IN THE MATTER OF
THE SECURITIES ACT
R.S.O. 1990 C.s.5, as amended (the "Act ")
IN THE MATTER OF
STATEMENT OF ALLEGATIONS OF
STAFF OF THE ONTARIO SECURITIES COMMISSION
Staff of the Ontario Securities Commission ("OSC") make the following allegations:
1. CML Industries Ltd. ("CML") was at all material times a reporting issuer within the meaning of subsection 1(1) of the Act . Its common shares were listed on the Toronto Stock Exchange ("TSE").
2. The Respondent, a resident of Pickering, Ontario, was at all material times employed by CML as a Cost Analyst. The Respondent had worked for CML for nine years in various positions. His father was Chairman of the Board, Chief Executive Officer and a director of CML. By virtue of his employment, the Respondent was in a special relationship with CML pursuant to section 76(5) (c) of the Act .
3. On March 30, 2000 the Respondent was advised by his father that he was not to trade in shares of CML as there was the likelihood of a deal involving the takeover of CML by Supremex Inc. ("Supremex") at $6.00 a share. Supremex is a wholly owned subsidiary of Mail-Well Inc., a public company listed on the New York Stock Exchange.
4. Notwithstanding the instructions of his father, on May 4, 2000 the Respondent purchased 3,000 shares of CML at $3.30. He purchased another 3,000 shares at $3.25 on May 5, 2000 and on May 10, 2000, a further 500 shares at $4.25. This last purchase occurred at 10:37 am.
5. At 11:44 am on May 10, 2000 the TSE halted trading in CML in anticipation of a press release announcing that Supremex would be making an offer to purchase all CML common shares for $6 per share. This press release was issued at 1:14pm.
6. On May 23, 2000 the Respondent sold all his shares of CML at $5.50 per share.This included 3,000 shares which had been purchased prior to the conversation of March 30, 2000 with his father. Excluding the 3,000 shares purchased prior to March 30, 2000 the Respondent realized a profit of approximately $15,925.
7. Sometime during the last two weeks of May, 2000 the Respondent became aware that the Market Surveillance Division of the TSE was conducting a review of the trading of shares of CML.
8. On June 8, 2000 the Respondent voluntarily advised the OSC staff of his conduct and offered his full cooperation to Staff.
9. On February 27 th , 2001, the Respondent again attended the offices of the OSC and admitted under oath that he had purchased shares of CML with knowledge of a material fact or material change with respect to CML that had not been generally disclosed to members of the public. The Respondent co-operated with Staff=s investigation and expressed deep remorse for his conduct. He instructed his counsel at the earliest stage to engage Staff in settlement discussions of this matter.
Conduct Contrary to the Public Interest
10. By engaging in the conduct described above, the Respondent acted in a manner contrary to the public interest.
11. Such additional allegations as Staff may make and as the Commission may permit.
June 15, 2001.