Foods approved the newsletters before they were printed and permitted Donas to use the companys logo.  However, Donas testified that he received no compensation from A & A Foods and held none of the companys securities.

The "Red Alert" Newsletter is a single sheet printed on fluorescent red paper.  The A & A Foods logo is printed in large characters at the top of the page.  Next to the logo are noted the exchanges on which the companys shares are listed (Vancouver Stock Exchange and National Association of Securities Dealers Automated Quotation System) and the stock symbol for each exchange.  Beneath that is a description of the companys capitalization and current share price.  The newsletter contains two charts.  The first, labeled "Impressive 10 Year Track Record", shows gross sales for the years 1981 to 1990.  The second, which is unlabelled, appears to show share price and volume for the years 1988 to 1991. The text provides information as to the companys sales, projected sales, market share, debt, plant, share price and listings.  It uses such phrases as "industry leader", "latest state of the art technology", "projected sales of $100 million in 1995" (1991 projected sales are stated to be $13.5 million), and "quadruple profit centre".  In the bottom right hand corner is a box containing the words, in bold face print: "Recommendation  Buy Now!  This Stock is on verge of Explosive Action".

The "Red Alert" Newsletter also states:  "A & A is listed on both the V.S.E. and NASDAQ.  Listings on Philadelphia and Toronto Stock Exchanges pending."  Donas did not obtain the written permission of the Superintendent of Brokers to make that statement.

The "Yellow Banana Alert" Newsletter is a single sheet printed on fluorescent yellow paper.  Again, the A & A Foods logo is printed in large characters at the top of the page. Underneath the logo are the words:  "On April 16, 1991, we were starting a campaign for A & A Foods Ltd.  Needless to say, if you have been purchasing A & A, both the company and ourselves have performed extremely well."  On the left hand side of the page are noted the companys stock exchange listings and stock symbols, capitalization, and share prices for April 16, 1991 ($3.50) and April 26, 1991 ($4.10).  On the right hand side of the page is information regarding A & A Foods sales, banking arrangements, business relationships, and registration with Standard & Poors Corporation.  The text also notes that A & A Foods had been "blue skied" in California and that "A & A Foods Ltd. has achieved a technical "Break-Out" by closing at $4.05 on Tuesday, April 23, 1991, exceeding the previous high of $3.85 in August 1990."  The back of the page is taken up with an unlabelled chart that appears to show share price and volume for June 29, 1988 to April 23, 1991.  In the bottom left hand corner of the front page of the newsletter are the words: "Recommendation  Why not share in this Explosive Growth?  Own a piece of an outstanding B.C. Company."

At the bottom of each newsletter is a box containing text in small print.  This text states that the newsletter is not "an offer to sell or a solicitation to buy any securities" and that there is no guarantee as to the accuracy or completeness of the information.  It also states that "[t]he writer may have an interest in the securities mentioned herein and could also be receiving compensation for the distribution of Annual Reports & Updated News.  This is intended and presented merely as a general informal commentary on day to day developments and not as a complete analysis.  Additional information with respect to any securities referred to herein be furnished [sic] upon request."

On May 1, 1991, Commission staff asked Donas to come to the Commission for an interview with respect to the "Red Alert" Newsletter.  Donas met with two investigators from the Compliance and Enforcement Division that day.  Near the end of the interview, he was advised that he did not have to answer the remaining questions that would be put to him and that he had the right to have a lawyer present.  Donas said that it was not a problem and that he would answer the questions. During the interview, Donas was advised that he should not distribute the newsletters, make any reference to a pending stock exchange listing or recommend a trade in any security without registration.  Donas states that he complied with this advice.  Commission staff had no further contact with Donas prior to the issuance of the notice of hearing.

On May 2, 1991, an article appeared in the Vancouver Sun entitled "B.C. regulators review Donas promotion".  The article begins:

B.C. securities regulators are reviewing the promotion of A & A Foods Ltd. by flamboyant Howe Street promoter Robert Donas.
Dean Holley, head of enforcement for the B.C. Securities Commission, said Wednedsay [sic] he will review promotional material being circulated by Donas to see whether it violates provisions of the B.C. Securities Act.
And Vancouver Stock Exchange surveillance manager Warren Funt said he is trying to determine what relationship, if any, the company has with Donas and whether it is knowingly participating in "undue hype."
The stock price of A & A Foods, a Vancouver cheese producer, has soared from $3.55 to a high of $6 on Tuesday since Donas began promoting the companys stock on April 16.  It closed Wednesday at $5.75.
The article goes on to discuss Donas history and that of A & A Foods.  It states that A & A Foods had been spending large amounts of money promoting its shares and that Holley was going to review the filing by A & A Foods president of a notice of intention to sell securities in light of these promotional efforts.  The article is accompanied by photographs of Donas and of the two newsletters.

On September 24, 1991, another article appeared in the Vancouver Sun entitled "Governments role in land purchase draws criticism from NDP".  The article deals primarily with a private sale of government land to A & A Estates Ltd., a subsidiary of A & A Foods.  However, the article also describes securities regulatory problems faced in 1991 by A & A Foods and states: "An investigation into the activities of Howe Street promoter Robert Donas activities in connection with A & A stock is also continuing, Holley said."

On October 9, 1992, Donas contacted the Ombudsman to complain about the investigation by Commission staff.  He spoke with Michael Ross, an Ombudsman Officer.  Donas testified that Ross told Donas in March 1993 that Ross had contacted Commission staff and told them to proceed by June 15, 1993, or drop the matter.  Commission staff received calls, but not any written correspondence from Ross.

Commission staff concluded at the time of the May 1, 1991 interview with Donas that he had contravened the Act. However, they were investigating a number of  matters respecting A & A Foods and it was unclear for some time whether Donas had been involved in those matters.   Also, other investigations required their attention.  In early 1993, they reviewed the Donas file and concluded that the hearing could proceed outside of the A & A Foods investigation.  The notice of hearing was issued on June 30, 1993.

3.ANALYSIS AND FINDINGS
The issues before us are:

1.Was Donas acting as an adviser and therefore required to be registered pursuant to section 20(1)(c) of the Act?
2.Was an exemption from the adviser registration requirement available to Donas?
3.Did Donas make a representation that the shares of A & A Foods would be listed on a stock exchange, contrary to section 35(1)(c) of the Act?
4.Should the proceedings against Donas be stayed due to abuse of process?
5.Do sections 20, 30(2) and 35 of the Act violate section 2(b) of the Charter in that they deny Donas the right of freedom of opinion and freedom of expression?
1.Was Donas acting as an adviser and therefore required to be registered pursuant to section 20(1)(c) of the Act?
Section 1(1) of the Act provides that:
1(1)"adviser" means a person engaging in, or holding himself out as engaging in, the business of advising another with respect to investment in or the purchase or sale of securities.
Section 20(1)(c) of the Act provides that:

20(1)No person shall ...
(c)act as an adviser unless he is registered as
(i)an adviser, or
(ii)a partner, director or officer of a registered adviser and is acting on behalf of that adviser in accordance with the regulations.
Section 14(c) of the Securities Regulation, B.C. Reg. 270/86 provides that:
14   Every person registered as an adviser under the Act shall be classified in one or more of the following categories according to qualification:  ...
(c)securities adviser - a person who engages in or holds himself out as engaging in the business of advising others through direct advice or through publications as to the investing in or buying or selling of specific securities, not purporting to be tailored to the needs of specific clients.
The first issue to be determined is whether Donas was "engaging in, or holding himself out as engaging in, the business of advising another with respect to investment in or the purchase or sale of securities".  The concise Oxford Dictionary of Current English (1990 ed.) defines " advice" as "words given or offered as an opinion or recommendation about future action or behavior...".

It is because the very nature of advising involves the offering of an opinion or recommendation to others that the Act requires advisers to be registered and to meet certain conditions as to their education and experience.  This requirement is intended to protect the public, as was acknowledged by LHeureux-Dubé J. in Brosseau v. Alberta Securities Commission (SCC) 57 D.L.R. (4th) 458 at p. 467:

Securities Acts in general can be said to be aimed at regulating the market and protecting the general public. This role was recognized by this court in Gregory & Co. Inc. v. Quebec Securities Comn (1961), 28 D.L.R. (2d) 721 at p. 725, [1961] S.C.R. 584 at p. 588, where Fauteux J. observed:
The paramount object of the Act is to ensure that persons who, in the province, carry on the business of trading in securities or acting as investment counsel, shall be honest and of good repute and, in this way, to protect the public, in the Province or elsewhere, from being defrauded as a result of certain activities initiated in the Province by persons therein carrying on such a business.
As indicated by the definition of "advice", the nature of the information given or offered by a person is the key factor in determining whether that person is advising with respect to investment in or the purchase or sale of securities.  A person who does nothing more than provide factual information about an issuer and its business activities is not advising in securities.  A person who recommends an investment in an issuer or the purchase or sale of an issuers securities, or who distributes or offers an opinion on the investment merits of an issuer or an issuers securities, is advising in securities.  If a person advising in securities is distributing or offering the advice in a manner that reflects a business purpose, the person is required to be registered under the Act.

The information given in the Donas newsletters goes far beyond the simply factual.  Through the newsletters, Donas distributed opinions on the investment merits of A & A Foods and its shares, as evidenced by such phrases as "industry leader", "latest state of the art technology", "quadruple profit centre", "Impressive 10 Year Track Record", and "A & A Foods Ltd. has achieved a technical "Break-Out" by closing at $4.05 on Tuesday, April 23, 1991".  Both newsletters contain share price charts showing substantial price increases in the shares of A & A Foods since 1988.  Finally, both newsletters contain a clear recommendation to buy the shares of A & A Foods.  The "Red Alert" Newsletter contains the words "Recommendation  Buy Now!  This stock is on verge of Explosive Action".  The "Yellow Banana Alert" Newsletter states "Recommendation  Why not share in this Explosive Growth?  Own a piece of an outstanding B.C. company."  In our view, it is clear that, by distributing these newsletters, Donas was distributing opinions on the investment merits of A & A Foods and its shares and recommending the purchase of shares of A & A Foods and was, therefore, advising in securities.

We are also of the view that Donas had a business purpose in distributing the newsletters and providing this advice. Donas has been involved in the securities industry since 1965. For most of those years, he was registered as a salesman of a registered dealer and, as part of his job, provided advice to his clients.  He surrendered his registration in June 1990 and, finding that his alternative career plans had fallen through, published the two newsletters in April 1991.  There is no evidence that he had any other occupation or career at that time.  It appears to us that, by distributing the newsletters, Donas was simply moving from one segment of the securities industry to another, from the business of trading to the business of advising.

Donas argued that he was "testing the market" with the two newsletters.  He was considering selling future newsletters on a subscription basis; whether he did so would depend on the feedback he got from the people receiving the initial two newsletters.  However, Donas did not seek this feedback from only a handful of individuals.  He distributed each of the two newsletters to approximately 400 people.  It is not credible to suggest that he would distribute this large number of newsletters if he was not in the business of advising in securities.  As well, the inclusion of a disclaimer in both newsletters, as well as the reference in the "Yellow Banana Alert" Newsletter to "a campaign for A & A Foods Ltd.", would lead a reader to conclude that Donas was in the business of advising in securities.  His business was nascent, but it was still a business.

On the basis of the evidence before us, we find that Donas was engaging in the business of advising another with respect to investment in or the purchase or sale of securities and was therefore required to be registered as an adviser, or as a partner, director or officer of a registered adviser, pursuant to section 20(1)(c) of the Act.

We also find that his activities fall squarely within the "securities adviser" category of adviser registration, which is set out in section 14(c) of the Regulation.  By distributing his newsletters, Donas was engaging in the business of advising others through publications as to the investing in or buying or selling of specific securities, not purporting to be tailored to the needs of specific clients.

2.Was an exemption from the adviser registration requirement available to Donas?
The second issue to be determined is whether an exemption from the adviser registration requirement was available to Donas.  The only two exemptions that could possibly have applied to him are those in section 30(2)(d) and (f) of the Act.

Section 30(2)(d) of the Act provides that:

30(2)Subject to subsection (3), the following persons may act as advisers without registration under section 20(1)(c): ...
(d)a person whom the superintendent considers has suitable educational qualifications or relevant experience.
Subsection (3) does not apply to paragraph (d).

Donas argued that the Superintendent must have considered Donas to have suitable educational qualifications or relevant experience because Donas had been registered under the Act as a salesman for several years.  However, the education and experience requirements for securities advisers are more stringent than those for salesmen. Securities advisers are required to have completed the Canadian Securities Course and the Canadian Investment Finance Course, as well as to have performed research involving the financial analysis of investments for at least five years under the supervision of an adviser (see section 60(1) of the Regulation).  Salesmen need only have completed the Canadian Securities Course or have been previously registered as a dealer or as a partner or officer of a dealer (see section 59(1) of the Regulation). Also, the exemption in section 30(2)(d) of the Act is discretionary.  Before relying on it, a person must obtain from the Superintendent a determination that the Superintendent considers the person to have suitable educational qualifications or relevant experience.  Donas did not seek such a determination.  Therefore, we find that Donas was unable to rely on the exemption provided in section 30(2)(d) of the Act.

Section 30(2)(f) and (3) of the Act provide that:

30(2)Subject to subsection (3), the following persons may act as advisers without registration under section 20(1)(c): ...
(f)a publisher of, or writer for, a bona fide newspaper, news magazine or business or financial publication, that is of general and regular paid circulation, distributed only to subscribers to it for value or to purchasers of it, who
(i)gives advice as an adviser only through the newspaper, magazine or publication,
(ii)has no direct or indirect interest in any of the securities in respect of which he gives advice, and
(iii)receives no commission or other consideration for giving the advice other than for acting in his capacity as a publisher or writer;
(3)A person is exempted under subsection (2)(a), (b), (c), (e) or (f) so long as the performance of the service as an adviser is solely incidental to his principal business or occupation as stated in those paragraphs.
Donas admits that the two newsletters were not of "regular paid circulation, distributed only to subscribers to it for value".  However, he argues that he was testing the market and, in effect, giving out free subscriptions to selected people for a period of time.  We do not accept this argument.  Donas did not give free subscriptions to only selected people.  No one had paid to subscribe to his newsletter or to purchase a copy of it.

In addition, we are of the view that neither of the newsletters is "a bona fide newspaper, news magazine or business or financial publication".  Nor do we consider Donas performance of adviser services to be solely incidental to his principal business or occupation as a publisher of, or writer for, such a publication.  These newsletters are not legitimate news or financial publications, like the Globe & Mail, the Financial Post, the Vancouver Sun or the Vancouver Province. They are tout sheets, documents designed to promote a company and its shares.  Donas adviser activities were not incidental to his business as a publisher or writer of a bona fide news or financial publication.  They were his business.

The only reason for the existence of these two newsletters is to promote the sale of shares in A & A Foods. This conclusion is supported by the statement in the "Yellow Banana Alert" Newsletter that:  "On April 16, 1991, we were starting a campaign for A & A Foods Ltd."

We find that Donas was unable to rely on the exemption provided in section 30(2)(f) of the Act.

3.Did Donas make a representation that the shares of A & A Foods would be listed on a stock exchange, contrary to section 35(1)(c) of the Act?
Section 35(1)(c) of the Act provides that:
35(1)No person, with the intention of effecting a trade in a security, ...
(c)shall, except with the written permission of the superintendent, make any representation, written or oral, that
(i)the security will be listed and posted for trading on a stock exchange, or
(ii)application has been or will be made to list and post the security for trading on a stock exchange.
The "Red Alert" Newsletter states that "A & A is listed on both the V.S.E. and NASDAQ.  Listings on Philadelphia and Toronto Stock Exchanges Pending."  Donas did not obtain the written permission of the Superintendent to make this representation.

Donas makes two arguments with respect to this allegation.  The first is that his intention in making the representation was to test market the newsletters and increase his credibility in the community, and that he had no intention of effecting a trade in the securities of A & A Foods.  It is our view that this argument must be rejected in light of the content of the newsletters, which were intended to encourage investors to buy shares of A & A Foods.  It is clear from the context of the newsletters that the reference to pending listings was included to make an investment in the shares of A & A foods appear more attractive to investors.

Donas second argument is that the use of the words "a stock exchange" (emphasis added) in section 35(1)(c) of the Act indicates that the correct interpretation of that section is to prohibit such representations only when the securities are not currently listed on any stock exchange.  Donas therefore argues that, because the securities of A & A Foods were already listed on the VSE and NASDAQ, it was not a breach of section 35(1)(c) of the Act to represent that they would be listed on another stock exchange.

We do not accept this argument.  The clear wording of section 35(1)(c) of the Act prohibits representations as to listing on "a stock exchange". There are no words that suggest that the section will apply only if that stock exchange is the first one on which the issuers securities are to be listed. The interpretation put forward by Donas asks us to read into the section words that are not there.

His interpretation is also, in our view, inconsistent with the purpose of the section.  Section 35(1)(c) of the Act is intended to prevent a person from selling a security by holding out the prospect that it will soon have greater liquidity, a larger following and, possibly, higher value, by virtue of being listed on a stock exchange.  Even if an issuers securities are already listed on an exchange, the issuer and its shareholders can certainly benefit from a listing on another exchange.  A listing on the Philadelphia Stock Exchange suggests the possibility of access to an even larger United States market.  A listing on The Toronto Stock Exchange implies that A & A Foods is ready to make the jump from an exchange specializing in junior issuers to a more senior market.  Both listings could only make the shares of A & A Foods more attractive to potential investors.

In conclusion, we find that Donas, with the intention of effecting a trade in the securities of A & A Foods and without obtaining the written permission of the Superintendent, made a representation that the securities would be listed and posted for trading on the Philadelphia Stock Exchange and The Toronto Stock Exchange, contrary to section 35(1)(c) of the Act.

4.Should the proceedings against Donas be stayed due to abuse of process?
Donas argues that because of inordinate delay and the oppressive and vexatious nature of these proceedings, he has suffered sufficient prejudice to require that the proceedings be stayed as an abuse of process.  He argues that, given all the circumstances, to proceed against him now is simply not fair.

Donas argues that even though Commission staff had concluded on May 1, 1991 that he had contravened the Act, the notice of hearing was not issued until June 30, 1993.  This, he argues, constitutes inordinate delay.  Donas also argues that the proceedings are oppressive and vexatious for three reasons.  The first is that numerous unregistered individuals have distributed newsletters similar to his without having been brought before a Commission hearing.  The second is that, when he attended the May 1, 1991 interview with Commission staff, he was not warned that he was being investigated and not advised to seek counsel or bring counsel with him.  The third reason is that, despite the fact that he was told at the May 1, 1991 interview that he should register as an adviser, neither of the Commission staff present could tell him how to go about complying with their request.  Finally, Donas argues that he has been prejudiced because the outstanding investigation, the existence of which has been publicly known since the Vancouver Sun article of May 2, 1991, has kept him out of the securities industry during a bull market and has therefore had a significant impact on his income.  He also claims that it has affected his health and "every aspect of his well-being".

Melnick J., of the British Columbia Supreme Court, in Bennett v. British Columbia Securities Commission, (1991), 82 D.L.R. (4th) 129 (B.C.S.C.); affd (1992), 69 B.C.L.R. 2nd 171 (C.A.); leave to the SCC refused [1992] 6 W.W.R. lvii (S.C.C.) provided a thorough analysis of the common law principles relating to abuse of process when there has been a delay in administrative proceedings.

Melnick J. concluded that the real delay in that case had been a period of approximately two years and asked the question, at page 194:  "Does a delay of that magnitude, given the overlays of the various other factors involved, amount to abuse of process?"

After discussing the other factors, he concluded at page 196:

In answering this question, I must have in mind the balance between the interest of the petitioners, and indeed the community at large, in the speedy resolution of such processes, and the interest of the community in being assured that the trading of securities is carried out with the propriety which they have a right to expect under the Securities Act.  Having regard to this balance in light of the "fundamental principles of justice which underlay the communitys sense of fair play and decency", it is my judgment that, given the context of the specific regulatory nature of the proposed hearing, and even given the length of the delay and all of the other circumstances alleged by the petitioners, it would not be an abuse of process for the hearing to be held.  To the extent that I must reflect in my judgment the communitys sense of fair play and decency, I would think that the community would say to the Commission:  "Get on with your hearing and give us your decision."  It is my judgment that to do so will allow essential justice to be done in all of these circumstances.
The Court of Appeal at page 179 of its decision stated:  "We are of the view that Mr. Justice Melnick applied the right principles and reached the right conclusion."

In this case, the first newsletter was issued on April 16, 1991, Donas was interviewed by Commission staff on May 1, 1991, and the notice of hearing was issued on June 30, 1993, well within the six year limitation period for the institution of such proceedings specified in section 142 of the Act. After two adjournments, both of which were consented to by the parties, the hearing was held in January 1994.  Any delay in this case has to be taken from the issuance of the notice of hearing to the conclusion of the hearing on January 13, 1994. However, Donas consented to two adjournments during this six month period.  Accordingly, we find that no real delay occurred in this matter.

In assessing Donas other arguments regarding abuse of process, we have considered the following factors:

1.While the Commission may not have held a hearing specifically directed at an unregistered adviser who distributed a newsletter, it has issued a number of decisions, and the Superintendent has signed agreed statements of fact, respecting unregistered advisers.
2.Donas voluntarily attended the May 1, 1991 interview with Commission staff.  When he was advised during the interview that he could refuse to answer further questions and retain counsel, he chose to continue the interview.
3.Both Commission staff present during the May 1, 1991 interview were investigators from the Compliance and Enforcement Division.  We are confident that had Donas approached the Registration Division of the Commission, he would have been given all the information and assistance he required respecting adviser registration procedures.
4.The prejudice alleged by Donas does not go to his ability to defend himself from the allegations in the notice of hearing.  It goes to his economic and physical health, and we have no evidence before us of detriment to either.
In determining whether there has been abuse of process, we must have in mind the balance between the interest of Donas, and the community at large, in the speedy resolution of the hearing, and the interest of the community in being assured that the trading of securities is carried out with the propriety they have a right to expect under the Securities Act.  Having regard to this balance in light of the "fundamental principles of justice which underlay the communitys sense of fair play and decency", we find that, given the context of the specific regulatory nature of the hearing and given the absence of any real delay and all of the other factors involved, it would not be abuse of process for the proceedings to continue.

5.Do sections 20, 30(2) and 35 of the Act violate section 2(b) of the Charter in that they deny Donas the right of freedom of opinion and freedom of expression?
Section 8(2) of the Constitutional Question Act, R.S.B.C. 1979, c. 63 provides that:

8(2)Where in a cause, matter or other proceeding
(a)the constitutional validity or constitutional applicability of any law is challenged, or
(b)an application is made for a constitutional remedy,
the law shall not be held to be invalid or inapplicable nor shall the remedy be granted until after notice of the challenge or application has been served on the Attorney General of Canada and the Attorney General of the Province in accordance with this section.
Though Donas has challenged the validity of sections 20, 30(2) and 35 of the Act, he did not serve on the Attorneys General the notice required under section 8(2) of the Constitutional Question Act.  Therefore, we would be unable to hold those sections to be invalid, even if we accepted Donas arguments.

As well, the arguments presented by Donas with respect to this important issue are meager.  The written argument comprises two and one-half double-spaced pages and cites no cases.  Commission staff did provide a more comprehensive argument, with reference to the relevant cases.  However, rather than embarking on an analysis of this issue without the benefit of thorough argument, we conclude, as we are required to do in any event by section 8(2) of the Constitutional Question Act, that sections 20, 30(2) and 35 of the Act are not invalid under the Charter.

4.  DECISION

As noted by the Supreme Court of Canada in Gregory and Brosseau, the Act is aimed at regulating the market and protecting the public.  A cornerstone of the regulatory structure is the requirement that people advising and trading on behalf of others be registered.  This is intended to ensure that the investing public receives expert advice from competent and ethical people.

Donas ought to have been familiar with the registration requirements of the Act; he had been registered as a salesman of a registered dealer for many years.  Despite this, he issued his newsletters without first obtaining the necessary registration or satisfying himself that he could rely on an exemption from the requirement to do so.

The prohibition against making representations concerning future stock exchange listings is also designed to protect the public.  It attempts to ensure that potential investors are not misled into a belief that a security has greater liquidity, and perhaps a higher value, than is really has. Donas contravened this prohibition in his "Red Alert" Newsletter.  He was once a registrant; he should have known better.

We consider it to be in the public interest to 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 Donas for one year from the date of this order;
2.under section 144.1 of the Act that Donas pay an administrative penalty of $3000; and
3.under section 154.2 of the Act that Donas pay the costs of the hearing, the amount to be determined following submissions from the parties.
D.M. HYNDMAN, Chair
H.D. BROWNE, Member
A.R. WANSTALL, Member