Securities Law & Instruments

In the Matter of Staff’s Recommendation
For Terms and Conditions on the Registration<
of Acasta Capital Inc.

Opportunity to be Heard by the Director under
Section 31 of the Securities Act (Ontario)



Decision

  1. For the reasons outlined below, my decision is to impose modified terms and conditions on Acasta Capital Inc. (Acasta) as provided below for a minimum period of six months.            

Overview

  1. Acasta is registered under the Securities Act (Ontario) (Act) in the category of exempt market dealer.

  2. By letter dated June 13, 2014, Staff of the Ontario Securities Commission (OSC) advised Acasta that it was recommending to the Director that terms and conditions be imposed on Acasta for the late filing of its annual financial statements. 

Process for requesting an opportunity to be heard

  1. Under section 31 of the Act, if a registrant wants to oppose Staff’s recommendation for terms and conditions, the registrant may request an opportunity to be heard (OTBH).  By email dated June 16, 2014, Michael Leibrock, Chief Compliance Officer (CCO) requested an OTBH. My decision is based on the written submissions of Mark Skuce (Legal Counsel, Compliance and Registrant Regulation Branch) and Michael Leibrock on behalf of Acasta.      

Submissions

  1. The fiscal year-end for Acasta is December 31.  Under section 12.12 (1)(a) of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (“NI 31-103”) requires that a registered dealer deliver its annual financial statements within 90 days of the firm’s year-end. Acasta’s annual financial statements were due no later than March 31, 2014.  However, Acasta submitted the financial statements on April 24, 2014 which was past the deadline.

  2. Staff submits that the filing of annual financial statements by registrants is a serious regulatory obligation placed on registrants and that financial statements are the principal tool enabling Staff to monitor a registrant’s financial viability and capital position.

  3. For these reasons, Staff regularly recommends the imposition of terms and conditions when registrants fail to file their annual financial statements on a timely basis.  Only in rare and extenuating circumstances would Staff not recommend imposing terms and conditions on a registrant that filed its annual financial statements late.

  4. Acasta submits that the reasons for failing to meet the filing deadline are:
    • they are a small office with resource constraints,
    • they have demanding travel commitments that are required to properly serve their growing client base; and
    • unexpected departure of their prior CCO in September, 2013.
  5. Acasta further submits that the imposition of the terms and conditions for a minimum period of six months will be highly burdensome and costly for a small firm. 

Decision and reasons

  1. My decision is to impose modified terms and conditions on the registration of Acasta as follows:
    • The firm shall deliver on a monthly basis, through the OSC’s electronic filing portal (https://eforms.osc.gov.on.ca/e31-103/index.jsp), starting with the month ending August 31, 2014 the following information:
      • year-to-date unaudited financial statement including a balance sheet and income statement or statement of financial position and statement of comprehensive income, both prepared in accordance with accounting principles required by National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards; and
      • month-end calculation of excess working capital using Form 31-103F1 Calculation of Excess Working Capital;
      • no later than three weeks after each month-end.
    • The firm will review its procedure for compliance with Ontario securities law and, no later than September 26, 2014, will deliver to the Compliance and Registrant Regulation Branch of the OSC addressed to the Attention of the “Financial Analyst”, a report setting out:
      • A certification from its CCO to the effect that the firm has reviewed its system for on-going compliance with Ontario securities law and rectified the problem(s) that led to its failure to satisfy the filing requirement; and
      • Details of the specific measures that will be taken to ensure that the filing requirement will be satisfied at all times in the future.
  2. The terms and conditions are modified from Staff’s recommendation.  I do not see the need for the registrant to provide reasons as to why the filing deadline was missed.  Sufficient information has already been submitted as part of this OTBH.

  3. It is the responsibility of the registrant to ensure compliance with Ontario securities law.  In this instance the annual financial statements were signed by the auditor and approved by Acasta’s Board of Directors on March 17, 2014 which should have been sufficient time for the financial statements to be filed with the OSC before the March 31st deadline. 

  4. Since the filing requirement of section 12.12 (1)(a) of NI 31-103 was not met and, in accordance with decided cases including Re Trafalgar Associates Limited (2013), 36 O.S.C.B. 1462; Re Windstar Equities Limited (2011), 34 O.S.C.B. 7292; Re First Canadian Property Investments Limited (2011), 34 O.S.C.B. 7038; Re Hill Harris Hunt Capital Limited (2011), 34 O.S.C.B. 6753 and Re Fox Collins Securities Incorporated (2011), 34 O.S.C.B. 6558, the terms and conditions are applied to the registration of Acasta.

  5. Staff submitted, and I agree that the reasons put forward for missing the filing deadline do not constitute rare and extenuating circumstances. There are many registrants in Ontario that are considered small, due to the number of personnel, and focused on building their business who meet their regulatory filing obligations.  A registrant is required to have sufficient resources in place to discharge their regulatory obligations regardless of the number of persons who are employed by the firm.

  6. Finally, it is my view that the requirement to submit the financial statement information required by the terms and conditions is not burdensome and costly since the requested materials are required books and records of a registrant.  This argument has been repeatedly rejected by the Director in a number of instances including Re CR Advisors Corporation (2008), 31 O.S.C.B. 6269.   


“Debra Foubert”  J.D.
Director
Compliance and Registrant Regulation Branch
Ontario Securities Commission
August 6, 2014