Appeal court confirms broad reach in financial transactions considered securities
CALGARY, Dec. 13, 2017 /CNW/ - In a memorandum of judgment, the Alberta Court of Appeal upheld the conviction of Lethbridge area resident Rand Tyler Stevenson for securities-related offences.
Stevenson had appealed his conviction by the Alberta Court of Queen's Bench for trading in securities of OCI Q Corp. without registration and engaging in an illegal distribution. Robert Smylski, also convicted in that decision, did not appeal to the Court of Appeal.
In December 2011, the Alberta Securities Commission (ASC) issued an Interim Cease Trade Order against Stevenson and others, prohibiting the further sale of securities of OCI. In February 2013, charges were laid against Stevenson, Smylski and Brent Derricott (now deceased), in Provincial Court. Smylski was also charged with trading in OCI securities in breach of an ASC order.
After a lengthy trial, the Provincial Court of Alberta dismissed all of the charges, primarily based on its finding that the numerous loan agreements used by OCI to raise funds were not securities as defined in the Securities Act. They were, according to the court, "private transactions." The ASC appealed that decision to the Court of Queen's Bench, arguing that the judge had erred in law.
Relying upon Supreme Court of Canada authority that, "substance, not form, is the governing factor", and that securities legislation must be construed broadly to protect investors and the capital markets, the Court of Queen's Bench agreed with the ASC and entered convictions against Stevenson, Derricott and Smylski. Justice Miller stated, "By classifying the Loan Agreements as private transactions they are not necessarily taken outside of the security legislation." He also noted that language in the loan agreements stating they were not subject to securities laws was not determinative. Stevenson was subsequently fined $295,000 for 39 counts of breaching the Securities Act (Alberta).
In upholding that decision, the Alberta Court of Appeal stated "the Securities Act is very broadly worded legislation, designed to cover virtually every method by which money could be raised from the public."
"This judgment by the Alberta Court of Appeal sends a clear message that investors are entitled to protections under Alberta securities laws when funds are raised from the public for investment purposes. Market participants must understand what is considered a security and ensure they follow securities regulations," said Cynthia Campbell, Director of Enforcement.
The three men raised in excess of $1 million through loan agreements between OCI and 24 Alberta investors, promising six-month returns of up to 150 times their investment. The investor funds were ostensibly to be used to help a poor Filipino fisherman probate his late aunt's billion dollar estate. The aunt, at one time the housekeeper for the former Philippine dictator Ferdinand Marcos, allegedly accumulated this wealth when she was employed as a minister in the Marcos government. As of Stevenson's sentencing in 2016 no payments had been made to investors, despite assurances as early as 2011 that the payments were "imminent."
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.
SOURCE Alberta Securities Commission
For further information: For Media Inquiries: Hilary McMeekin, Communications Manager, 403.592.8186; For Investor Inquiries: ASC Public Inquiries, Toll Free 1.877.355.4488, [email protected]