ASC Finds Edmonton Businessmen Illegally Traded KCP Shares

    CALGARY, Aug. 10 /CNW/ - In two related decisions, the Alberta Securities
Commission (ASC) has determined that Edmonton residents James Woodrow Baker
and Brian Patrick Hughes contravened Alberta securities laws while promoting
shares of KCP Innovative Services Inc. In 2004, KCP distributed shares to over
100 Alberta investors, raising over $1.5 million. The ASC Panel found that
some of those shares were distributed to investors who did not qualify for the
Accredited Investor exemption, an exemption that would have allowed KCP to
trade its shares without complying with the registration and prospectus
requirements of Alberta securities laws.
    KCP and its CEO and director Baker relied on agents such as Hughes to
promote its shares. The ASC Panel found that KCP, through Baker, failed to
take reasonable steps to ensure that its agents were complying with the
requirements of the exemptions that KCP claimed. The Panel emphasized, "it is
imperative that the issuer impress on its agents the necessity of strict
compliance with any exemption or exemptions relied on." The Panel went on to
say that, "while Alberta investors must take care to read, understand and
truthfully execute legal documents," the issuer remains responsible for
ensuring that each investor meets the requirements of the exemption under
which the issuer's shares are traded.
    The Panel will consider submissions from KCP and Baker before it decides
what, if any, sanctions should be imposed on them.
    In related proceedings, Hughes admitted, as an agent of KCP, he illegally
traded and distributed KCP shares and made prohibited representations to
investors regarding a possible future listing of KCP shares on a stock
exchange. The ASC Panel concluded that Hughes had a responsibility to ensure
he understood and complied with securities regulatory requirements. His
failure to do so prevented investors from receiving the advice and information
to which they were entitled under Alberta securities laws. Despite Hughes'
subordinate role in the illegal distribution of KCP shares, the Panel viewed
Hughes' misconduct as serious, and considered it to be harmful to all
participants in the Alberta capital market. The Panel imposed a $10,000
administrative penalty and $4,000 towards costs against Hughes and prohibited
him from trading or purchasing any securities (with certain exceptions), and
from using any exemptions allowed under Alberta securities laws for a
three-year period.
    Both decisions are available on the ASC website at

    The ASC is the regulatory agency responsible for administering the
province's securities laws. It is entrusted to foster a fair and efficient
capital market in Alberta and to protect investors. As a member of the
Canadian Securities Administrators, the ASC works to improve, coordinate and
harmonize the regulation of Canada's capital markets.

For further information:

For further information: For Media Inquiries: Tamera Van Brunt,
Director, Communications and Investor Education, (403) 297-2664; For Investor
Inquiries: ASC Public Inquiries, (403) 297-4296, Toll Free 1-877-355-4488

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