Securities Law & Instruments


[Update: The terms and conditions imposed by the Director in this decision were removed as at January 31, 2009.]


In the Matter of the Registration of
CR Advisors Corporation


Opportunity to be heard by the Director
Section 26(3) Securities Act


Date:
June 16, 2008
 
Director:
David M. Gilkes
Manager, Registrant Regulation
Ontario Securities Commission
 
Submissions:
Isabelita Chichioco             For the staff of the Commission
Linda G. Currie                   For CR Advisors Corporation
 
Background

1.   CR Advisors Corporation (CR Advisors) has been registered in Ontario in the categories of Limited Market Dealer, and Investment Counsel and Portfolio Manager since August 28, 2003.

2.   CR Advisors was due to file its financial statements with the Ontario Securities Commission (OSC) on March 31, 2008. The financial statements for CR Advisors were filed on April 4, 2008.

3.   On April 14, 2008 staff of the OSC wrote CR Advisors indicating that a late filing fee was due and that it had recommended that terms and conditions be imposed on the registration of CR Advisors. CR Advisors paid the late filing fee on April 23, 2008.

4.   The Director may restrict a registration by imposing terms and conditions under section 26 of the Securities Act but must provide the registrant with the opportunity to be heard (OTBH) by the Director. On April 29, 2008 CR Advisors requested an OTBH.

5.   The OTBH was conducted through written submissions. The submission on behalf of CR Advisors was received on May 12, 2008.

Submissions

6.   OSC staff noted that this was the second time that CR Advisors had filed its financial statements late. It was late filing for the financial year ending December 31, 2004. As a result, the Director imposed terms and conditions requiring monthly financial reporting on the registration of CR Advisors for a period of six months in 2005.

7.   Counsel for CR Advisors explained that the delay in filing the statements was a result of a simple oversight by its legal counsel. Counsel believed that the late filing of the financial statements was an isolated and unique instance.

8.   Counsel further submitted that the Registrant would have to engage its auditor to review the monthly statements to ensure compliance with generally accepted accounting principles. These monthly reviews would result in the Registrant paying about $30,000 in accounting fees.

Suitability for Registration

9.   A registrant is in a position to perform valuable services to the public, both in the form of direct services to individual investors and as part of the larger system that provides the public benefits of fair and efficient capital markets. A registrant also has a corresponding capacity to do material harm to individual investors and the public at large.

10.  OSC staff focus on three criteria in determining whether an applicant is suitable for registration: proficiency, integrity and financial solvency.

11.  Financial statements are the principal tool used by the OSC to monitor a registrant’s financial viability and its capital position.

12.  The failure to file or late filing of audited financial statements is an important factor in determining the continuing suitability of a registrant. The experience of OSC staff has been that delays in filing financial statements can be indicative of a serious underlying financial problem with the registrant.

13.  A registrant cannot relieve itself of the filing requirement deadlines by engaging a third party to make filings. A registrant cannot delegate its responsibility for compliance with the requirements of securities legislation.

Decision

14.  All registrants are required to meet the filing requirements of the Securities Act within the prescribed time limits. The filing of annual audited financial statements is a serious regulatory obligation placed on registrants.

15.  When these obligations are not met, OSC staff has consistently recommended that terms and conditions to monitor the financial situation of the firm be imposed on its registration. Only in rare circumstances would this course of action not be followed. In general, the monitoring conditions are imposed for six months and may be imposed for a longer term when there has been repeat failures to meet filing requirements.

16.  A simple oversight by counsel for CR Advisors is not a persuasive reason to not impose monitoring terms and conditions. However, it is a reason to limit the duration of the terms and conditions even though this is the second time the Registrant has filed its financial statements late.

17.  It should not be a burden for the Registrant to provide monthly unaudited financial statements. The financial statements are not required to be reviewed by an auditor and all registrants are required to maintain proper books and records at all times. Furthermore, the Registrant has provided these type of statements to the OSC in the past.

18.  Therefore, the terms and conditions as set out in Schedule A are imposed on the registration of CR Advisors for a period of six months.

June 16, 2008

“David M. Gilkes”



Schedule A

Terms and Conditions on the Registration of
CR Advisors Corporation


1.   CR Advisors Corporation shall file on a monthly basis with the Compliance section of the Ontario Securities Commission, attention Financial Analyst, effective with the month ending May 31, 2008, the following information:
  1. year-to-date unaudited financial statements, which includes a balance sheet and income statement prepared in accordance with generally accepted accounting principles;
  2. month end calculation of excess free capital;
no later than three weeks after each month end.