Image Credit: Shutterstock
May 13, 2015 - 8:29 AM
LUMBY - A Lumby man who tried — and ultimately failed — to get away with circumventing B.C. securities laws won’t be working anywhere near them for years.
In 2006, Donald Gordon Byrne, a self-employed technician from Lumby, partnered up with friend and former business associate Robert Scott Morrice, according to a B.C. Securities Commission settlement.
They discussed the idea of incorporating a mining company because of Morrice’s knowledge of obtaining ticker symbols for companies on the U.S Over-the-Counter markets, and selling them after incorporation. The duo followed through on the idea, incorporated Edgemont Mining Inc. in Nevada, and Byrne enlisted a friend to be the nominee director for the company. Edgemont possessed minimal assets and no active business.
In 2008, the Corporate Finance Compliance staff sent a letter to Edgemont informing it of the Over-the-Counter rule, which brought with it new filing requirements and restrictions on the resale of securities. The rule was introduced to discourage the incorporation and sale of shell companies for abusive purposes.
A 2007 report by the securities commission chair stated a large number of individuals in B.C. were incorporating shell companies and listing them on over the counter markets in the U.S. for deceptive purposes. The company promoters would sell their shares to unsuspecting investors, and because the business had no legitimate prospects, the stock would soon become worthless. The new Over-the-Counter rule strengthened the regulation of companies like Edgemont, something Byrne wanted to avoid.
By this time, Byrne had two other Over-the-Counter shell companies with B.C. directors that he eventually intended to sell for a profit. To bypass the new rule, he asked family in Saskatchewan to help find new directors for the Shell companies to create the appearance they were being operated outside B.C. The new directors included a farmer, a welder, and a freight broker, none of whom had any experience in mining or had ever held executive positions within a company.
“The Saskatchewan nominees were all friends, and Byrne told them the Shell Companies were going to be sold and they would be paid some money,” states the settlement agreement.
Byrne and Morrice told them to write cheques to make it appear they purchased shares from the former B.C. directors, but they didn’t use their own money, the commission said.
“Byrne helped to disguise who was controlling the shell companies by finding and instructing nominee directors in order to evade the application of the (Over the Counter) Rule. This conduct was contrary to the public interest because by doing so, Byrne harmed the reputation, credibility, and integrity of the securities market in British Columbia,” the commission said.
As punishment, Byrne is now banned from acting in a management or consultative capacity relating to activities in the securities market, and is prohibited from engaging in investor relations, among other restrictions. He’s bound by the prohibitions for the next four years. Morrice was also penalized for his part in the operation.
The securities commission was assisted by the RCMP Integrated Market Enforcement Team and the Financial and Consumer Affairs Authority of Saskatchewan.
To contact the reporter for this story, email Charlotte Helston at chelston@infonews.ca or call 250-309-5230. To contact the editor, email mjones@infonews.ca or call 250-718-2724.
News from © iNFOnews, 2015