COR#96/020

John H. Frank, for Commission staff. Geoffrey Danzig.

This is a hearing under sections 144(1) and 144.1 of the Securities Act, S.B.C. 1985, c.83.  On July 20, 1995, notice was given to Geoffrey Danzig by the Superintendent of Brokers that a hearing would be held before the Commission on August 22, 1995, to determine whether it is in the public interest to make regulatory orders against Danzig under the Act.  The notice alleged that Danzig failed to file insider reports relating to his direct or indirect beneficial ownership of, or control or direction over, the securities of Boswell International Technologies Ltd., as required under section 70 of the Act.

The notice stated that the Commission would consider whether it is in the public interest to: remove any or all of the statutory exemptions available to Danzig, under section 144(1)(c) of the Act; prohibit Danzig from becoming or acting as a director or officer of any issuer, under section 144(1)(d) of the Act; order that Danzig pay an administrative penalty under section 144.1 of the Act;
order that Danzig pay prescribed fees or charges for costs related to the hearing, under section 154.2 of the Act; and
make any other orders as may be appropriate under the circumstances.

The notice stated that Danzig could be represented by counsel at the hearing and could make representations and lead evidence. The notice also stated that determinations could be made in the matter if Danzig did not appear at the hearing.

The hearing was held on the morning of August 22, 1995. Danzig appeared on his own behalf, testified and made submissions.  The hearing adjourned and the panel reserved its decision.

On November 14, 1995, counsel for Danzig sent a letter to the Commission, in which he sought to reopen the hearing on the basis that the process, in Danzig's case, offended the rules of natural justice.  Counsel submitted that Danzig "was advised, or at least understood from advice by staff of the Superintendent, that the matter would be brief and would not entail serious consequences."  Therefore, he concluded, Danzig was not adequately represented and, as a result, was unprepared to meet Commission staff's submissions.

Commission staff responded in a letter dated November 17, 1995, in which they stated that they had advised Danzig that the hearing would, perhaps, take a morning and that he could retain counsel.  They also stated that they had made no representations, and Danzig had made no inquiries, regarding the consequences that could flow from the hearing.  Commission staff submitted that Danzig's allegations were without foundation and that there is no reason in fact or in law to reopen the matter for further submissions or evidence.  The letter was copied to Danzig's counsel, who did not reply.

We conclude that there is nothing on the record in these proceedings to support Danzig's allegation that the rules of natural justice have been breached.  Danzig has not provided us with any legal authority in support of his application to reopen the hearing or with any indication that he has new or compelling evidence in this matter. In the circumstances, we decline to reopen the hearing.

2.   BACKGROUND

Boswell has been a reporting issuer since October 4, 1983.  Boswell's shares are listed and posted for trading on the Vancouver Stock Exchange.  Danzig was a director of Boswell from April 1992 to November 15, 1994.  He was also President and Chief Executive Officer of Boswell, and was responsible for running the company.

In July 1993, Danzig and two other directors of Boswell, Ronald J. Craig and Peter A. Junger, entered into  a partnership called the Craig Partnership.  Each of Danzig and Craig transferred 49,000 shares of Boswell, and Junger transferred 60,000 shares of Boswell, into the partnership, and each owned 33 1/3% of the partnership.  The partnership was established to operate a "market making account" in respect of Boswell shares.  Craig had trading authority for the account.  Danzig testified that he had no knowledge of the activity in the partnership account and had attended no partnership meetings.  The partnership was wound up sometime between June and November, 1994.  The partnership transferred 20,000 shares of Boswell back to Danzig in November 1994.

While Danzig was a director of Boswell, he purchased and sold shares of Boswell both directly, and indirectly through the partnership.  He submitted insider reports with respect to his initial holdings, and his subsequent transactions, as follows:

MONTH OF	DATE A REPORT WAS	DATE A REPORT
REPORT	RECEIVED BY THE	WAS FOUND
------	COMMISSION	ACCEPTABLE BY
	----------	THE COMMISSION
		--------------

March 92	April 12, 1994	July 6, 1994
March 93	April 12, 1994	July 6, 1994
May 93	April 12, 1994	July 6, 1994
July 93	April 12, 1994	July 6, 1994
August 93	April 12, 1994	July 6, 1994
September 93	April 12, 1994	July 6, 1994
October 93	April 12, 1994	July 6, 1994
November 93	April 12, 1994	July 6, 1994
December 93	April 12, 1994	July 6, 1994
January 94	April 12, 1994	July 6, 1994
February 94	April 12, 1994	July 6, 1994
March 94	June 7, 1994	July 28, 1994
April 94	June 7, 1994	July 28, 1994
May 94	June 7, 1994	July 28, 1994
June 94	July 22, 1994
	(date of report)	July 28, 1994
September 94	August 9, 1995	August 9, 1995
October 94	August 9, 1995	August 9, 1995
November 94	August 9, 1995	August 9, 1995

The insider reports reveal that, from March 1992 to November 1994, Danzig directly acquired 301,667 shares, valued at over $137,000 and disposed of 157,000 shares valued at over $44,000.  From July 1993 to November 1994, the partnership acquired 439,500 shares, valued at over $349,000 and disposed of 477,600 shares, valued at over $363,000.  These shares were traded in 157 transactions, many of which were made through the Exchange.  The figures in this paragraph do not include Danzig's transfer of 30,000 shares to the partnership or the partnership's transfer of 20,000 shares to Danzig.

Danzig testified that, prior to becoming a director of Boswell, he had been a director of two other public companies. He also testified that he had been trading in public companies for 20 years.  Yet he also testified that, until sometime in early 1994 when he received a call from someone at the Commission, he "didn't know anything about insider trading reports" and had never filed an insider report.  After that call, he gave his dealer account statements to Craig's secretary and relied on her to fill out his reports, because he knew nothing of the partnership trades and because he was frequently travelling to solicit business for Boswell.  He never looked at the reports prepared by Craig's secretary; he simply signed them.

3.

DECISION

The relevant provisions of the Act are as follows:

1(1)		"insider" means, where used in relation to an issuer, (a)  a director or senior officer of the issuer;
70(2)		A person who is an insider of a reporting issuer shall, within 10 days of becoming an insider, file an insider report in the required form effective the date on which he became an insider, disclosing any direct or indirect beneficial ownership of, or control or direction over, securities of the reporting issuer.
70(4)		Where a person (a)     has filed or is required to file an insider report under subsection (2) or under a former enactment, and (b)     whose direct or indirect beneficial ownership of, or control or direction over, securities of the reporting issuer changes from that shown or required to be shown in the latest insider report filed by him, he shall, within 10 days after the end of the month in which the change takes place, file an insider report in the required form disclosing

(c)

his direct or indirect beneficial ownership of, or control or direction over, securities of the reporting issuer at the end of that month, and

(d)   the change or changes in his ownership in securities of the reporting issuer that occurred during the month so long as he was an insider of the reporting issuer at any time that month.

Danzig was a director and senior officer of Boswell and, pursuant to section 1(1) of the Act, an insider of Boswell from April 1992 to November 1994.  Boswell was a reporting issuer throughout this period.

Danzig filed an initial insider report under section 70(2) of the Act for the month of March 1992.  This report was first submitted in April 1994 and found acceptable in July 1994, more than two years after it was required to be filed pursuant to section 70(2) of the Act.

During 17 months of the period that Danzig was an insider of Boswell, there were changes in Danzig's direct and indirect (through the partnership) beneficial ownership of Boswell shares.  Though Danzig eventually submitted acceptable insider reports with respect to each of these months, none of the reports was filed within 10 days after the end of the month in which the changes took place.

Therefore, we find that Danzig contravened section 70(2) of the Act on one occasion, and section 70(4) of the Act on 17 occasions, by failing to file the insider reports required to be filed under that section within the time periods set out in that section.

The Commission has noted in several decisions, including In the Matter of Robert Theodore Slavik (1990) BCSC Weekly Summary, Vol. 90:28, and  In the Matter of Seven Mile High Group Inc. [1991] 47 BCSC Weekly Summary 7, that disclosure of trading by insiders is a key element in the continuous disclosure regime for reporting issuers.  As the Commission stated in the  Seven Mile High decision at page 36:

The information provided by insider reports is important market information, as it discloses to market participants the trading activities of the persons most closely connected to, and therefore in a position to be most knowledgeable about, a reporting issuer.  Timely reporting is particularly important where, as in this case, the insider is an active trader.

Danzig had been trading in public companies for over 20 years, and had been a director of two public companies.  He should have been familiar with his obligation to file insider reports.  Even if Danzig had not known of this obligation prior to early 1994, when he received a call from the Commission, he can not claim to have lacked knowledge after that time.  Yet Danzig continued to file late reports.  It is no answer for Danzig to say that he relied upon another person to prepare his reports.  Danzig was the insider, and he had the obligation to ensure that his insider reports were both accurate and filed in a timely manner.  It is also no answer for Danzig to say that he knew nothing of the trading done by the partnership.  As a beneficial owner of the Boswell shares held by the partnership, he had an obligation to keep advised of and report in an accurate and timely manner the trades in those shares carried out by the partnership.

We consider Danzig's conduct to have fallen considerably below the standard expected of an insider and director of a reporting issuer.  We therefore consider it in the public interest to order:

1.		under section 144(1)(a) of the Act that Danzig comply with the requirement to pay $150 for filing three insider reports outside the required time period, as provided in section 183(1) Item 35 of the Securities Regulation, B.C. Reg. 270/86 (since January 1, 1996, section 22(1) Item 41 of the Securities Regulation, B.C. Reg. 478/95);
2.		under section 144(1)(c) of the Act that the exemptions described in sections 30 to 32.1, 55, 58, 80 and 81 of the Act do not apply to Danzig for a period of three years from the date of this decision;
3.		under section 144(1)(d) of the Act that Danzig is prohibited from becoming or acting as a director or officer of a reporting issuer

(a)		until he has successfully completed a course of study satisfactory to the Executive Director concerning the duties and responsibilities of directors and officers, and
(b)		a period of three years has elapsed from the date of this decision;

4.		under section 144.1 of the Act that Danzig pay within 30 days from the date of this decision an administrative penalty of $15,000; and
5.		under section 154.2 of the Act that Danzig pay prescribed fees and charges for the costs of or related to the hearing incurred by the Commission and the Executive Director, the amounts to be determined following further submissions from the parties.