Securities Law & Instruments


Headnote

Section 144 – application for partial revocation of cease trade order – variation of cease trade order to permit certain trades for the purpose of closing out outstanding short positions held by fund entities and to facilitate wind-up of fund entities – partial revocation granted subject to conditions.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 127, 144.

IN THE MATTER OF
THE SECURITIES ACT,
 R.S.O. 1990, c. S.5, AS AMENDED
(THE “ACT”)

AND

IN THE MATTER OF
GENFUND MANAGEMENT INC.
(“GENFUND”)
AND
GENFUND CORP.
(TOGETHER WITH GENFUND, THE “APPLICANTS”)

AND

POSEIDON CONCEPTS CORP.
(“POSEIDON”)

ORDER
(Subsection 144(1) of the Act)

                WHEREAS the securities of Poseidon are subject to a temporary cease trade order made by the Director on February 26, 2013 pursuant to section 127 of the Act, as extended by a further order made by the Director dated March 11, 2013 pursuant to section 127 of the Act (collectively, the “Cease Trade Order”), ordering that trading in the securities of Poseidon cease until the Cease Trade Order is revoked;

                AND WHEREAS the Director varied the Cease Trade Order on March 19, 2013, January 21, 2014, July 22, 2014 and September 2, 2015;

                AND WHEREAS the Applicants have made an application to the Ontario Securities Commission (the “Commission”) pursuant to subsection 144(1) of the Act for a partial revocation of the Cease Trade Order to permit the Funds (as defined below) managed by GenFund to close out their Short Positions (as defined below) in Poseidon;

                AND UPON the Applicants having represented to the Commission that:

1.             GenFund is the portfolio manager and the investment fund manager of two investment funds organized as classes of shares of GenFund Corp., being GMF 130/30 Fund Class (the “130/30 Fund”) and GFM Market Neutral Fund Class (the “Market Neutral Fund”, and together with the 130/30 Fund, collectively, the “Funds”).

2.             In addition to the Cease Trade Order, the securities of Poseidon are subject to the following cease trade orders:

(a)           an order of the Alberta Securities Commission issued on February 14, 2013;

(b)           an order of the British Columbia Securities Commission issued on February 18, 2013; and

(c)           an order of the Autorité des marchés financiers (2013-FIIC-0045) issued on March 6, 2013.

3.             To the knowledge of the Applicants:

(a)           on April 9, 2013, Poseidon and its affiliates obtained an initial order from the Alberta Court of Queen’s Bench providing creditor protection under the Companies’ Creditors Arrangement Act (Canada);

(b)           Poseidon sold all of its assets on or about June 25, 2013;

(c)           Poseidon’s securities are not listed on and do not trade on any exchange in Canada;

(d)           Poseidon’s securities are not subject to cease trade orders in jurisdictions outside of Canada; and

(e)           as of September 22, 2016, Poseidon’s securities traded on the OTC Pink Marketplace in the United States of America.

4.             The Funds collectively hold aggregate short positions of 132,400 common shares of Poseidon (collectively, the “Short Positions”). In connection with the creation of the Short Positions, the Funds pledged cash collateral (the “Collateral”) to lenders of common shares of Poseidon.

5.             The Funds established the Short Positions gradually from December 2011 to January 2013. At such time, the Applicants had no information concerning potential cease trade orders of securities of Poseidon and the Cease Trade Order was not reasonably foreseeable considering the information then available to the Applicants. At the time the Short Positions were established, the securities of Poseidon were listed on the Toronto Stock Exchange.

6.             The Funds’ prime brokers lent common shares of Poseidon to the Funds for the purposes of establishing the Short Positions. To settle the Short Positions, and secure a return of the Collateral, the Funds must acquire common shares of Poseidon and deliver them to the Funds’ prime brokers.

7.             None of the Applicants or the Funds is an insider or control person of Poseidon, or has been employed by or in any way affiliated with Poseidon.

8.             None of the Applicants or the Funds is in default under any applicable securities legislation.

9.             The Applicants are seeking a partial revocation of the Cease Trade Order under subsection 144(1) of the Act permitting the Funds to acquire common shares of Poseidon outside of Canada to allow the Funds to close out the Short Positions.

10.          The terms and conditions to the Cease Trade Order put the Applicants and Funds at a disadvantage to non-Canadian shareholders who are free to trade their shares of Poseidon on the OTC Pink Marketplace.

                AND UPON considering the Application and the recommendation of staff of the Commission;

                AND UPON the Director being satisfied that it is not prejudicial to the public interest to vary the Cease Trade Order under subsection 144(1) of the Act;

                IT IS HEREBY ORDERED pursuant to subsection 144(1) of the Act that the Cease Trade Order is varied by including the following section:

Despite this order, GMF 130/30 Fund Class and GFM Market Neutral Fund Class, investment funds managed by GenFund Management Inc. (the “Investment Funds”), none of whom are, or were at the date of this order, insiders or control persons of Poseidon Concepts Corp., may acquire securities of Poseidon Concepts Corp. that are necessary for and in connection with the closing out of short positions the Investment Funds held in Poseidon Concepts Corp. before the date of this order, if:

1.             the acquisition is made through the OTC Pink Marketplace; and

2.             the acquisition is made through an investment dealer registered in Ontario.

                DATED at Toronto, Ontario on this 2nd day of December, 2016.

“Jo-Anne Matear”
Manager, Corporate Finance
Ontario Securities Commission