TORONTO, April 24 /CNW/ - A Hearing Panel of the Investment Dealers
Association of Canada (IDA), appointed pursuant to By-law 20, has found
Octagon Capital Corporation (Octagon), at all material times a Member of the
IDA, guilty of participating in an illegal private placement distribution,
which was not in accordance with the provisions of the Ontario, Alberta, and
British Columbia Securities Acts, thereby engaging in business conduct
unbecoming or detrimental to the public interest, contrary to By-law 29.1 and
In its liability decision dated April 3, 2007, the Hearing Panel found
that, between July 2002 and June 2003, Octagon facilitated the private
placement of two Bright Star Venture (BSV) debentures - in 97 client accounts
opened by Barry (Sai-Kwong) Leung, at the material time an Approved Person
with Octagon (See Bulletin No.3477) - without performing due diligence and
ensuring that the debentures had been approved for distribution, that a
prospectus had been issued, or that the clients were qualified to invest in
the debentures under the appropriate Rules.
The Panel found that there was no evidence that Octagon was aware that
this was an RRSP stripping scheme until May 2003 and the activity was closed
by Octagon on June 12, 2003.
Mr. Leung opened the 97 accounts for the purpose of liquidating the
clients' holdings in locked-in retirement savings plans (LIRAs) and to
reinvest the proceeds of sale into accounts under the administration of
Octagon. As each LIRA account was opened, transfers arrived in the form of
cash which was then used by Octagon to subscribe to the BSV debentures.
Although the clients had agreed to purchase the BSV debentures prior to
opening the accounts, this did not release Octagon, the plan carrier for the
specific LIRA accounts, from its responsibilities.
In a Settlement Agreement with the IDA, Barry Leung admitted that he had
contravened IDA By-laws and Regulations as well as the Securities Acts of
British Columbia, Alberta and Ontario. On November 4, 2005, Mr. Leung was
prohibited from registration approval with any IDA Member firm for a period of
five years and fined $100,000.
In addition, the Hearing Panel found that the evidence did not support
two further sets of allegations, contrary to By-law 29.1, Regulation 1300.2,
and Policy 2, that, between 2003 and 2004, Octagon failed to make adequate
inquiries into six accounts, under the name of Benil, to ensure that such
accounts were not being directed by someone who they knew or ought to have
known to have had a history of securities violations and/or an association
with organized crime; and that, between 2003 and 2004, Octagon failed to
notify clients that there was a potential conflict of interest involving their
Registered Representative and Musicrypt Inc., a publicly traded company listed
on the TSX Venture Exchange, in which they were investing.
The penalties to be imposed upon Octagon will be assessed at a penalty
hearing on May 10, 2007.
The Investment Dealers Association of Canada (IDA) is the national
self-regulatory organization of the securities industry. The IDA's mission is
to protect investors, foster market integrity and enhance the efficiency and
competitiveness of the Canadian capital markets. The IDA enforces rules and
regulations regarding the sales, business and financial practices of its
Member firms and their approved persons. Investigating complaints and
disciplining Members and approved persons is part of the IDA's regulatory
For further information:
For further information: Jeff Kehoe, Director, Enforcement Litigation,
(416) 943-6996 or firstname.lastname@example.org; Connie Craddock, Vice-President, Public
Affairs, (416) 943-5870 or email@example.com