Settlements

JAMES WALTER GLOVER [Agreed Stmnt.]

BCSECCOM #:
Document Type:
Agreed Stmnt.
Published Date:
1999-09-17
Effective Date:
1999-09-14
Details:


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

AND

IN THE MATTER OF JAMES WALTER GLOVER


Agreed Statement of Facts and Undertaking


1. The following agreement has been reached between James Walter Glover (“Glover”) and the Executive Director.

Statement of Agreed Facts

2. As the basis of the undertakings referred to in paragraph 3 of this agreement, Glover acknowledges the following facts as correct:
      2.1 On June 10, 1999, the Alberta Securities Commission entered into a Settlement Agreement and Undertaking (the “ASC Settlement”), a copy of which is attached as Exhibit “A” to this agreement, with Glover, with respect to matters involving a private placement of the securities of Consolidated Nu-Sky Exploration Inc. (“Consolidated Nu-Sky”), the securities of which have been (and still are) listed and posted for trading on the Vancouver Stock Exchange since January 14, 1987;

      2.2 The admissions of facts set forth in numbered paragraphs 2.1 through 2.28 of the ASC Settlement are correct;

      2.3 On or about October 15, 1993, Consolidated Nu-Sky distributed, by way of a private placement, 1,000,000 units of its own securities (the “Units”), each unit consisting of one common share and one share purchase warrant for $0.78 per unit;
      2.4 Subsequent to the distribution of the Units, Glover executed, and caused Consolidated Nu-Sky to file, a Form 20, Report of Exempt Distribution (the “Form 20”), with the British Columbia Securities Commission (the “BCSC”), in which it was disclosed that Glover, Tom Fehr (“Fehr”) and Stephen Reize (“Reize”) were purchasers, as principals, of 168,206, 84,614 and 73,717 of the Units, respectively, and that each of those trades had been made in reliance upon certain statutory exemptions from the registration and prospectus requirements of the Securities Act, S.B.C. 1985, c. 83 (the “Prior Act”);

      2.5 The Form 20 was received for filing by the BCSC on October 22, 1993;

      2.6 The Form 20 disclosed that 73,717 of the Units were distributed to Reize in reliance upon the “friends and relatives” exemption found in section 117(i) of the Securities Regulation, B.C. Reg. 270/86, now section 128(h) of the Securities Rules, R.B.C. Reg. 194/97; however, based on the facts contained in numbered paragraphs 2.21 and 2.22 of the ASC Settlement, which Glover has acknowledged as being correct, Consolidated Nu-Sky could not rely upon that exemption from the prospectus requirements of the Prior Act to distribute the Units to Reize;

      2.7 The distribution of the Units to Reize was not exempt from the registration and prospectus requirements of the Prior Act, and, therefore, violated sections 20 and 42 of the Prior Act;

      2.8 Based on the facts contained in numbered paragraphs 2.11 through 2.19 of the ASC Settlement, which Glover has acknowledged as being correct, Glover entered into a series of transactions involving himself, Fehr and Reize, to effect a distribution of an aggregate of 266,282 of the Units to 14 Alberta investors (the “Non-qualifying Investors”) who were not qualified to rely upon any of the exemptions from the registration and prospectus requirements of the Prior Act, which had the effect of circumventing the registration and prospectus provisions of the Prior Act;

      2.9 Glover and Fehr were not the principal purchasers of 168,206 and 84,614 of the Units, respectively, and Reize was not the principal purchaser of 13,462 of the Units;
      2.10 Glover, Fehr and Reize merely acted as nominee purchasers for the Non-qualifying Investors who had paid for the 266,282 Units;

      2.11 The Form 20 contained misrepresentations with respect to the distribution of the Units, in contravention of section 138(1)(b) of the Prior Act, now section 155(1)(c) of the Act, for which Glover is deemed to be responsible as a signatory of the Form 20; and

      2.12 The trades in the 266,282 Units were contrary to sections 20 and 42 of the Prior Act, now sections 34 and 61, respectively, of the Act, in that such trades were deemed to be a distribution without a preliminary prospectus and a prospectus having been filed with the Executive Director, and receipts obtained therefor, and without Glover, Fehr and Reize being registered to trade in the Units, at a time when no exemptions from the registration and prospectus requirements of the Prior Act were available.

Settlement and Undertaking

3. Based upon the facts as set out, Glover undertakes and agrees:
      3.1 not to breach the Act, the Rules or any applicable regulations, policies and guidelines;

      3.2 not to become or act as a director, officer or promoter of any issuer of securities in British Columbia for a period of six months, from the date of this agreement;

      3.3 not to engage in investor relations activities on behalf of any issuer of securities in British Columbia for a period of six months, from the date of this agreement;

      3.4 to take and complete successfully the securities program offered by Simon Fraser University, or a comparable course of study acceptable to the Executive Director, regarding public companies, and the duties and responsibility of directors and officers of public companies, prior to acting as a director or officer of any reporting issuer in British Columbia or engaging in investor relations activities on behalf of any reporting issuer in British Columbia; and

      3.5 to pay investigation costs in the amount of $1,000.00 to the BCSC.

4. Glover 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.

DATED at Calgary, Alberta, on September 8th, 1999.

“J. Skwarik” )
Witness Signature )
)
J. Skwarik )
Witness Name (Please Print) )
1400, 350 - 7th Ave SW )
Calgary, Ab, T2P 3N9 ) James Walter Glover
Address )
)
Legal Assistant )
Occupation )

DATED at Vancouver, British Columbia, on September 14, 1999.





                          Steve Wilson
                          Executive Director



EXHIBIT “A”
E/00111
ALBERTA SECURITIES COMMISSION
(the “Commission”)


IN THE MATTER OF The Securities Act
S.A. 1981 c.S-6.1, as amended (“the Act”)

-and-

IN THE MATTER OF James W. Glover
(“the Respondent”)


SETTLEMENT AGREEMENT AND UNDERTAKING


1. INTRODUCTION
      1.1 The Staff of the Commission (“the Staff”) conducted an investigation into allegations that the Respondent breached the requirements of the Act or rules pursuant to the Act (“the Rules”) and acted contrary to the public interest; and

      1.2 the Staff and the Respondent have agreed to resolve the allegations against the Respondent in this matter based on the terms and conditions set out herein.

2. AGREED STATEMENT OF FACTS

Consolidated Nu-Sky Exploration Inc.
      2.1 On or about July 15,1986, Tab Ventures Corp. (“Tab”) was incorporated pursuant to the Laws of British Columbia;

      2.2 on or about December 30, 1986, Tab became a reporting issuer in the Province of British Columbia and on or about January 14, 1987, became listed on the Vancouver Stock Exchange. As such, Tab became subject to the regulatory jurisdiction of the Vancouver Stock Exchange and the British Columbia Securities Commission;

      2.3 on or about June 22, 1987, Tab changed its name to Nu-Sky Exploration Inc. (“Nu-Sky”). On or about May 22, 1991, Nu-Sky changed its name to Consolidated Nu-Sky Exploration Inc. (“Consolidated Nu-Sky”);


      2.4 on or about August 29, 1989, Nu-Sky became a reporting issuer in the Province of Alberta pursuant to section 117 of the Act;

      2.5 on or about February 22, 1995, Consolidated Nu-Sky was granted a continuance under the Alberta Business Corporations Act and on May 31, 1995, was removed from the Register of the British Columbia Registrar of Companies;

The Parties
      2.6 at all material times, the Respondent was the President and a director of Consolidated Nu--Sky;

      2.7 at all material times, David Sevalrud (“Sevalrud”) was a barrister and solicitor, licensed to practise law in the Province of Alberta who acted as counsel to and was a director of Consolidated Nu-Sky;

      2.8 at all material times, Tom Fehr (“Fehr”) was an employee of Consolidated Nu-Sky who acted in accordance with the Respondent’s instructions;

      2.9 at all material times, Stephen Reize (“Reize”) was an acquaintance of the Respondent;

      2.10 none of the parties referred to above is, or has been, registered to trade in securities;
Private Placement
      2.11 on or about June 10, 1993, the Respondent actively solicited a number of investors resident in Alberta to participate in a private placement of securities of Consolidated Nu-Sky, namely, a unit offering of 1,000,000 units, each unit consisting of one common share and one share purchase warrant for $0.78 per unit. The units were represented to qualify as flow-through shares for income tax purposes;

      2.12 shortly thereafter and prior to the issuance of the units, the Respondent and Sevalrud became aware that pursuant to the British Columbia Securities Act and Regulation, to which Consolidated Nu-Sky was also subject, the amount paid for the securities in respect of all trades under subsection 117(i) of the British Columbia Securities Act, commonly known as the friends and relatives exemption, upon which Consolidated Nu-Sky intended to rely, could not exceed $250,000.00 during the 12-month period preceding the trade;

      2.13 as the amount that the Respondent had intended to solicit from the investors referred to above exceeded $250,000.00 during the 12-month period, fourteen (14) of the investors who had subscribed to the issue in the form of private placement subscription agreements could not purchase the securities pursuant to the above noted exemption (these investors are hereinafter referred to as the “Non-qualifying Investors”);

      2.14 it was thus decided that the Respondent, as a senior officer and director and Fehr as an employee (both of whom could avail themselves of other exemptions under the British Columbia Securities Act not subject to the $250,000.00 limit) would purchase 168,206 and 84,614 units, respectively, in their own names, on behalf of the Non-qualifying Investors from monies they and/or Consolidated Nu-Sky received from the Non-qualifying Investors;
        2.15 further, Reize in his own name, purchased 73,717 units, 13,462 of which were purchased from monies received from another Non-qualifying Investor;

        2.16 thereafter, on or about June 25, 1993, Consolidated Nu-Sky issued 1,000,000 units relying upon the exemptions contained in paragraph 107(1)(z) of the Act and the exemptions set out in the British Columbia Securities Act. The shares arising out of the units were subject to a one year hold period in Alberta from the date of the initial exempt trade (the “Hold Period”);

        2.17 sometime thereafter and prior to the expiry of the Hold Period, the Respondent provided a written undertaking (the “Undertaking”) to the Non-qualifying Investors advising that they would be entitled to their shares upon the expiry of the Hold Period. The Undertaking further stated that the Non-qualifying Investors would receive the flow-through tax benefit of the shares;

        2.18 the Undertaking was drafted and prepared by Sevalrud, as counsel to Consolidated Nu-Sky;

        2.19 ultimately, some of the Non-qualifying Investors did not receive their shares and none of the Non-qualifying Investors received the income tax benefits from the flow-through shares. However, the Respondent provided some of the Non-qualifying investors with additional shares as a result of this failure to receive a tax benefit;

    Form 20 Misrepresentation
        2.20 on or about October 20, 1993, following the approval of the issuance of the securities by the Vancouver Stock Exchange, Consolidated Nu-Sky filed a Form 20 pursuant to subsection 108(1) of the Act. The Form 20 disclosed that the Respondent, Fehr and Reize were the purchasers, as principal, of at least 168,206, 84,614 and 73,717units respectively and that such trades had been conducted in reliance on the exemptions from the prospectus and registration requirements contained in paragraph 107(1)(z) of the Act;

        2.21 further, the Form 20 filed by Consolidated Nu-Sky indicated that the trades to Reize had been conducted in reliance on the exemption from the prospectus and registration requirements contained in paragraph 107(1)(z) of the Act, commonly referred to as the “close friends or business associates” exemption;

        2.22 however, Staff’s investigation revealed that the use of the said exemption could not be supported based upon the evidence regarding the relationship between Reize and the directors and promoters of Consolidated Nu-Sky;

    Breach of Hold Period Requirements
        2.23 the provision of the Undertaking to the Non-qualifying Investors during the Hold Period constituted a trade in that it was an act or conduct in furtherance of a trade;

        2.24 the Respondent, however, relied upon the advice and direction of Consolidated Nu-Sky’s legal counsel, Sevalrud, in the provision of the Undertaking;

        2.25 Sevalrud entered into a Settlement Agreement with Staff in which he agreed to resign any and all positions he holds as a director or officer and further agreed not to become or act as a director or officer for a one (1) year period;

    Summary
        2.26 the sale of the securities to the Non-qualifying Investors, the unlawful use of the “close friends or business associates” exemption and the subsequent filing of a false Form 20 render the trades in securities of Consolidated Nu-Sky referred to above contrary to subsections 54(1) and 81(1) of the Act, in that such trades were a distribution, without a preliminary prospectus and prospectus having been filed with the Commission and receipts obtained therefor, and without the Respondent, Fehr or Reize being registered, at a time when no exemptions were available under the Act;

        2.27 the Respondent authorized, permitted or acquiesced in the said trades when he knew or ought to have known that said trades were in contravention of the Act;

        2.28 further, and as a result thereof, the Respondent has acted contrary to the public interest and in particular has acted or authorized or permitted acts in contravention of Rule 129 and subsections 54(1), 81(1), 108(1), and 109(3)(c) of the Act.

    3. SETTLEMENT TERMS
        3.1 The Respondent hereby undertakes to the Executive Director to make himself aware of the requirements of the Act and that he will comply with the Act and the Rules in the future;

        3.2 the Respondent hereby undertakes to the Executive Director to resign forthwith any and all positions he currently holds as a director or officer. There are two exceptions to the requirement that the Respondent resign any and all positions he currently holds as a director or officer: the Respondent is permitted to remain a director and officer of both 767736 Alberta Ltd., a holding company in which the Respondent and his wife are the sole shareholders and directors, and of Big Horn Meadows Development Corporation, which is the Respondent’s primary source of income. Further, the Respondent agrees not to become or act as a director or officer of any other issuer for a period of one (1) year;

        3.3 the Respondent shall not trade in any securities for a period of six (6) months from the date that this Settlement Agreement is executed, except that the Respondent be permitted to use the exemption contained in paragraph 65(1)(j) of the Act;

        3.4 the Respondent agrees to pay costs to the Commission in the amount of $2,500.00;

        3.5 the Respondent shall successfully complete and provide written confirmation of same to the Executive Director within six (6) months of the execution of this Settlement Agreement, the course by the Canadian Securities Institute, “The Securities Law and Regulation Seminar” or in the event of its unavailability another course approved by the Executive Director;

        3.6 the Respondent acknowledges that this agreement will remain on his file and may be referred to in any future disciplinary or other enforcement matters;
        3.7 the Respondent hereby waives any rights that he may have under the Act or otherwise, a hearing, review, judicial review or appeal of the matters referred to herein;

        3.8 this Settlement Agreement resolves all matters regarding the private placement of securities of Consolidated Nu-Sky described herein and in particular the Form 20 misrepresentation and breach of Hold Period requirement and the Staff will take no further steps, including the initiation of any proceedings before the Commission, with respect to these matters.
      Signed by James W. Clover )
      at Calgary, Alberta this )
      9th day of June, 1999, )
      in the presence of: )
      )
      ) (original signed by)
      Witness ) James W. Glover
      )


      Dated at Calgary, Alberta this ) ALBERTA SECURITIES COMMISSION
      )
      10th day of June, 1999 ) (original signed by)
      ) David Linder
      ) Executive Director
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