IN THE MATTER OF
1. By Notice of Hearing dated June 16, 1995, (the "Notice of Hearing") the Ontario Securities Commission (the "Commission") announced that it proposed tohold a hearing to consider whether it is in the public interest to order, pursuant to clause 3 of section 127(1) of the Securities Act, R.S.O. 1990, c. S.5, asamended (the "Act"), that any exemptions contained in Ontario securities law do not apply to Westall Parr ("Parr") permanently or for such period as is specifiedin the order.
II. JOINT SETTLEMENT RECOMMENDATION
2. The Staff of the Commission ("Staff") agree to recommend the settlement of the proceeding initiated in respect of Parr by the Notice of Hearing in accordancewith the terms and conditions set out hereinafter. Parr agrees to the settlement on the basis of the facts agreed to as hereinafter provided.
3. The Staff and Parr agree that only if, as and when the settlement is approved by the Commission, this Settlement Agreement and Schedule "A" attached hereto(the "Settlement Agreement") will be released to the public.
III. STATEMENT OF FACTS
4. For the purpose of this proceeding only, Parr makes oath and states that the facts set out in Part III of this Settlement Agreement are true, to the extent that heis directly aware of them and, to the extent that he does not have direct knowledge, they are not inconsistent with his understanding.
5. Staff acknowledge that the facts contained in Part III of this Settlement Agreement are consistent with its investigation.
B. Selby Green International Inc.
6. Prior to January 15, 1993, Derry Gold Resources Inc. ("Derry Gold") was a reporting issuer as defined by the Act. 703,754 common shares and 500,000preference shares of Derry Gold were issued and outstanding. Parr owned all of the preference shares representing 41% of the votes and was the president and adirector of Derry Gold. Parr was the controlling shareholder of Selby Green Information Services Ltd., a private company.
7. On January 15, 1993, Derry Gold completed the acquisition of Selby Green Information Services Ltd. (the "Reverse Takeover"). Pursuant to the ReverseTakeover, Derry Gold issued 121,101,500 common shares to the shareholders of Selby Green Information Services Ltd. The outstanding common shares ofDerry Gold were then consolidated one share for every ten shares outstanding. As a result, Parr owned 7,500,000 common shares and a director controlled4,500,000 common shares.
8. Derry Gold changed its name to Selby Green International Inc. ("Selby Green") which has been a reporting issuer as defined by the Act since the ReverseTakeover and trading in its shares has been quoted on the Canadian Dealer Network Inc. ("CDN"). At all material times Parr was the controlling shareholder, adirector and the president of Selby Green.
9. After the Reverse Takeover was completed, Parr opened three accounts at a registered broker (the "Broker"). One account was in the name of his privatecompany and the other two accounts were in the names of associates of Parr (the "Parr Accounts"). Parr had permission to trade in securities in all threeaccounts. The Broker obtained designation as the market maker for Selby Green. The purported market making activities were carried out by the Broker onParr's instructions through the Parr Accounts. Parr, in turn, received instructions from another person verbally and in writing with respect to what trades to makein the accounts which were opened.
10. Option agreements were arranged with Glendale Securities Inc. ("Glendale"), a registered securities dealer. Glendale required that the options represent justless than 10% of the public float of Selby Green. These agreements gave Glendale options to purchase 1,176,500 Selby Green shares. They were initially datedFebruary 15, 1993, but were re-dated March 2, 1993. The option price for the shares was between 15 and 20 per share. The options were eventually exercised byGlendale.
11. Between January 28, 1993, and March 10, 1993, there were only ten trades in the securities of Selby Green. These trades had the effect of increasing theprice of the securities from 5 to 60 per share. There were no other trades in securities of Selby Green during that period.
12. With respect to these ten trades in Selby Green shares, all sell orders and six of the purchase orders were placed by Parr through the Parr Accounts at theBroker. During these trades Parr had discussions with a director of Glendale. Parr also received a written note from the director detailing trading instructions.
13. Of the four purchase orders which were not placed by Parr, three purchase orders were placed by persons connected with the director of Glendale.
14. The effect of these ten trades was to create a false appearance of public trading and a false appearance with respect to the market price of Selby Greenshares. This enabled Glendale to sell Selby Green shares to its clients at artificially high prices.
15. Commencing March 12, 1993, Glendale began to sell Selby Green securities to its clients at 70 per share and later at increasingly higher prices. By May,1993, the price had increased to $1.00 per share and ultimately the price rose to a high of $1.40 per share. During this period in the market for Selby Greenshares, Glendale was the primary seller. By May 31, 1993, Glendale had sold 1,266,124 Selby Green shares to clients, resulting in a gross profit of approximately$750,000.
16. Glendale paid $196,475 when it exercised the options.
17. There was no business reason relating to the affairs of Selby Green that would justify the increase in price from 5 to 60 in the first ten trades, nor the furtherincrease in price to $1.40 after Glendale began to sell securities of Selby Green.
18. Throughout the time that Glendale was selling Selby Green shares to its clients, Parr was continuing to "make a market" in securities of Selby Green at theinsistence of Glendale. The Parr Accounts at the Broker purchased all shares of Selby Green that were offered for sale on the market by other dealers in order toprevent these sales from depressing the price of Selby Green shares while Glendale continued to sell Selby Green shares to its clients.
19. The Parr accounts purchased the shares offered on the market on the understanding that Glendale was to buy the shares from the Parr accounts. The Parraccounts reached the point where they were unable to pay for the shares that were purchased. The Broker then stopped making the market. Glendale purchasedfrom the Broker the shares that had not been paid for and arranged for another broker to make a market in the shares of Selby Green.
20. Glendale later purchased all of the shares that had been bought by the Parr accounts for a price equal to the price paid by the Parr accounts minus thecommissions paid by the Parr accounts.
Sworn before me at the City of Toronto, in the Municipality of Metropolitan Toronto this 24th day of February, 1997.
"Michael W. Lacy"
A Commissioner for taking
IV. THE POSITION OF PARR
21. Parr has consistently maintained that in doing the trading in the Parr accounts he was acting under the directions of the director of Glendale and that he wasnot aware of the significance of what he was being advised to do. Parr initially was not aware that this trading activity was improper.
22. Parr believed that Selby Green was a legitimate, viable company which Parr at all times believed had a marketable product.
23. Parr assisted Staff in its investigation of Glendale and its director by, at an early stage, providing documents including the handwritten note, and later bygiving a tape-recorded statement.
24. Parr was not registered under the Act. At the time of the trading in question he was not a sophisticated stock market participant.
25. Parr has not previously been required to appear before the Commission.
26. Given Mr. Parr's age, current fiscal situation, and future business aspirations, the proposed settlement will have a significant impact on Mr. Parr's life.
V. CONDUCT CONTRARY TO THE PUBLIC INTEREST
27. Staff state that the conduct of Parr was contrary to the public interest in that the trading in shares of Selby Green had the effect of creating a false ormisleading appearance of active public trading in Selby Green securities and of creating a false or misleading appearance with respect to the market price ofsecurities of Selby Green and enabled Glendale to sell securities of Selby Green to its clients at artificially high prices.
VI. TERMS OF SETTLEMENT
28. Parr agrees to the following terms of settlement:
a. an order, pursuant to clause 3 of section 127(1) of the Act, that all exemptions contained in Ontario securities law do not apply to Parr for a period of fiveyears from the date of the approval of this Settlement Agreement, except that Parr may trade in securities in his Registered Retirement Savings Plan (as definedby the Income Tax Act) and in mutual funds and securities listed in clause 1 of subsection 35(2) of the Act, but all such trades to be in compliance with clause 10of subsection 35(1) of the Act.
b. Parr agrees that he will not act as a director or officer of a reporting issuer for a period of five years from the date of approval of this Settlement Agreement.
29. Parr hereby consents to an order of the Commission incorporating the terms of settlement in the form annexed hereto as Schedule "A".
VII. STAFF COMMITMENT
30. If this Settlement Agreement is approved by the Commission, Staff will not initiate any complaint to the Commission or request the Commission to hold ahearing or issue any order or initiate any other proceeding or prosecution in respect of any conduct or alleged conduct of Parr in relation to the facts set out inPart III of this Settlement Agreement.
IX. PROCEDURE FOR APPROVAL OF THE SETTLEMENT
31. The approval of the Settlement as set out in the Settlement Agreement shall be sought at a public hearing before the Commission on February 19, 1997, oranother date agreed upon between Staff and Parr, in accordance with the procedures described herein and such further procedures which may be agreed uponbetween Staff and Parr.
32. Staff and Parr agree that if the Settlement Agreement is approved by the Commission, it will constitute the entirety of the evidence to be submitted respectingParr in this matter and Parr agrees to waive his rights to a full hearing and appeal of this matter under the Act.
33. Staff and Parr agree that if the Settlement Agreement is approved by the Commission, they will not make statements that are inconsistent with the SettlementAgreement.
34. If, for any reason whatsoever, the Settlement Agreement is not approved by the Commission, or the order set forth in Schedule "A" is not made by theCommission:
a. Staff and Parr will each be entitled to proceed to a hearing of the allegations in the Notice of Hearing and related Statement of Allegations unaffected by theSettlement Agreement or the settlement negotiations;
b. The terms of the Settlement Agreement will not be raised in any other proceeding or disclosed to any person except with the written consent of Staff and Parror as may be otherwise required by law; and
c. Parr further agrees that he will not raise in any proceeding the Settlement Agreement or the negotiation or process of approval thereof as a basis for any attackon the Commission's jurisdiction, alleged bias or appearance of bias, alleged unfairness or any other challenge that may otherwise be available.
35. If, prior to the approval of this Settlement Agreement by the Commission, there are new facts or issues of substantial concern, in the view of Staff, regardingthe facts set out in Part III of the Settlement Agreement, Staff and Parr will each be at liberty to withdraw from the Settlement Agreement. Notice of suchintention will be provided to the other in writing. In the event of such notice being given, the provisions of the preceding paragraph in this Part will apply as if theSettlement Agreement had not been approved in accordance with the procedures set out herein.
X. DISCLOSURE OF SETTLEMENT AGREEMENT
36. The terms of the Settlement Agreement will be treated as confidential by all parties hereto until approved by the Commission and forever if for any reasonwhatsoever, the Settlement Agreement is not approved by the Commission.
37. Any obligation as to confidentiality shall terminate upon the approval of this Settlement Agreement by the Commission.
XI. EXECUTION OF SETTLEMENT AGREEMENT
38. This Settlement Agreement may be signed in one or more counterparts which shall constitute a binding agreement and a facsimile copy of any signature shallbe as effective as an original signature.
February 26th, 1997.
SIGNED IN THE PRESENCE OF:
"Michael W. Lacy" "Westell Parr"
"Sara Blake" "Larry Waite"
ON BEHALF OF THE
ONTARIO SECURITIES COMMISSION