R.S.O. 1990, c.S.5, AS AMENDED
ANDREW CURRAH, COLIN HALANEN,
JOSEPH DAMM, NICHOLAS WEIR,
PENNY CURRAH AND WARREN HAWKINS
1. By Notice of Hearing dated October 28, 2005, the Ontario Securities Commission (the "Commission") announced that it proposed to hold a hearing to consider whether, pursuant to section 127 of the Securities Act, R.S.O. 1990, c. S.5 (the "Act"), it is in the public interest for the Commission to make an order approving the settlement agreement entered into between Staff of the Commission and the respondent Andrew Currah ("Currah").
II. JOINT SETTLEMENT RECOMMENDATION
2. Staff of the Commission ("Staff") recommend settlement with Currah (also referred to hereafter as the "Respondent") in accordance with the terms and conditions set out below. The Respondent agrees to the settlement on the basis of the facts set out in Part III herein and consents to the making of an Order in the form attached as Schedule "A" on the basis of the facts set out in Part III herein.
3. The terms of this settlement agreement, including the attached Schedule "A" (collectively, the "Settlement Agreement") will be released to the public only if and when the Settlement Agreement is approved by the Commission.III AGREED FACTS
4. For the purposes of this settlement agreement, the Respondent agrees with the facts set out in Part III.(a) Background
4. Findore Minerals Inc. ("Findore") is an Ontario junior resource company that was listed on the Canadian Dealing Network ("CDN") at all material times. At all material times, Findore's common shares traded over-the-counter and were quoted on the CDN. Although Findore changed its name to Cantex Energy Inc. on December 17, 1997, the company will be referred to herein as Findore.
5. The respondent Andrew Currah ("Currah") is a resident of Ontario. He is 43 years old.
6. Currah purchased a controlling interest, namely 471,000 common shares, in Findore in November 1994. Currah was president of Findore between November 1994 and July 1997, secretary of Findore from September 1997 to December 1997, and a director of Findore from November 1994 to December 1997. After December 1997, Currah remained closely involved in the affairs of Findore, working as a promoter of Findore's shares. Findore subleased office space from Currah.
7. At all material times, Currah worked closely with Colin Halanen ("Halanen"). Until December 1997, Currah worked closely with the respondent Nicholas Weir ("Weir").
8. Between 1996 and 1998, Findore issued 2,049,623 common shares from treasury to Currah or to companies controlled by Currah. Currah invested in a Findore private placement receiving 750,000 hold Findore shares at 20 cents which he did not sell until outside the period in question. Currah sold 700,000 of these shares on February 1, 1999 for 15 cents.(b) Trading in Findore shares by Currah
9. In the period described in paragraph 7, the respondents Currah, Halanen and Weir (collectively, the "Group"), individually and through companies that they owned or controlled, were active traders in Findore's shares through the CDN. Currah's trading included shares issued to him by Findore for stock options. In the period between July 1997 and December 1998, Currah (personally and through corporate trading accounts in which he directed all trading) made hundreds of trades in Findore shares.
10. For his trading in Findore shares, Currah used 12 brokerage accounts at 5 brokerage houses in his own name, in the name of his wife Penny Currah and in the names of the following companies over which he held and exercised trading authority: Currah Capital Inc., Currah and Sons Ltd., Galaxy Galleria Inc., and Findore Gold Resources Ltd. (collectively, the "Currah Accounts").
11. Currah entered into numerous trades, which were reported to other investors via the CDN, when he ought to have known that the trades may create a misleading appearance as to the volume of trading in Findore's common shares or as to the market price for those shares.
12. On 48 occasions, Andrew Currah engaged in trades of Findore shares among the Currah Accounts. Twenty of those trades occurred at prices higher than the preceding reported trade, creating an "uptick" in the price of Findore shares.
13. In the same period, the Currah Accounts entered 52 trades with other members of the Group. Thirty-nine of those trades among the Group created upticks in the price of the Findore shares.
14. Currah executed the trades described in paragraphs 10 through 13 to achieve at least one or more of the following objectives,
(a) to earn trading profits which, in turn could be used to pay his personal and business expenses;
(b) to support the price of Findore’s shares in the face of short selling of Findore shares;
(c) to transfer shares among his various personal and corporate brokerage accounts to cover significant debit balances that had accumulated in his brokerage accounts, which he could not cover by other means;
(d) to attempt to hold as many Findore shares as possible, pending an anticipated increase in the share price; and
(e) to reduce his position in Findore shares, based on requirements by brokerage firms that he reduce the concentration of his personal and corporate holdings of Findore shares.
15. Currah allowed debit balances to accumulate in cash accounts that he held at various brokerage firms. He knew, at all material times, that his brokerage accounts were not margin accounts, and that Findore's shares were not marginable. From time to time, Currah had other marginable securities in his accounts which covered his debit balances.(c) Market Making Activities
16. Research Capital was approved by the CDN as a market maker for Findore shares. The respondents Joseph Damm ("Damm") and Warren Hawkins ("Hawkins") are registered representatives who, at all material times, posted bids and offers on the CDN through Research Capital's market making facility. Hawkins/Damm acted as agency traders, primarily for Currah and occasionally for other Research Capital clients, through the market making capacity of Research Capital. On a daily basis, Currah and/or other members of the Group gave trading instructions for Findore shares to Damm and Hawkins, which influenced the Research Capital bid and offer prices for Findore's shares.
17. Currah made 2 Currah Accounts at Research Capital available, so that Findore shares held in those accounts could be used for agency trading through the market making facility of Research Capital.
18. Currah knew that he was a significant client of Research Capital in respect of trading in Findore shares.
19. From time to time when trading was hectic, to Currah's knowledge, Damm and Hawkins entered trades of Findore shares on behalf of the Group without properly describing the actual orders for the respective account. At the end of those trading days, Damm and Hawkins conducted telephone meetings with Currah and other members of the Group to determine the Group account to which those trades would be allocated.(d) Market Price of Findore's Shares
20. In June 1997, prior to the commencement of the Group's trading activity described above, the common shares of Findore had been trading in the range of $0.10 to $0.14 per share. Trading in Findore's shares became very active, as reported on the CDN, in the latter part of July 1997 and by September 26, 1997, the share price reached $1.92. The stock peaked on April 3, 1998 at a high of $2.30 per share. The reported Findore share price stayed above $1.00 per share through to the fall of 1998, before declining markedly to its June 1997 levels in 1999. The trading by the Group, as described in paragraphs 10 to 14, contributed to fluctuations in the price of Findore shares.
21. On 60 selected days of trading in the period between July 1997 and December 1998, the Group accounted for an average of 29 percent of the market activity for Findore's shares. Currah's net profits from his trading activities were $810,000.IV THE RESPONDENT'S POSITION
22. It was Currah's understanding that, on a daily basis, Currah and/or other members of the Group or other Research Capital client accounts, gave orders to Damm/ Hawkins and they would, in turn, post the best bid/ask among Research's clientele.
23. Currah disclosed, clearly and concisely, on his Research Capital client application form that he was an officer of Findore; yet Research Capital, when applying for a market making status in Findore, presented their September 23, 1996 application to the CDN without mentioning that Currah was not arm's length to the issuer, Findore. Currah did not become aware of the contents of Research Capital's market maker application until 2004. Currah does not accept responsibility for Research Capital's representations to the CDN.
24. The CDN did not have a 'no down tick' rule in place during the material time. Thus, short sellers could perform raids on the Findore market without the market being able to recover, because the short sellers did not have to wait until an 'even tick' or an uptick occurred till they could recommence their short selling. This 'no down tick' rule exists in other markets. Currah, by buying Findore shares, in the aftermath of a 'bear raid', would make 'upticks' in the stock because of the unregulated short selling. Hence, Currah believes that the CDN trading paradigm, in this instance, contributed to greater volatility in the market. At the time, Currah believed that his trading contributed to an orderly market for Findore's shares.
25. Currah employed the agency trading of Research Capital to display bids and offers in Findore. Currah did not have exclusivity to these orders, as the bid and offer agency mechanism was open to all RCAP retail and pro accounts. By eliminating the market maker's inventory account from the trading landscape, Currah thought this method would encourage investors to invest in Findore because the bid-ask spreads would be tighter and the true volume would be represented.
26. Currah held great belief in the future success of Findore as manifested in his continual support of the stock through purchasing Findore all the way up to its high and all the way down to its low. After being asked by Findore's Treasurer, in February 1999, to step aside for the 'good' of the company, Currah sold his major share portion of 700,000 shares at 15 cents per share.
27. Currah does not presently have the ability to pay a substantial cost award, but recognizes the cost incurred by the Commissions in its investigation, and his obligation to pay that cost.V CONDUCT CONTRARY TO THE PUBLIC INTEREST
28. Certain of Currah's trades, as described in paragraphs 9 through 14, were designed to intervene in the marketplace for Findore shares in order to reverse the effects that trading by others was having on the market price for Findore's shares. This trading by Currah interfered with the operation of an arm's length public market for Findore's shares. The role of self-appointed guardian of the market price of Findore's shares was not one that Currah ought to have undertaken. Currah's conduct, in employing Research Capital's market making facilities for the trading described herein, was contrary to the public interest.
29. As to trading in Findore shares by Currah among the Currah Accounts, these trades did not involve a true economic transfer of the shares and accordingly interfered with the operation of an arm's length public market for Findore's shares. Currah's conduct in this regard was contrary to the public interest.VI TERMS OF SETTLEMENT
30. Currah agrees to the following terms of settlement, to be set out in an order by the Commission pursuant to s. 127(1) of the Act, as follows:
(a) that Currah is required to cease trading in securities for a period of 10 years and that the exemptions contained in s. 35 of the Securities Act and OSC Rule 45-501 do not apply to Currah, subject only to the exceptions noted in paragraph (b) below. For greater certainty, the Order will pertain to all trading by Currah, whether directly or indirectly in any capacity whatsoever, or through nominee accounts;
(b) that Currah will be permitted, after a period of 5 years from the date of the Order approving this settlement agreement, to trade in securities through RRSP accounts held solely in his name if the securities are: (i) mutual fund units, guaranteed investment certificates or bonds or (ii) securities in which Currah does not own directly or indirectly through another person or company or through any person or company acting on his behalf, more than one (1) percent of the outstanding securities of the class or series of the class in question;
(c) that Currah will be permanently prohibited from acting as a director or officer of an issuer;
(d) Currah will pay to the Commission costs of its investigation in the amount of $1,000 immediately, plus costs in the amount $44,000 within 5 years after the date of the Order approving this settlement. In the event that Currah refuses or fails to make these cost payments within 5 years, the terms of paragraph 30(b) will not come into force for (i) the 5 year period referred to in paragraph 30(b), plus (ii) an additional number of days equal to the number of days in which Currah remains in default in paying costs to the Commission. In the event that Currah refuses or fails to make the cost payments within 10 years, the terms of paragraph 30(a) will be extended permanently ; and
(e) that Currah will cooperate with Staff in its investigation of trading in Findore shares, including making a statement under oath in advance of any hearing and testifying as a witness for Staff at any proceedings commenced by Staff before the Commission, the Ontario Court of Justice or the Ontario Superior Court.
VII STAFF COMMITMENT
31. If this Settlement Agreement is approved by the Commission, Staff will not initiate any proceeding under Ontario securities law in respect of any conduct or alleged conduct of Currah in relation to the facts set out in Part III of this Settlement Agreement, subject to the provisions of paragraph 35 below.VIII. PROCEDURE FOR APPROVAL OF SETTLEMENT
32. Approval of this Settlement Agreement shall be sought at a hearing of the Commission on a date agreed to by Staff and Currah.
33. Staff and Currah may refer to any part, or all, of the Settlement Agreement at the Settlement Hearing. Staff and Currah also agree that if this Settlement Agreement is approved by the Commission, it will constitute the entirety of the evidence to be submitted respecting Currah in this matter, and Currah agrees to waive his rights to a full hearing, judicial review or appeal of the matter under the Act.
34. Staff and Currah agree that if this Settlement Agreement is approved by the Commission, neither Staff nor Currah will make any public statement inconsistent with this Settlement Agreement.
35. If this Settlement Agreement is approved by the Commission and, at any subsequent time, Currah fails to honour any of the Terms of Settlement set out in Part VI herein, Staff reserve the right to bring proceedings under Ontario securities law against Currah based on, but not limited to, the facts set out in Part III of the Settlement Agreement, as well as the breach of the Settlement Agreement.
36. If, for any reason whatsoever, this Settlement Agreement is not approved by the Commission or an Order in the form attached as Schedule "A" is not made by the Commission, each of Staff and Currah will be entitled to all available proceedings, remedies and challenges, including proceeding to a hearing of the allegations in the Notice of Hearing and Statement of Allegations, unaffected by this Settlement Agreement or the settlement negotiations.
37. Whether or not this Settlement Agreement is approved by the Commission, Currah agrees that he will not, in any proceeding, refer to or rely upon this Settlement Agreement or the negotiation or process of approval of this Settlement Agreement as the basis for any allegation against the Commission of lack of jurisdiction, bias, appearance of bias, unfairness, or any other remedy or challenge that may otherwise be available.IX. DISCLOSURE OF AGREEMENT
38. The terms of this Settlement Agreement will be treated as confidential by all parties hereto until approved by the Commission, and forever if, for any reason whatsoever, this Settlement Agreement is not approved by the Commission, except with the written consent of both Currah and Staff or as may be required by law.
39. Any obligations of confidentiality shall terminate upon approval of this Settlement Agreement by the Commission.X. EXECUTION OF SETTLEMENT AGREEMENT
40. This Settlement Agreement may be signed in one or more counterparts which together shall constitute a binding agreement.
41. A facsimile copy of any signature shall be effective as an original signature.
|Dated this "28" day of "October", 2005|
Staff of the Ontario Securities Commission
Per: Michael Watson
Director, Enforcement Branch
Dated this day of
IN THE MATTER OF THE SECURITIES ACT
R.S.O. 1990, c.S.5, AS AMENDED
ANDREW CURRAH, COLIN HALANEN,
JOSEPH DAMM, NICHOLAS WEIR,
PENNY CURRAH AND WARREN HAWKINS
WHEREAS on July 23, 2004 , the Ontario Securities Commission (the “Commission”) issued a Notice of Hearing pursuant to section 127 of the Securities Act (the “Act”) in respect of trading in the shares of Findore Minerals Inc.;
AND WHEREAS on October 20, 2005, Staff of the Commission filed an Amended Statement of Allegations;
AND WHEREAS Andrew Currah (“Currah”) entered into a settlement agreement dated October 28, 2005 (the “Settlement Agreement”) in relation to the matters set out in the Amended Statement of Allegations;
AND WHEREAS the Commission issued a Notice of Hearing dated October 28, 2005 setting out that it proposed to consider the Settlement Agreement;
UPON reviewing the Settlement Agreement, the Notice of Hearing, the Amended Statement of Allegations, and upon considering submissions from Currah and from Staff of the Commission;
AND WHEREAS the Commission is of the opinion that it is in the public interest to make this Order;
IT IS HEREBY ORDERED, PURSUANT TO SECTIONS 127 AND 127.1 OF THE ACT, THAT :
- Currah shall cease trading in securities for a period of 10 years and the exemptions contained in s. 35 of the Act and OSC Rule 45-501 shall not apply to Currah, subject only to the exceptions noted in paragraph 2 below. For greater certainty, this Order pertains to all trading by Currah, whether directly or indirectly in any capacity whatsoever, or through nominee accounts;
- Currah shall be permitted, after a period of 5 years from the date of this Order, to trade in securities through RRSP accounts held solely in his name if the securities are: (i) mutual fund units, guaranteed investment certificates or bonds; or (ii) securities in which Currah does not own directly or indirectly through another person or company or through any person or company acting on his behalf, more than one (1) percent of the outstanding securities of the class or series of the class in question;
- Currah shall be permanently prohibited from acting as a director or officer of an issuer;
- Currah shall pay to the Commission costs of its investigation in the amount of $1,000 immediately, plus costs in the amount $44,000 within 5 years after the date of this Order. In the event that Currah refuses or fails to make these cost payments within 5 years, the terms of paragraph 2 of this Order shall not come into force for (i) the 5 year period referred to in paragraph 2, plus (ii) an additional number of days equal to the number of days in which Currah remains in default in paying costs to the Commission. In the event that Currah refuses or fails to make the cost payments within 10 years, the terms of paragraph 1 of this Order shall be extended permanently; and
- Currah shall cooperate with Staff in its investigation of trading in Findore shares, including making a statement under oath in advance of any hearing and testifying as a witness for Staff at ay proceedings commenced by Staff before the Commission, the Ontario Court of Justice or the Ontario Superior Court.
Dated at Toronto, Ontario this day of October, 2005