Decisions
CANADIAN GLOBAL FINANCIAL GROUP LTD., et. al. [Ruling]
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BCSECCOM #:
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Document Type:
Ruling
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Published Date:
1999-12-03
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Effective Date:
1999-11-26
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Details:
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IN THE MATTER OF THE SECURITIES ACT
R.S.B.C. 1996, c. 418
AND
IN THE MATTER OF CANADIAN GLOBAL FINANCIAL GROUP LTD.
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IN THE MATTER OF CANADIAN GLOBAL FINANCIAL GROUP LTD.
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IN THE MATTER OF ENVIROSONICS TECHNOLOGIES INC.
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IN THE MATTER OF CANADIAN GLOBAL INVESTMENT CORPORATION, DANNY FRANCIS BILINSKI, ROBERT PIERRE LAMBLIN, LINDY ARNOT, KEVIN WALL AND DON WILSON AND ANY OTHER INDIVIDUAL REGISTERED TO TRADE ON BEHALF OF CANADIAN GLOBAL INVESTMENT CORPORATION
HEARING
PANEL: JOYCE C. MAYKUT, Q.C. VICE CHAIR
JOHN K. GRAF MEMBER
ROY WARES MEMBER
DATE OF HEARING: OCTOBER 26 TO 27, NOVEMBER 1, 1999
DATE OF DECISION: NOVEMBER 26, 1999
APPEARING: PATRICIA A.A. TAYLOR FOR COMMISSION STAFF
MARK ANDREWS FOR CANADIAN GLOBAL
LATA C. CASCIANO FINANCIAL GROUP LTD.,
- ENVIROSONICS TECHNOLOGIES INC.,
CANADIAN GLOBAL INVESTMENT CORPORATION, DANNY FRANCIS BILINSKI, ROBERT PIERRE LAMBLIN, LINDA ARNOT, KEVIN WALL, DON WILSON, DOUG WILSON
RULING OF THE COMMISSION
1. INTRODUCTION
On September 30, 1999, the Executive Director issued orders under section 161(2) of the Securities Act, R.S.B.C. 1996, c. 418, cease trading the securities of Canadian Global Financial Group Ltd. and Envirosonics Technologies Inc. The temporary orders, set to expire on October 8, 1999, were accompanied by a notice of hearing to be held before the British Columbia Securities Commission on October 8, 1999.
On October 8, 1999, the Commission considered an application by Commission staff to extend the temporary orders under section 161(3) of the Act and to adjourn the hearing until their investigation was concluded. On October 15, 1999, the Commission issued its Ruling on the application, see COR#99/275. The Commission stated there was prima facie evidence that the securities of Canadian Global Financial and Envirosonics were sold to clients of Canadian Global Investment Corporation, a registered mutual fund dealer, contrary to sections 34 and 61 of the Act. On this basis and in light of Commission staff’s continuing investigation, the Commission considered it necessary and in the public interest to order under section 161(3) of the Act that the temporary orders be extended until a hearing is held and a decision rendered. The Commission adjourned the hearing against Canadian Global Financial and Envirosonics to October 26, 1999.
In its Ruling, the Commission also stated that evidence before it raised concerns about the registrations under the Act of Canadian Global Investment, Danny Francis Bilinski, Robert Pierre Lamblin, Lindy Arnot, Kevin Wall and Don Wilson and any other individual registered to trade on behalf of Canadian Global Investment (the “New Respondents”). The Commission found that the New Respondents sold Canadian Global Financial and Envirosonics securities to clients of Canadian Global Investment in circumstances:
· that bring into question the suitability of the securities for these clients;
· where the money raised from investors aggregating over $5 million has not yet been accounted for;
· where the money was invested in the parent of Canadian Global Investment and in its indirect wholly owned subsidiary;
· where for the last financial year of Canadian Global Investment most of its gross commissions were from the sale of exempt securities; and
· where Canadian Global Investment, just over two years ago, entered into a settlement with the Executive Director for failure to maintain proper books and records.
Between October 20 and November 1, 1999, applications were made under section 171 of the Act, by some of the New Respondents to vary the temporary orders issued by the Commission on October 15, 1999. On October 21, 1999, the Commission varied the temporary orders to permit the New Respondents to use, in certain circumstances, the exemption described in section 44(2)(e) of the Act in connection with the purchase and sale of a mutual fund security. On October 29, 1999, the Commission further varied the temporary orders to permit the New Respondents to use the exemptions in section 75 of the Act to distribute the securities of Canadian Global Real Estate Holdings Ltd., Columbia Ostrich (VCC) Ltd., Gorlan Trailer Technologies Inc. and Pacific Bowling Centers, Inc., provided that each distribution of each security is made through a registered dealer under the Act other than Canadian Global Investment.
The hearing to consider whether the temporary orders made, and as varied, against Canadian Global Financial, Envirosonics and the New Respondents ought to be varied further or extended, proceeded on October 26, 27 and November 1, 1999.
The Commission had before it the evidence in the October 8, 1999, application. This evidence included the affidavits of Wendy Sullivan, the Chief Examiner of the Registration Division at the Commission and the person principally responsible for conducting the staff audit of Canadian Global Investment under section 39 of the Act and of Manmohan Sanghera, an examiner with the Registration Division at the Commission. A copy of a draft offering memorandum for Canadian Global Financial was attached to Sullivan’s affidavit. Several other affidavits were filed including those of Robert Head, Commission staff investigator, sworn October 26, 1999, Bilinski sworn October 26, 1999, Don Wilson sworn October 25, 1999, and Douglas Wilson sworn October 25, 1999, and November 1, 1999. A copy of an offering memorandum for Pacific Bowling Centers signed and dated June 25, 1999, was attached to Bilinski’s affidavit. An affidavit of Colin Russell Martin sworn October 25, 1999, which had attached as exhibits the affidavits of Renee Smitherman, Neil Anthony Singleton and Lita Martin, each of which was sworn October 25, 1999 was also filed. Each of Martin, Smitherman and Singleton is a sales representative with Canadian Global Investment and a New Respondent not represented by counsel.
In addition, counsel for Canadian Global Investment filed a book of four offering memoranda relating to Canadian Global Real Estate Holdings Ltd., Columbia Ostrich (VCC) Ltd., Gorlan Trailer Technologies Inc. and ARC Sonics International Inc. The Canadian Global Real Estate memorandum was dated July 1, 1999. However the copy before us was not signed and did not include the referenced schedules. The Columbia Ostrich memorandum was dated August 16, 1999, and was signed by one of the two directors indicated. The Gorlan Trailer memorandum was dated and signed on March 5, 1999. The ARC Sonics International memorandum was dated August 4, 1998 and was unsigned.
Counsel for Canadian Global Investment represented at the hearing that Canadian Global Investment was unable to find another registered dealer under the Act that would agree to distribute the securities of Canadian Global Real Estate, Columbia Ostrich, Gorlan Trailer and Pacific Bowling in accordance with the Commission’s variation order of October 29, 1999, and sought to have that condition removed. Bilinski also stated in his affidavit that there will be “extraordinarily prejudicial impact upon” several Canadian Global Financial projects, including Canadian Global Real Estate, Columbia Ostrich, Gorlan Trailer and Pacific Bowling, if the temporary orders remain in effect. Counsel argued that while it may be appropriate to extend the Envirosonic’s temporary order, the temporary order against Canadian Global Financial should be varied by extending it until an offering memorandum prepared and accepted by Commission staff is filed in accordance with the Act and delivered, together with an offer of rescission, to all persons who subscribed for Canadian Global Financial securities. Finally, counsel argued that there was no reason for the continuation of the temporary orders, as varied, restricting the New Respondents’ use of statutory exemptions and that these orders should be revoked in their entirety.
Commission staff argued that the temporary orders againstCanadian Global Financial and Envirosonics should not be revoked and that the temporary orders, as varied, against the New Respondents should not be varied further. Commission staff also argued that they require a further 180 days to complete their investigation and that all of the temporary orders ought to be extended until a hearing is held and a decision rendered.
The Commission reserved its decision and considering it necessary and in the public interest extended, under section 161(3) of the Act, the temporary orders, as varied, until this ruling is rendered.
Subsequent to the hearing, the Commission received a letter dated November 3, 1999, in which counsel for Pacific Bowling represented to counsel for Canadian Global Investment Corporation the “need for immediate funding” of a “further $1,000,000…in order to complete” the Pacific Bowling project scheduled for opening on November 20, 1999, and to prevent the project from being shut down by the general contractor “in the event an interim payment is not made by the end of this week".
On November 4, 1999, the Commission further varied the temporary orders to permit each of the New Respondents to use the exemptions described in sections 44 to 47, 74, 75, 98 and 99 of the Act in connection with the distribution of the securities of Canadian Global Real Estate, Columbia Ostrich, Gorlan Trailer and Pacific Bowling provided that:
· the New Respondents do so in accordance with the requirements of the Act, including the requirements relating to the ‘know your client’ and suitability of investment rules as described in Commission Notice 98/56; and
· where an investment in any of the securities of Canadian Global Real Estate, Columbia Ostrich, Gorlan Trailer and Pacific Bowling has been determined by a New Respondent to be unsuitable for an investor and the investor nonetheless wishes to purchase the security, the distribution of that security must be made through a registered dealer under the Act other than Canadian Global Investment.
This is our ruling and our reasons on the remaining aspects of the temporary orders.