Association suspends geologist for disclosure violations
Reports provided an excessively rosy picture of prospect in Arizona
David Baines, Vancouver Sun
Published: Friday, December 03, 2010Geologist Duncan Bain has been disciplined by his professional association for writing reports for a U.S. exploration company that did not comply with national standards for mineral disclosure.
In a settlement agreement with the Association of Professional Engineers and Geoscientists of B.C., Bain admitted he wrote two reports for U.S. Canadian Minerals Inc. that did not comply with National Instrument 43-101, the national securities policy that prescribes standards for mineral disclosure.
He agreed to a six-month practice suspension, starting on Dec. 31. He also agreed to pay the association's costs, up to a maximum of $5,000.
Bain, 56, obtained his geology degree from the University of Western Ontario in 1977 and became a member of the B.C. association in 1991. He is also a member of the Association of Professional Geoscientists of Ontario.
He lives in London, Ont., where he runs his own firm, Duncan Bain Consulting Ltd., which provided consulting services to U.S. Canadian Minerals.
He also serves as a director of Vancouver-based St. Elias Mines Ltd., which trades on the TSX Venture Exchange, and Calgary-based Toa Minerals Ltd., which trades on the bulletin board.
Bain is one of handful of geologists who have provided professional services for dodgy companies that trade on the U.S. over-the-counter markets.
Geoff Thiele, direction of investigations and discipline for the B.C. association, told me earlier this week that due to member involvement in these companies and the attendant reputational risk, the association is proposing to place these geologists in a special pool from which names will be randomly selected for practice reviews.
"We want our members' work for these companies to be done to the expected standard and that the members carry out appropriate due diligence regarding the work and the people it is being done for," he said.
All I can say is, it's about time. If the association balks at this extremely modest proposal, its credibility as a regulatory organization will be very much in doubt.
-
The B.C. Securities Commission has fined Research Capital Corp. $225,000 for executing trades in U.S. over-the-counter stocks that were subject to cease-trade orders.
In a settlement agreement, the brokerage firm -- which is now called Mackie Research Capital Corp. -- admitted that from mid-2005 to September 2007, it executed 46 trades in eight companies that were subject to cease-trade orders.
The companies were Apiva Ventures Ltd., Digital Youth Network Corp., Canwest Petroleum Corp., Navitrak International Corp., International Ranger Corp., International Bioanalogics Systems Inc., Brookmont Exploration Inc. and Raven Gold Corp.
This is the second time Research Capital has been nailed for this sort of infraction. In February 2004, a commission hearing panel ordered the company to make changes in its compliance system.
The firm complied, but admitted that certain aspects of its new system broke down in mid-2005. It wasn't until commission staff alerted the firm to the problem that it became aware of it.
In addition to paying a fine, the firm has agreed to engage an independent monitor to review its compliance system and report back to the commission.
-
Western Liquid Funding Limited Partnership is not so liquid any more. The partnership, run by former South African lawyer Steven Friedland, raised money by selling partnership units to private investors under exemptions from prospectus and registration requirements.
According to its offering memorandum, the partnership used the proceeds to provide "short-term financing or bridge funding to a diversified portfolio of small privately held arm's-length companies, mainly located in Western Canada."
Unit holders were to receive interest on their invested capital at the rate of one per cent per month, plus "discretionary bonuses." Investors could ask for their capital back after six months.
In April this year, the commission issued a cease-trade order against the partnership on grounds that its offering memorandum did not provide investors with sufficient information for them to make an informed investment decision.
An investigation ensued, culminating Tuesday in a settlement agreement.
The agreement notes that from August 2004 to June this year, Friedland raised $12 million from 140 investors, at least 100 of whom were B.C. residents. However, neither Friedland nor Western Liquid was registered to trade securities, and no prospectus was filed with the commission, contrary to securities rules.
For these offences, Friedland, who is 52 years old, agreed to a 20-year suspension from the B.C. securities market.
The commission said he would also have been fined $225,000, but both he and the partnership are officially bankrupt. Fortunately, this was not the financial disaster it could have been. Up until June, the partnership repaid all interest due to investors -in excess of $10 million -plus all capital on demand.
Since then, they have not been able to make any payments. The net loss to investors is not stated. The commission also noted that Friedland had cooperated with commission staff and incurred significant personal debt in an attempt to meet obligations to investors.
In my view, this is another investment offering that should have been subjected to registration and prospectus requirements right from the start.
Commission officials tell me they are now conducting greater scrutiny of these so-called exempt offerings to try to catch the non-compliant ones before they develop into train wrecks.
Once again, all I can say is, it's about time.
dbaines@vancouversun.com
