Settlements

FIRST MARATHON SECURITIES LIMITED [Agreed Stmt]

BCSECCOM #:
Document Type:
Agreed Stmt
Published Date:
1999-02-05
Effective Date:
1999-01-29
Details:


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

AND

IN THE MATTER OF FIRST MARATHON SECURITIES LIMITED


Agreed Statement of Facts and Undertaking

The following agreement has been reached between First Marathon Securities Limited (“FMSL”) and the Executive Director:

Facts

1. FMSL acknowledges the following facts as correct:
      1.1 FMSL is an investment dealer registered pursuant to the Securities Act, R.S.B.C. 1996, c. 418 (the “Act”), has its head office in Toronto, Ontario and is a member of the Vancouver Stock Exchange, Alberta Stock Exchange (the “ASE”), and The Toronto Stock Exchange;

      1.2 Cartaway Resources Corporation (“Cartaway”) is a company incorporated under the laws of the Province of Alberta, under the name Cambridge Ventures Corporation on June 5, 1986. It changed its name to Cartaway Container Corporation on September 29, 1989, and was registered extra-provincially in British Columbia on July 25, 1995. It changed its name to Cartaway Resources Corporation on July 29, 1996. Cartaway was at all material times a reporting issuer in Alberta trading on the ASE, and became a reporting issuer in British Columbia on November 3, 1995;

      1.3 between June 1, 1994 and June 30, 1996, (the “Relevant Period”) Robert Hartvikson, Blayne Johnson, Eric Savics, David Lyall and Robert Disbrow (the “Brokers”) were registered representatives, registered pursuant to the Act, and were employees of FMSL, working in FMSL’s Vancouver branch office;

      1.4 Disbrow was the Branch Manager of FMSL in Vancouver, and was a director and a Vice-Chairman of FMSL. He was during the Relevant Period the person who had the responsibility of supervising the FMSL employees in the Vancouver office;

      1.5 Larry Birchall, Michael Stuart, Charles Fraser and Matt Aufricht were registered representatives and were employees of FMSL working in FMSL’s Calgary office during the Relevant Period;

      1.6 by an agreement in writing dated September 1, 1994, Birchall, Stuart, Hartvikson, Johnson, Lyall, Savics, Aufricht and Fraser acquired 45.5% of the issued and outstanding shares of Cartaway for $0.10 per share;

      1.7 Stuart was at all material times a vice president of corporate finance of FMSL in Calgary and became president, secretary, and a director of Cartaway on October 17, 1994;

      1.8 on April 19, 1995, Cartaway issued a press release announcing a brokered private placement of up to seven million (7,000,000) units of Cartaway securities priced at $0.125 per unit, each unit consisting of one common share and one share purchase warrant entitling the holder to purchase an additional common share at $0.20 for a period of two years from closing (the “Private Placement”). The Private Placement was to close on May 5, 1995;

      1.9 FMSL acted as agent for the Private Placement, pursuant to a written agreement dated May 5, 1995, between FMSL and Cartaway. Stuart signed the agreement for both contracting parties;

      1.10 at the conclusion of the Private Placement, FMSL employees and their families owned approximately 66% of the issued and outstanding common shares of Cartaway;

      1.11 on or about May 12, 1995, trading in the shares of Cartaway was halted on the ASE at the request of the company, pending an announcement;

      1.12 trading in the shares of Cartaway did not resume until July 4, 1995;
      1.13 during the period of the trading halt:
          1.13.1 Cartaway engaged in a distribution, by way of an offering memorandum dated June 23, 1995, (the “Offering Memorandum”) of 4,000,000 special warrants at $1 per share for Series A warrants and $1.50 per share for Series B warrants. The Offering Memorandum was filed with the British Columbia Securities Commission and the offering completed on July 11, 1995;

          1.13.2 FMSL acted as agent for the distribution;

          1.13.3 on June 29, 1995, Cartaway issued a press release disclosing that John Ivany had joined the company as President and a director and Walter Nash had joined as Vice President in charge of exploration and as a director. Stuart resigned as President but remained a director; and

          1.13.4 on June 29, 1995, Cartaway announced the acquisition of a number of mining claims and a change in business direction for Cartaway into mining.
Acknowledgment

2. FMSL acknowledges the following in respect of the facts referred to above:
      2.1 during the Relevant Period FMSL failed to apply proper business procedures in breach of section 44(1) of the Securities Rules, B.C. Reg. 194/97 (the “Rules”);

      2.2 FMSL failed to ensure that Disbrow, as branch manager, carried out his duties of supervision;

      2.3 as a result of the facts described in paragraph 1.1 and the failures described in paragraphs 2.1 and 2.2 above, FMSL may have inadequately addressed the potential conflicts of interest that arose between the Brokers, Stuart, Cartaway, clients of FMSL and FMSL; and

      2.4 the circumstances as outlined above, particularly paragraphs 1.9, 1.10 and 1.13, created an unacceptable risk that the integrity of the capital markets might be compromised.

FMSL Internal Policy

3. FMSL has fully cooperated with the British Columbia Securities Commission throughout the course of the investigation.

4. FMSL has taken remedial action, satisfactory to the British Columbia Securities Commission, to improve its compliance and supervision programs and procedures so as to address the supervisory failures referred to herein.

5. FMSL has developed and implemented an internal policy referred to as “The First Marathon Employee Investment Policy” which is designed to address, among other things, the potential conflicts that arise in circumstances where employees of FMSL either individually or collectively own a significant percentage of the securities of any issuer. Among the policies outlined are the following:
      5.1 no employee of FMSL will act in the legal role of a promoter for any issuer;

      5.2 no employee of FMSL will, individually or with others purchase or otherwise, acquire, directly or indirectly, a corporate shell to be used to obtain access to public market financing;

      5.3 employees of FMSL are required to notify the Vice President of Compliance of FMSL when their holdings of any public company reaches five per cent of the issued and outstanding shares; and

      5.4 the collective holdings of FMSL employees of the issued and outstanding shares of any public company must not exceed 19.9% without the written consent of the Vice President of Compliance of FMSL.
Undertakings

6. FMSL undertakes as follows:
      6.1 to pay $50,000 to the British Columbia Securities Commission, as a contribution to the costs of the investigation; and

      6.2 to donate $450,000 to the Mineral Deposit Research Fund at the University of British Columbia.

7. FMSL waives any right it 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.

8. The British Columbia Securities Commission and FMSL have agreed to a full and final settlement to resolve the allegations and proceedings set out in the Notice of Hearing In the Matter of Cartaway Resources Corporation as against FMSL dated July 17, 1998 on the basis of the terms and conditions set out in this Agreed Statement of Facts.



DATED at Toronto, Ontario, on January 28, 1999.




FIRST MARATHON SECURITIES LIMITED




Per: “Michael Walsh
Authorized Signatory




DATED at Vancouver, British Columbia, on January 29, 1999.





Michael J. Watson
Executive Director




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