Mark L. Skwarok and Mary Beck, for the Superintendent of Brokers.

Dwight C. Harbottle, for James Elias Ryan.

DECISION AND REASONS OF THE COMMISSION:-- This matter was brought before the Commission by the Superintendent of Brokers through a notice of hearing under section 144 of the Securities Act (the "Act"), dated July 19, 1990. The notice was issued in connection with alleged misrepresentations to the Commission by Mr. James Elias Ryan ("Ryan").

The Superintendent alleged that on three occasions in 1989, in filing a Uniform Application for Registration/Approval ("Form 4") as a director or officer of a reporting issuer, Ryan made various misrepresentations regarding, inter alia, previous registrations and licensing, suspensions and other disciplinary actions.

The notice stated that the Commission would be asked to determine whether it is in the public interest:

1.		To order under Section 144(1)(c) of the Act, S.B.C. 1985, c. 83, that any or all of the exemptions described in Sections 30 to 32, 55, 58, 80 and 81 do not apply to Ryan;
2.		To order under Section 144(1)(d) of the Act that Ryan resign as a director or officer of any reporting issuer and is prohibited from becoming or acting as a director or officer of any reporting issuer;
3.		To order under Section 154.2 of the Act that Ryan pay prescribed fees or charges for the costs of or related to the hearing;
4.		To make any other orders as may be appropriate in the circumstances.

Ryan is a resident of the United States of America and, during most of 1989, was Director, President, Chief Executive Officer and Chief Financial Officer of Dunvegan Exploration Ltd. ("Dunvegan") and Vice-President, Finance, of American Platinum Inc. ("American Platinum"). Dunvegan is a company incorporated under the Company Act, R.S.B.C. 1979, c. 59 (the "Company Act"). American Platinum is a company incorporated under the Company Act whose shares were listed and posted for trading on the Vancouver Stock Exchange throughout 1989.

Regulatory, Criminal and Civil Actions

The evidence identified the following regulatory, criminal and civil actions against Ryan during his career in the securities industry:

	- On February 23, 1976, the District Business Conduct Committee of the National Association of Securities Dealers ("NASD"), in San Francisco, California, fined Ryan $250 and censured him for failing to file an advertisement with the NASD and for soliciting business through letters containing misleading language.
	- On April 5, 1982, the United States Securities and Exchange Commission ("SEC") suspended Ryan from associating with any broker or dealer for three months. The Commission found that Ryan had sold unregistered securities, consisting of 75,000 shares of a mining company; fraudulently charged excessive mark-ups to clients in 179 transactions involving various securities; and deliberately delayed time stamping customer order tickets. This decision was affirmed on appeal by the United States Court of Appeals for the Ninth Circuit on May 23, 1983.
	- On June 2, 1983, the Arizona Corporation Commission issued a cease and desist order against Ryan and three other individuals, all of whom were salesmen for National Securities Corporation ("National"). The order was based on findings by the commission that Ryan and the others had offered to sell or sold 24 different securities within the State of Arizona that were not registered and that Ryan and the others had acted as dealers or salesmen in connection with these transactions without being registered.  Ryan subsequently obtained registration in Arizona in early 1984.
	- Also on June 2, 1983, the Arizona Corporation Commission denied registration to National. Ryan's Form 4 stated that he was vice president of National from 1977 to 1989. This denial of registration was based on findings that National offered to sell or sold securities within the State of Arizona that were not registered and that National had acted as a dealer or salesman in connection with these transactions without being registered.
	- On January 28, 1985, the Nebraska Department of Banking and Finance, Bureau of Securities, denied Ryan's application for registration due to the SEC decision of April 5, 1982 and the Arizona decision of June 2, 1983. On July 19, 1985 this decision was affirmed following a hearing. On August 1, 1986 the decision was vacated and Ryan was granted registration.
	- On February 8, 1985, the Kentucky Division of Securities rejected Ryan's application for registration "for disciplinary reasons". Ryan later resubmitted an application and was approved for registration on August 20, 1985.
	- On June 16, 1985, the Tennessee Securities Division entered a complaint and notice for an order denying Ryan's application for registration. On April 3, 1986, following a hearing of the complaint, the Commissioner of Commerce and Insurance granted registration to Ryan subject to a probation period of one year.
	- On March 14, 1986, a civil complaint (the "Sundt Complaint") was filed in the Superior Court of Washington for King County, against Ryan, his wife and National, alleging misrepresentation and fraud in the sale of securities. The court was later advised that the Sundt Complaint was settled between the parties and the case was dismissed.
	- On May 26, 1987, Ryan was charged by grand jury indictment in New Mexico with one count of conspiracy to commit securities fraud and eleven counts of securities fraud. On December 27, 1988, Ryan entered a Settlement agreement with the Attorney General of New Mexico under which he paid $25,000 to the Attorney General, voluntarily refrained from doing business as a securities sales person for fifteen business days, and agreed to certain restrictions and requirements regarding future representations regarding his expertise and analysis. In return, the Attorney General agreed to dismiss with prejudice all charges against Ryan.
	- On July 21, 1989, a civil complaint (the "Hurst Complaint") was filed in the Superior Court of Washington for King County, against Ryan, his wife and National, alleging misrepresentation and fraud in the sale of securities. Ryan testified that the Hurst complaint has now been settled.
	- On January 29, 1990, the District Business Conduct Committee of NASD in Seattle, Washington issued a complaint against Ryan alleging that, in 1987, he engaged in unfair sales practices and made unsuitable recommendations in connection with transactions involving two customers.

Ryan filed a Form 4 with the Commission, dated February 21, 1989, as a prospective officer of American Platinum.  The form was sworn before a lawyer in Vancouver.

Form 4 is a questionnaire through which an individual who applies for registration under the Act or who is a director or officer of a reporting issuer or an issuer filing a preliminary prospectus is required to provide certain personal information to the Commission. Questions 13 to 18 of Form 4 deal with regulatory, criminal or civil actions against the individual or an entity with which the individual was associated. The individual is required to provide details in respect of any question to which the answer is "Yes".

Form 4 requires the individual to swear the following affidavit: "I, the undersigned applicant, do depose and say that I have read and understand the questions in this application form as well as the answers made by myself thereto and the Caution set out above, and that statements of fact made therein and in the attachments, if any, are true." The "Caution" referred to states that "Filing of any false information or failure to disclose full information required by or on this application may result in rejection or in disciplinary action taken against the applicant ...".

Question 13(A) of Form 4, asks the following: "Have you ever been refused registration or a licence, or has your registration or licence been suspended or cancelled, under any act or regulation thereof, regulating trading in securities, commodities or commodity futures contracts of any province, territory, state or country."

Ryan answered "No" to this question. The Superintendent argued that the answer should have been "Yes" and that Ryan ought to have disclosed the SEC decision of April 5, 1982, the Nebraska decision of January 28, 1985 and the Tennessee decision of June 16, 1985.

Question 13(B) of Form 4 asks the following: "Are you now or have you ever been a partner, shareholder, director or officer of a company or of a partnership which has, during the time of your association with it, been refused registration ... or a licence, or whose registration has been suspended or cancelled under the act, or regulation thereof, regulating trading in securities ... of any province, territory, state or company."

Ryan answered "No" to this question. The Superintendent argued that the answer should have been "Yes" and that Ryan ought to have disclosed the Arizona Corporation Commission's denial of registration in respect of National on June 2, 1983.

Question 13(E) of Form 4 asks the following: "Has any prior or current registration or licensing to deal or trade in securities ... held by you or any partnership or company of which you were at the time of such event a partner, officer or director ... ever been the subject of disciplinary action undertaken by any authority regulating or supervising trading in securities ... ?"

Ryan answered "No" to this question. The Superintendent argued that the answer should have been "Yes" and that Ryan ought to have disclosed the Arizona cease and desist order of June 2, 1983.

Question 14(C) of Form 4 asks the following: "Have you ... ever been the subject of disciplinary action undertaken by any authority as described in question 14(A)?"  The authorities described in question 14(A) include (among others) an association of investment dealers, investment bankers, brokers, or broker-dealers.

Ryan answered "No" to this question. The Superintendent argued that the answer should have been "Yes" and that Ryan ought to have disclosed the NASD fine and censure of February 23, 1976.

Question 16 of Form 4 asks the following: "Has any claim been made successfully or, to your knowledge, is any claim pending in any civil proceedings before a court or other tribunal in any province, territory, state or country which was, or is, based in whole or in part on fraud, theft, deceit, misrepresentation or similar conduct? (A) Against you? (B) Against any ... company... of which you were at the time of such event, or at the time such proceedings were commenced, [an] ... officer... ?"

Ryan answered "No" to this question. The Superintendent argued that the answer should have been "Yes" and that Ryan ought to have disclosed that an out-of-court Settlement was reached with respect to the Sundt Complaint filed against him and National in the Superior Court of Washington on March 14, 1986.

The Second Form 4

On September 19, 1989, Ryan filed another Form 4 with the Commission, as a director and officer of Dunvegan. This form was also sworn before a lawyer in Vancouver. Again Ryan answered "No" to sections 13(A), 13(B), 13(E), 14(C) and 16. Subsequent to his previous filing on February 21, 1989, the Hurst Complaint had been filed in the Superior Court of Washington on July 21, 1989. The Superintendent argued that this action ought to have been disclosed in respect of question 16.

The Third Form 4

Following discussions with the staff of the Commission, Ryan filed an amended Form 4 dated December 19, 1989, which replaced the September 19, 1989, filing. This form was also sworn before a lawyer in Vancouver. In this filing, Ryan changed his answers to questions 13(A), 13(B), 13(E), 14(C) and 16 from "No" to "Yes". The Superintendent argued that, in providing details in respect of these answers, Ryan ought to have disclosed and failed to disclose the denials of registration in Tennessee, Nebraska and Kentucky, the New Mexico Settlement, or the Sundt Complaint.  The Superintendent also argued that the regulatory sanctions that were disclosed were described inaccurately as follows:

	- In describing the NASD decision of April 8, 1976, Ryan stated that he was fined $250 "because my Secretary sent out letter mentioning a mutual fund without having enclosed a current prospectus". There was no reference to the fact that he was fined and censured for failing to file an advertisement and for soliciting business through letters containing misleading language.
	- Ryan described the SEC decision of April 5, 1983, as having been "for excessive mark-up on block of 75,000 shares of a listed stock. Time stamp violation found also." In fact, the SEC found that Ryan had sold 75,000 shares that were not registered and that he had charged excessive mark ups in 179 transactions involving various securities.
	- Ryan stated that National had failed to have him registered in Arizona and that Arizona took action against him "because of the SEC case". He also stated that "A cease and desist order was made by them, even though Ryan had not done any business in that state." In fact, the Arizona order made no reference to the SEC decision but was based on a finding that he sold 24 different unregistered securities in Arizona when neither he nor the securities were registered.

Ryan admitted that he had answered questions 13(A), 13(B), 13(E) and 14(C) incorrectly in the first and second Form 4's. He also admitted that question 16 was answered incorrectly on the second Form 4, but took the position that he was not required to disclose the Sundt Complaint because it had been settled and therefore the claim had not been made against him "successfully".

Ryan testified that he failed to ensure that his Form 4 filings were accurate because he was too busy to pay attention to the completion of forms. He explained that throughout his career he had always had others do things for him and that he had never been taught how to sign forms. He said that when he signed forms he just did what he was told and assumed that lawyers would ensure they were filled out properly. He said that he did not read the cautions on the Form 4's before signing them.

He also said that he had assumed that the Form 4 dealt only with Canadian matters and noted that similar forms in the United States deal only with matters that occurred within the past 10 years. He said he now realizes his error and has learned his lesson.

With respect to the third Form 4, Ryan testified that he assumed that what he gave the Commission staff was complete as he had been told that by his lawyer in Seattle. He said that he did not read the material before submitting it.

When questioned about the NASD decision, Ryan said that his advertisement was in accordance with the rules but that his secretary forgot to send it in to NASD. When it was pointed out that his defence at the time had not mentioned his secretary, he answered that "You don't understand the industry."

Ryan said that his problems with the SEC resulted from his disdain for the SEC staff in Seattle. He said that the finding against him regarding mark up violations was unique in the United States as no one else had been "nailed" on these matters. The SEC decision, however, noted that the SEC had "repeatedly" made findings that excessive mark ups were fraudulent.

Ryan testified that "the first I heard of the Arizona hearing was today, I never saw the notice, National handled it." However, the Arizona action has been at issue in many of the jurisdictions where Ryan has attempted to qualify for registration. Further, Ryan referred to the Arizona case in the third Form 4.

Ryan said that all his problems were caused by his reliance on others to attend to details. He testified that when he was at National he had 7,000 clients and received 700 calls a day, and that he relied on his secretary to ensure that business was handled properly.

DECISION

We find that Ryan gave false answers and failed to provide full information in his first and second Form 4 filings. He admitted that he answered questions 13(A), 13(B), 13(E) and 14(C) falsely in the first and second Form 4's and that he also answered question 16 falsely in the second Form 4. We find that he answered question 16 falsely in the first Form 4, as he ought to have reported the Settlement of the Sundt Complaint as a successful civil claim against him.

Although he corrected his answers to the questions in the third Form 4, the evidence clearly shows that it contained false statements and failed to provide full information.

The false answers and the information that Ryan failed to provide related to his past conduct in trading in securities. The information sought through Form 4 is important and relevant to the Commission in carrying out its mandate to regulate trading in securities.

The Commission must be able to rely on persons who file Form 4's to answer the questions truthfully. Commission staff cannot look behind the answers to every form to verify their accuracy. The importance of being truthful is emphasized by the caution contained in the Form 4 and by the fact that it is required to be sworn. In each case, Ryan swore as to the truth of the information before a lawyer.

We do not accept Ryan's explanations for his false answers and his failure to provide full information concerning his record of regulatory and civil actions in the first and second Form 4's. He had a positive obligation to ensure their truthfulness. His explanation that he relied on others to carry out this obligation is ludicrous.

With respect to the third Form 4, even after being prompted by the commission's staff, he provided false information and failed to provide full information with respect to his history of regulatory and civil actions.

Furthermore, in giving evidence at the hearing, Ryan gave inconsistent and evasive answers regarding his disciplinary history and continually blamed his problems on others. He gave answers under oath which were contradicted by the documentary evidence and which we find to be false.

We also note that the past regulatory and civil actions against Ryan in the United States were based on dishonest conduct and disregard for regulatory requirements.

The Superintendent noted that this was the first case concerning a false Form 4 to come before the Commission and suggested that the Commission should remove Ryan's trading exemptions and prohibit him from being a director or officer for three years.

We consider that, in this case, it is not necessary to deal with Ryan's trading exemptions. However, we consider it in the public interest, based on Ryan's filing of false Form 4's, his unwillingness to be truthful even at the hearing and his past history of misconduct, to protect the public by prohibiting him from being a director or officer for a lengthy period.

We order

	- under section 144(1)(d) of the Act, that Ryan resign any position that he holds as a director or officer of a reporting issuer and is prohibited from becoming or acting as a director of a reporting issuer for 5 years; and
	- under section 154.2 of the Act, that Ryan pay the prescribed fees or charges for the costs of or related to the hearing, the amount to be determined on application to the Commission if the parties are unable to agree on the amount.