Notices of Hearing & Temporary Orders

ROBERT A. DIIANNI [Amended Sec. 161]

BCSECCOM #:
2001 BCSECCOM 850
Document Type:
Amended Sec. 161
Published Date:
2001-08-22
Effective Date:
2001-08-14
Details:


2001 BCSECCOM 850


IN THE MATTER OF THE SECURITIES ACT
R.S.B.C. 1996, c. 418

AND

IN THE MATTER OF ROBERT A. DIIANNI (AKA ROBERT DIANNI)


Further Amended Notice of Hearing Under Section 161

[para 1]
1. A hearing will be held to give Robert A. DiIanni an opportunity to be heard before the British Columbia Securities Commission determines whether it is in the public interest to make the following orders:

1.1 pursuant to section 161(1)(c) of the Securities Act, R.S.B.C. 1996, c. 418 (the “Act”), that any or all of the exemptions described in sections 44 to 47, 74, 75, 98 or 99 of the Act do not apply to DiIanni;

1.2 pursuant to section 161(1)(b) of the Act, that DiIanni be prohibited from purchasing securities;

1.3 pursuant to section 161(1)(d) of the Act, that DiIanni resign any position he may hold as a director or officer of any issuer and that he be prohibited from becoming or acting as a director or officer of any issuer;

1.4 pursuant to section 161(1)(d) of the Act, that DiIanni be prohibited from engaging in investor relations activities;

1.5 pursuant to section 174 of the Act, that DiIanni pay prescribed fees or charges for the costs of or related to the Hearing; and

1.6 such further and other relief as the Commission considers appropriate in the circumstances.

[para 2]
2. The Commission will be asked to consider the following facts and allegations before making its determinations:

Prior regulatory and criminal proceedings
2.1 On January 25, 1984, in proceedings before the United States Securities and Exchange Commission (the “SEC”), DiIanni was barred by the SEC from association with any broker, dealer, municipal securities dealer, investment adviser, or investment company for a period of at least four years.

2.2 On August 17, 1987, a Final Judgment of Permanent Injunction was issued by the United States District Court for the District of Massachusetts in a civil suit initiated by the SEC against DiIanni.

2.3 On December 20, 1988, DiIanni was Indicted by a Grand Jury in the United States District Court for the District of Massachusetts on 45 counts ^ including mail fraud, wire fraud, securities fraud, interstate transportation of stolen property, and aiding and abetting.

2.4 ^ DiIanni plead guilty to six of the counts in the Indictment, including mail fraud, wire fraud, interstate transportation of stolen property, and securities fraud involving a series of schemes whereby he defrauded clients of over $1.3 million USD. On November 28, 1989, DiIanni was sentenced to imprisonment for 42 months, probation for a period of three years, payment of restitution to the victims, and a special condition that DiIanni comply with the Permanent Injunction obtained by the SEC.

2.5 During the period from May 3 to July 30, 1993 (the “Relevant Period”), DiIanni had trading authority over several brokerage accounts which were involved in ^ trading activities in the securities of Annisquam Art Company Ltd. (now Citrine Holdings Limited) (“Annisquam”) that were contrary to the public interest. The shares of Annisquam were listed for trading on the Vancouver Stock Exchange (now Canadian Venture Exchange (CDNX)).

2.6 On January 5, 1994, as a result of the criminal conviction, the SEC Injunction, and the trading activities of DiIanni, the Executive Director issued temporary orders (the “Temporary Orders”) under section 144 of the Securities Act, S.B.C. 1985, c. 83 (the “Former Act”), section 161 of the Act. The Temporary Orders had the effect of precluding DiIanni, among others, from trading in the securities of Annisquam.

Annisquam, Ralston and DiIanni: the Relationship
2.7 DiIanni represented in documents that Ralston Limited Partnership (“Ralston”) was a Massachusetts limited partnership specializing in investments in publicly owned companies, that he was a consultant to Ralston, and that he had been given non-exclusive trading authority over Ralston’s brokerage accounts by the General Partner of Ralston.

2.8 DiIanni further represented in documents that purchases of securities of Annisquam were made in the market, on his instructions, on behalf of Ralston, and those securities were held in accounts at Union Securities Limited (“Union Securities”) and at G.R. Stuart Securities Inc., a U.S. broker dealer.

2.9 DiIanni had trading authority over at least two accounts at Union Securities in the name of Ralston during the Relevant Period.

2.10 DiIanni also had trading authority over accounts in the name of Ralston and in his own name at Georgia Pacific Securities Corporation (“Georgia Pacific”) during the Relevant Period.

Trading in the Securities of Annisquam by Ralston
2.11 Accounts in the name of Ralston at several brokerage firms, including Union Securities, Georgia Pacific, G.R. Stuart & Company, Inc., which cleared through National Financial Services Corporation, Bishop Rosen & Co. Inc., which cleared through RBC Dominion, and another U.S. broker dealer, which cleared through Canaccord Capital Corporation, traded in securities of Annisquam during the Relevant Period. Those accounts participated in jitney trades (where one broker dealer trades on behalf of another broker dealer’s client) in the securities of Annisquam.

2.12 The issued and outstanding share capital of Annisquam during the Relevant Period was approximately 9,318,228 shares.

2.13 It appears that during the Relevant Period:

2.13.1 2,413,749 shares of Annisquam were traded on the facilities of VSE;

2.13.2 the Ralston accounts at Union Securities were two of the four most active accounts that traded in the securities of Annisquam;

2.13.3 the Ralston accounts at Union Securities purchased and sold 626,500 shares of Annisquam, being 25.96% of the total 2,413,749 shares of Annisquam traded;

2.13.4 the Ralston accounts at Union Securities accounted for 73% of 313 upticks (purchases of shares made at a higher price than the previous purchase), with most of the uptick trades occurring in the last half-hour of the trading day (or being high closes);

2.13.5 the Ralston accounts at Union Securities accounted for 73% of high close trades in Annisquam securities;

2.13.6 the Ralston accounts at Union Securities accounted for 59% of the new high trading prices for Annisquam securities;

2.13.7 Brink Hudson Lefever Ltd. executed 118 jitney trades relating to Annisquam securities;

2.13.8 Union Securities executed 98 jitney trades relating to Annisquam securities; and

2.13.9 Georgia Pacific executed 51 jitney trades relating to Annisquam securities.

2.14 It appears that:

2.14.1 the price of securities of Annisquam was approximately $0.22 on October 15, 1992, about $1.60 on May 3, 1993, about $3.45 on July 30, 1993, and about $4.30 on August 20, 1993; and

2.14.2 the Ralston accounts at various broker dealers participated in the increase in price of securities of Annisquam during the Relevant Period through a practice of high closing, upticking, new high trades, and market domination.

2.15 It appears that Ralston’s accounts at Union Securities were involved in a number of uneconomic trades in or about the Relevant Period. In particular, Ralston sold shares of Annisquam at prices lower than it purchased securities of Annisquam, often on the same trade day. Nonetheless, there was a large debit in one of the Ralston accounts at Union Securities for a number of months from April, 1993.

2.16 DiIanni engaged in or participated in the transactions set out in paragraphs 2.13, 2.14 and 2.15 relating to the acquisition of or trade of securities of Annisquam when DiIanni knew, or ought reasonably to have known, the transactions created or resulted in a misleading appearance of trading activity in, or an artificial price for, the securities of Annisquam, contrary to section 41.1(a) of the Former Act (now section 57(a) of the Act), and contrary to the public interest.

2.17 The Executive Director also gave notice of a hearing (the “Notice of Hearing”) to be held on January 18, 1994, to give DiIanni an opportunity to be heard before the Commission to determine whether further orders should be made under section 144 of the Former Act.

2.18 The Commission has adjourned the hearing generally, by consent, on January 5, 1994 and February 16, 1994, and extended the Temporary Orders, until such time as a hearing is held and a decision rendered.

[para 3]
3. DiIanni may be represented by counsel ^ and may make representations and lead evidence at the Hearing on Wednesday, September 5, 2001, at 10:00 a.m. DiIanni is requested to advise the Commission of his intention to attend the Hearing by contacting the Secretary to the Commission at P.O. Box 10142, Pacific Centre, 701 West Georgia Street, Vancouver, BC, V7Y 1L2, or by telephone at (604) 899-6500, or by email at commsec@bcsc.bc.ca.
^
[para 4]
4. Determinations may be made in this matter if DiIanni or his counsel do not appear at the Hearing.

[para 5]
DATED at Vancouver, British Columbia, on August 14, 2001.





Steve Wilson
Executive Director
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