Proceedings

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IN THE MATTER OF

THE SECURITIES ACT

R.S.O. 1990, c.S.5, as amended

AND

IN THE MATTER OF

RAMPART INVESTMENT MANAGEMENT COMPANY

WRITTEN SUBMISSIONS TO THE DIRECTOR

PURSUANT TO SUBSECTION 26(3) OF THE SECURITIES ACT

Date:
November 11, 2003
 
Director:
Winfield Liu
Senior Legal Counsel
Market Regulation
 
Submissions:
Marrianne Bridge
Manager, Compliance
Capital Markets Branch
 
Garth Foster
Counsel for the Registrant

DECISION AND REASONS FOR DECISION

The decision of the Director is to impose terms and conditions on the registration of Rampart Investment Management Company ("Rampart" or "Registrant") due to its failure to deliver its audited annual financial statements for the year ended June 30, 2003 within the timeframes prescribed by the Regulation ("Regulation") made under the Securities Act ("Act"). Furthermore, Rampart's request for an exemption from the requirement to pay late filing fees is denied. The reasons for the decision are set out below.

Background

Rampart is registered as a Non-Canadian Advisor Investment Counsel Portfolio Manager. It was initially registered on June 24, 2002 and its financial year end is June 30. Under section 139 of the Regulation, Rampart was obligated to deliver its annual audited financial statements for the year ended June 30, 2003 no later than September 30. It failed to do so and was notified by staff in a letter dated October 3, 2003 of its deficiency. Rampart was also advised that as a result of its failure to deliver the financial statements that staff would recommend to the Director that Rampart's registration be subject to terms and conditions as set out in Schedule "A" attached. The audited financial statements were delivered to the Commission on or about October 23, 2003.

Under subsection 26(3) of the Act "the Director shall not refuse to grant, renew, reinstate or amend registration or impose terms and conditions thereon without giving the applicant an opportunity to be heard". Rampart has requested an opportunity to be heard under subsection 26(3) by way of written submissions. In addition, Rampart is seeking an exemption from the requirement to pay the late filing fees that are required under section M(1)(a) of Appendix C to OSC Rule 13-502 -- Fees, resulting from the late filing of the financial statements.

Summary of the Registrant's Submission

The Registrant submits that its failure to file the audited annual financial statements was inadvertent and that there was no intention by the corporation not to comply with Ontario securities laws. It was initially registered as a non-resident advisor to pursue certain business opportunities in Ontario which have ultimately not materialised, and as a result the corporation's intention is to let its registration lapse at the end of the year. Rampart is not required to file financial statements with any other regulators in the United States or elsewhere which contributed to management's failure to realise its obligations under Ontario securities laws. Upon becoming aware of the deficiency Rampart immediately contacted its auditors and proceeded to complete and deliver to the Commission the audited financial statements. Furthermore, Rampart submits that to date it has not provided advisory services to any person in Ontario, and, as it intends to allow its registration to lapse, there is no prejudice to the public interest to granting the requested relief.

Summary of Staff's Submission

Staff does not believe that the failure to file the financial statements on a timely basis could properly be characterised as inadvertent. In particular, staff notes that Rampart was late in filing its financial statements for the period ending June 30, 2002 and had had discussions with staff at that time regarding the imposition of terms and conditions on its registration. Also, staff had provided copies of the relevant section of the Regulation relating the filing of financial statements to an individual connected with Rampart prior to the filing deadline.

Director's Findings

I agree with staff's position. Although Rampart submits that the failure to deliver its financial statements on time was completely inadvertent, its previous failure to deliver financial statements for the period ended June 30, 2002 on time and, the subsequent discussions it had with staff, should have been sufficient notice to Rampart to fully understand its filing obligations as a registrant. I find the Rampart knew or should have known its filing obligations and its failure to meet those obligations was a result of insufficient attention to and importance placed on those obligations.

The filing of annual financial statements by registrants is one of the most important regulatory requirements in the Act. Financial solvency is one of the essential components of a dealer or adviser's continued suitability for registration. Financial statements are the principal tool enabling staff to monitor a registrant's financial viability and its capital position. As a result, the late filing (or non-filing) of annual financial statements raises serious potential regulatory concerns and needs to be addressed in a serious fashion. Accordingly, I find that the imposition of the terms and conditions as set out in Schedule "A" to be appropriate in this case.

In the circumstances I also find that it would be inappropriate to exempt Rampart from the requirement to pay the late filing fees due under section M(1)(a) of Appendix C to OSC Rule 13-502. The penalty for late filings was intended to reflect the importance that is placed on the obligation that each registrant has to make timely filings and in furthering that notion, to provide registrants with the appropriate incentive to ensure that proper attention is given to the matter and that the registrant does not fail to meet its filing obligations whether deliberately or through inadvertence. Granting an exemption in situations where the failure was not deliberate would remove any incentive for registrants to assume responsibility for meeting their obligations. The request for an exemption to pay the late filing fees is denied.

November 11, 2003.

"Winfield Liu"

 

SCHEDULE "A"

TERMS AND CONDITIONS OF REGISTRATION ON

Rampart Investment Management Company, Inc. (the "Registrant")

The Registrant shall file on a monthly basis with the Compliance Section of the Ontario Securities Commission, attention Financial Analyst, effective with the month ending November 30, 2003, 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; and

(2) month end calculation of excess free capital;

no later than three weeks after each month end.