Re: 2001-4 -- [Elgindy] Elgindy and the British Columbia Securities Commission
2001 BCSECCOM 720
IN THE MATTER OF THE SECURITIES ACT
R.S.B.C. 1996, C.418
AND
IN THE MATTER OF PACIFIC INTERNATIONAL SECURITIES INC.
AND
IN THE MATTER OF MAX MEIER, LAWRENCE HUGH MCQUID,JEAN-PAUL PHILIPPE BACHELLERIE, ROBERT HERBERT BLADES, GERMAIN CARRIERE, JOHN TODD EYMANN, ALBERTO JOHN QUATTROCIOCCHI, MARTIN J. REYNOLDS, AND THERESA MARY SHEEHAN
(COLLECTIVELY REFERRED TO AS THE “DIRECTORS”)
(ALL PARTIES REFERRED TO COLLECTIVELY AS THE “RESPONDENTS”)
Notice of Hearing Under Section 161
[para 1]
1. TAKE NOTICE that a hearing will be held at the 12th Floor Hearing Room, 701 West Georgia Street, Vancouver, British Columbia (the “Hearing”) to give the Respondents an opportunity to be heard, before the British Columbia Securities Commission determines whether it is in the public interest to make the following orders:
1.1 the Respondents’ respective registrations be restricted, or that conditions be imposed on the Respondents as registrants, pursuant to section 161(1)(f) of the Securities Act, R.S.B.C. 1996, c. 418 (the “Act”);
1.2 the Directors resign any position they hold as a director or officer of any issuer, and that they be prohibited from becoming or acting as a director or officer of any issuer, pursuant to section 161(1)(d) of the Act;
1.3 the Respondents pay an administrative penalty, pursuant to section 162 of the Act;
1.4 the Respondents pay prescribed fees or charges for the costs of or related to the hearing, pursuant to section 174 of the Act; and
1.5 such further and other orders as the Commission may deem appropriate in the circumstances.
[para 2]
2. AND TAKE NOTICE that the Executive Director will ask the Commission to consider the following facts and allegations in makings its determinations.
The Parties
[para 3]
3. Pacific International Securities Inc. (“Pacific International”) is a company incorporated under the laws of British Columbia, with its head office in Vancouver, British Columbia. It was incorporated as D.J. Hall and Company Inc. on June 12, 1981. It changed its name to Pacific International on September 6, 1983. It was registered under the Act as a broker from October 23, 1981, to December 31, 1999, and has been an investment dealer since January 1, 2000. It has been a member of the Vancouver Stock Exchange (the “VSE”), now the Canadian Venture Exchange Inc. (the “CDNX”), since October, 1981, and a member of the Investment Dealers Association of Canada (the “IDA”) since June, 1987.
[para 4]
4. Max Meier co-founded Pacific International. He has been a director from August, 1983, until the present. He was President and Chief Executive Officer from August, 1983, until in or about May, 2001, and Chairman and Chief Executive Officer from May, 2001. As such, he has overseen Pacific International’s overall management since August, 1983.
[para 5]
5. Lawrence Hugh McQuid joined Pacific International in October, 1985. From January, 1986, until July, 1997, he was its Chief Financial Officer and was, at all times material to this Notice, the designated Compliance Officer of Pacific International under sections 47 and 65 of the Securities Rules, B.C. Reg. 194/97 and the predecessor sections. From July, 1997, until in or about May, 2001, he was Chief Operating Officer. He was Senior Vice President from January, 1986, until in or about May, 2001. He has been Senior Vice President Administration from in or about May, 2001. He has been a director of Pacific International from January, 1986, until the present.
[para 6]
6. Jean-Paul Philippe Bachellerie joined Pacific International in September, 1995. He has been a director from July, 1997, to the present. He was a Vice President and Chief Financial Officer from July, 1997, until in or about May, 2001. From in or about May, 2001, he has been President and Chief Operating Officer of Pacific International.
[para 7]
7. Robert Herbert Blades joined Pacific International in June, 1987. He has been a Vice President from October, 1990, until the present, and a director of Pacific International from April, 1992, until the present.
[para 8]
8. Germain Carrière has been a director of Pacific International from May, 1998, until the present. He is the President and Chief Operating Officer of National Bank Financial Ltd., which holds an equity interest in Pacific International.
[para 9]
9. John Todd Eymann co-founded Pacific International. He has been a director from April, 1984, until the present. He was the Executive Vice President of Pacific International from April, 1984, until in or about May, 2001. From May, 2001, he has been Vice Chairman of Pacific International.
[para 10]
10. Alberto Quattrociocchi was a Vice President of Pacific International from June, 1991, until September,1998, a director from April, 1992, until the present, and a Senior Vice President from September, 1998, until in or about May, 2001, overseeing the Sales and Research portfolios at Pacific International. From in or about May, 2001, he has been Executive Vice President of Pacific International.
[para 11]
11. Martin J. Reynolds was the Chairman and a director of Pacific International from June, 1994. He resigned as Chairman in October, 1998, and as a director in March, 1999.
[para 12]
12. Theresa Mary Sheehan was a Registered Representative since February, 1991, at Pacific International. She has been a director of Pacific International from August, 1993, until the present, and a Vice-President from August, 1997, until the present.
Pacific International’s Business
[para 13]
13. In 1993, Pacific International’s commissions from accounts trading in securities listed or quoted in the U.S. totalled approximately $2,300,000.00 (approximately 14% of total commission revenue). By December 31, 1999, its commissions from this activity increased to $19,200,000.00 annually (approximately 67% of its total commission revenue), 82% of which was generated by only 15 out of Pacific International’s 85 registered representatives, and 80% of which came from non-resident accounts. This increase indicates that the Respondents had a business strategy to encourage the development of this business.
[para 14]
14. From July 1, 1995, until at least December 31, 1999, (the “Material Time”), certain clients of Pacific International, most of whom were not resident in Canada, operated U.S. dollar accounts (the “Accounts”), which traded securities listed or quoted in the U.S.
[para 15]
15. The Accounts include Accounts mentioned in indictments (the “Indictments”) issued in the United States, as well as a sample of Accounts at Pacific International generating the largest commission revenue in the period from January 1, 1999, to June 30, 1999. The sample was chosen from 368 Accounts on the basis that accounts generating the largest revenue are the most active, would have the greatest impact on Pacific International’s revenues, and should have attracted the most compliance attention.
Indictments, Complaints and Investigations
[para 16]
16. On March 28, 1997, May 21, 1998, June 15, 1999, and June 18, 1999, the United States Department of Justice filed Indictments naming clients of Pacific International, citing their trading through certain of the Accounts, and alleging breaches of American securities laws.
[para 17]
17. During the Material Time, the United States Securities and Exchange Commission (the “SEC”) named Accounts or clients of Pacific International in civil complaints (the “Complaints”).
[para 18]
18. On July 11, 1998, the Vancouver Stock Exchange issued a citation against J.C. Hauchecorne, a registered representative of Pacific International, involving activity related to the Indictments.
[para 19]
19. Pacific International knew or ought to have known of some or all of the Indictments, the Complaints, the citation, and some or all of the behaviour which led to them. This information ought to have led Pacific International to conduct internal reviews of the trading in US markets and account opening activities and to address the compliance deficiencies which those reviews should have revealed. This did not happen and the compliance deficiencies continued.
Account Activity
[para 20]
20. Throughout the Material Time, certain of the Accounts displayed activities and characteristics (the “Activity”) that would have caused a reasonable registrant to investigate the owners and operations of the Accounts, because each Activity, alone or in combination, is potentially a symptom of illegal conduct or conduct contrary to the public interest, including money laundering and share manipulation.
20.1 Some Accounts were owned or operated by non-residents and residents of Canada who were experienced market participants, such as insiders, control persons, promoters, or persons engaged in investor relations activities. Others were persons registered or formerly registered to trade in securities in the United States or elsewhere. The trading of foreign stocks in British Columbia by non-residents should have prompted Pacific International to question the motivation of those clients.
20.2 Some Accounts were owned, operated by, or associated with persons with criminal or regulatory histories. Particulars of certain individuals with criminal or regulatory histories who owned, operated or were associated with Accounts at Pacific International include:
Name History
Randolph Beimel May 1997: Fined $150,000 and barred from NASD.
Gerald Burns May 1988 – December 1991: In prison on fraud conviction related to sale of unregistered securities.
September 1997: SEC Complaint (together with Angel Lorie) regarding defrauding Spanish citizens.
October 1998: Barred in Florida from acting as officer or director of any public issuer, a $100,000 civil penalty, and disgorgement of $2.7 million.
June 1999: SEC barred Burns from participation in any offering of a penny stock.
Subsequently implicated in Cambridge International Bank and Trust Company matter.
Jimmy Ray Carter August 1992: Fined $300,000 and barred from NASD for selling shares that were neither registered or exempt from registration. Also charged unfair prices to customers.
Anthony Elgindy 1997: NASD suspension for one year and $30,000 fine.
1998: Registration revoked by NASD for failure to pay monies in previously executed Settlement Agreement.
Joseph Garofalo Violations of anti-fraud provisions of U.S. Securities and Exchange Act.
May 1993: Permanent injunction resulting from an SEC Complaint.
Richard Gladstone July 1991: Fined $150,000 by the NASD and barred from any association with any member of NASD. Brokerage firm (Morgan Gladstone) expelled from NASD.
Paul Harary 1990: Convicted of criminal fraud.
David Hesterman May 1998: Criminal indictment filed for securities fraud.
1984: Conviction for securities fraud.
Steven Keyser November 1987: Permanent injunction and disgorgement order pursuant to an SEC Complaint.
Angel Lorie September 1997: SEC action banning Lorie from participating in penny stock offerings and from associating with any broker, dealer, investment advisor or investment company.
Salvatore Mazzeo October 1997: Plead guilty to attempted enterprise corruption.
Todd Moore May 1997: SEC Complaint regarding Members Service Corporation.
Maurice Rind August 1990: SEC Complaint regarding securities fraud in connection with collapse of ZZZZ Best company.
1976: Sentenced to 18 months in prison and fined $10,000 for conspiracy to violate federal securities laws, mail fraud, and other violations.
Shalom Weiss Indicted in April, 1998, on racketeering and money laundering charges. Convicted in November, 1999. Sentenced to consecutive prison sentences totaling 845 years and restitution of over $100 million.
20.3 Some Accounts were cash accounts and ran significant debit balances.
20.4 Some Accounts consistently received in, or transferred out, or both, by physical or electronic delivery, large blocks of stocks traded on the National Association of Securities Dealers Over-the-Counter Bulletin Board (the “NASD OTCBB”).
20.5 Sale proceeds from some Accounts were frequently distributed to third parties.
20.6 Some clients frequently paid significant fees so that they could receive cash from sales before the settlement date.
20.7 Cash was transferred in and out of some Accounts with little or no intervening trading activity between the receipt and transfer of cash.
Pacific International’s Failure to Screen its Clients (the “Screening Deficiencies”)
[para 21]
21. Pacific International failed to fulfil the requirements of various rules and statutes to ensure it had proper client information as follows:
21.1 Client verification procedures in the Accounts frequently did not satisfy the requirements of the Proceeds of Crime (Money Laundering) Act, S.C. 1991, c. 26, P-24.5, and the Proceeds of Crime (Money Laundering) Regulations SOR 93-75.
21.2 Some Account opening documents lacked certain information, such as proper client identification or other essential facts.
21.3 Trading and other activity occurred in some Accounts before a designated partner, director, or officer approved the opening of the Account, as required by CDNX Rule F.1.01.3 (formerly VSE Rule F.1.01.c) and IDA Regulation 1300.2.
[para 22]
22. Clients received into their Accounts securities that were ostensibly issued under American registration exemptions and then disposed of those securities into U.S. markets. Pacific International failed to make reasonable inquiries to determine whether its clients were not illegally distributing those securities (the “Distributions”).
Demands for Production
[para 23]
23. Pacific International received numerous requests during the Material Time for production of information from Commission Staff and the Vancouver Stock Exchange relating to the Accounts (the “Demands”).
The Respondents’ Failure to Take Action
[para 24]
24.1 Pacific International’s compliance and operations staff identified and documented some or all of the Activity, the Screening Deficiencies, and the Distributions. In addition, the Respondents knew, or ought to have known, of the Indictments, the Complaints, the Demands, and that the Vancouver Stock Exchange was investigating certain of the Accounts and the owners of those Accounts.
24.2 Given the increasing financial importance of trading by its clients in securities listed or quoted in the U.S. to Pacific International’s business during the Material Time, and the active nature of the Accounts, the Respondents knew or ought to have known of the Activity and should have taken steps to make inquiries whether the Accounts were being used for illegal or abusive trading.
24.3 Despite this, no or inadequate steps were taken by the Respondents or any of them to make the necessary inquiries.
American Registration
[para 25]
25. Given the nature and extent of its US business, Pacific International ought, as set out in VSE Notice to Members #18/94 and IDA Bulletin #2537, to have been registered to trade in the United States as a broker dealer pursuant to both federal and state law or either of them, and would then have been subject to the requirements of American law in trading on behalf of its clients, including being a member of the National Association of Securities Dealers.
[para 26]
26. By not seeking registration and joining the NASD, Pacific International avoided the scrutiny of the NASD and avoided complying with the rules and requirements of the NASD, which could have assisted it in its gatekeeper and compliance functions.
Breaches of the Act and Rules
[para 27]
27. The Respondents breached the following provisions of the Act, the Rules and SRO requirements:
27.1 Pacific International failed to learn and the Directors failed to cause it to learn, the essential facts about Pacific International’s clients holding Accounts, including especially, but not exclusively, their identity, reputation, and reasons for retaining Pacific International, when the Respondents knew, or ought to have known, information that caused, or ought to have caused, doubt whether certain of Pacific International’s clients were of good business or financial reputation, contrary to section 48 of the Rules or section 43 of B.C. Reg. 270/86, VSE Rules F.1.04, F.1.01, VSE By-law 5.01(2) and IDA Regulation 1300.1(a).
27.2 The information the Respondents knew or ought to have known included:
27.2.1 the Activity;
27.2.2 the Distributions;
27.2.3 the Indictments, the Complaints and the Demands;
27.2.4 the Screening Deficiencies;
27.2.5 the issuance of the VSE citation against J.C. Hauchecorne; and,
27.2.6 the reviews conducted by its compliance and operations staff.
27.3 The Respondents failed to establish and apply written prudent business procedures for dealing with clients, particularly those holding Accounts, including supervising the registered representatives or the investment advisors employed by Pacific International, in compliance with the Act and the regulations, contrary to s. 44 of the Rules and section 40 of B.C. Reg. 270/86, VSE Rule F.2.01, and IDA Regulation 1300.1(b).
Conduct Contrary to the Public Interest
[para 28]
28. The Respondents acted contrary to the public interest by the following:
28.1 failing to establish and apply adequate procedures to identify, investigate, halt, and prevent, where appropriate, the Activity, Screening Deficiencies, and the American Dispositions;
28.2 failing to supervise properly or at all the conduct of its investment advisors and registered representatives;
28.3 failing to ensure that it was not assisting its clients to dispose of restricted securities into American securities markets; and
28.4 failing to become a member of the NASD for better scrutiny of its U.S. business.
[para 29]
29. The Directors failed to fulfil their obligations under the Act and Rules or to exercise the care, diligence and skill of a reasonably prudent person, contrary to sections 118 and 135 of the Company Act, R.S.B.C. 1996, c. 62.
[para 30]
30. The Directors failed to ensure that Pacific International’s conduct, business and affairs complied with all applicable laws, regulations, rules, and by-laws.
[para 31]
31. The Respondents failed to fulfill their roles as gatekeepers in the securities industry.
Executive Committee and Senior Officer Responsibility
[para 32]
32. All of the individual Respondents except for Sheehan were members of the Executive Committee of the Board of Directors and bore added responsibility for the conduct of Pacific International’s business and its management, including ensuring that Pacific International’s compliance procedures were adequate, were in place and were followed.
[para 33]
33. McQuid, as the senior officer most directly responsible for compliance at Pacific International in the Material Time, and Meier, as the senior officer to whom he reported, were more particularly responsible for compliance procedures at Pacific International.
Notice
[para 34]
34. TAKE NOTICE that the Commission will hold a hearing to provide the Respondents with an opportunity to be represented by counsel, lead evidence, and submit representations. The Respondents or their counsel are requested to advise the Commission of their intention to answer this Notice of Hearing before the Commission by contacting the Secretary of the Commission at P.O. Box 10142, Pacific Centre, 701 West Georgia Street, Vancouver, BC, V7Y 1L2, phone: (604) 899-6500, or email to: commsec@bcsc.bc.ca.
[para 35]
35. AND TAKE NOTICE that the Respondents or their counsel are required to attend at the 12th Floor, 701 West Georgia Street, Vancouver, British Columbia on September 19, 2001, at 10:00 a.m., if they wish to be heard, before the Commission fixes a date for the Hearing (the “Set Date Hearing”).
[para 36]
36. AND TAKE NOTICE that determinations may be made in this matter if the Respondents or their counsel do not appear at the Set Date Hearing or the Hearing.
DATED at Vancouver, British Columbia, on July 10, 2001.
Steve Wilson
Executive Director
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2002 BCSECCOM 452
Temporary Order and Notice of Hearing
Amr I. Elgindy (also known as Anthony Elgindy, Tony Elgindy and Anthony Pacific), Mary Faith Elgindy, Pacific Equity Investigations and Derrick W. Cleveland
(the Respondents)
Section 161 of the Securities Act, RSBC 1996, c. 418
¶ 1
A hearing (the Hearing) will be held to give the Respondents an opportunity to be heard before the British Columbia Securities Commission (the Commission) considers whether it is in the public interest to make the following orders:
1. under section 161(1)(c) of the of the Securities Act, RSBC 1996, c. 418 (the Act), that any or all of the exemptions described in sections 44 to 47, 74, 75, 98 or 99 of the Act do not apply to the Respondents;
2. under section 161(1)(d) of the Act, that Amr I. Elgindy (Elgindy) and Derrick W. Cleveland (Cleveland) each be prohibited from becoming or acting as a director or officer of any issuer;
3. under section 161(1)(d) of the Act that Elgindy and Cleveland each be prohibited from engaging in investor relations activities;
4. under section 162 of the Act, that Elgindy and Cleveland each pay an administrative penalty;
5. under section 174 of the Act, that Elgindy and Cleveland pay the prescribed fees or charges of or related to the hearing; and
6. any other orders that may be appropriate in the circumstances.
¶ 2
The Commission will be asked to consider the following facts and allegations in making its determinations:
1. Elgindy is a resident of the United States and has never been registered under the Act. He has or controls at least one account with an investment dealer in British Columbia.
2. Elgindy was registered as a trader with the National Association of Securities Dealers (NASD). In a decision dated December 28, 2001, a NASD Regulation, Inc. hearing panel found that Elgindy had made a series of high bids without intending to honor them and had disseminated recommendations without disclosing the firm’s market maker status. For the bids, Elgindy was fined $2,000 and suspended for one year. For the recommendations, he was fined $1,000.
3. Mary Faith Elgindy is a resident of the United States and has never been registered under the Act. She is the spouse of Elgindy and she has or controls at least one account with an investment dealer in British Columbia.
4. Cleveland is a resident of the United States and has never been registered under the Act. He has or controls at least one account with an investment dealer in British Columbia.
5. Pacific Equity Investigations, a business based in San Diego California, operated a public investment website, a subscription based e-mail newsletter and subscription based investment website. Elgindy founded and at material times controlled the business.
6. On or about May 23, 2002, the United States District Court Eastern District of New York issued an indictment (the Indictment) which alleges the following:
(a) From approximately November 2000 to May 2002, Elgindy in conjunction with Cleveland and others, conducted a short selling scheme involving stock of certain publicly traded companies (the Companies) whose respective stock prices appeared to be vulnerable to the release of negative news.
(b) After Elgindy short sold the stock of the Companies, he engaged in manipulative activities designed to lower their respective prices. This included using Pacific Equity Investigations to spread negative, and some times false information about the Companies and encourage others to short sell the stocks, all with a view to maximizing Elgindy’s gain from the scheme.
(c) Elgindy traded on non-public material information that he improperly obtained from certain special agents of the Federal Bureau of Investigation, who are also named in the Indictment.
(d) Elgindy short sold stock through brokerage accounts at Global Securities Corporation (Global Securities), in Vancouver, British Columbia and elsewhere.
(e) Elgindy, Cleveland and others have been charged with participating in an illegal scheme that:
(i) traded on material, non-public information that had been misappropriated from confidential law enforcement databases;
(ii) manipulated the securities markets; and
(iii) extorted stock from companies that feared being targets of the scheme.
(f) Elgindy and others have also been charged with obstructing a Grand Jury investigation of this scheme.
6. In conjunction with the Indictment the government of the United States commenced a civil forfeiture action which seeks to seize funds on deposit in accounts maintained by Elgindy, Mary Faith Elgindy, and Pacific Equity Investigations.
7. On May 20, 2002, pursuant to the forfeiture action, the United States District Court Eastern District of New York issued a Warrant of Arrest for Articles in rem (Warrant of Arrest) against Elgindy, Mary Faith Elgindy and Pacific Equity Investigations, in order to seize assets in Canada and the United States. Among the assets that are sought to be seized are funds on deposit at Global Securities, a registrant under the Act, the Bank of Montreal, and the Royal Bank.
¶ 3
The Executive Director considers the length of time to hold a hearing under section 161(1) of the Act could be prejudicial to the public interest.
¶ 4
The Executive Director, considering that it would be in the public interest to do so, orders under section 161(2) of the Act that the exemptions described in sections 44 to 47, 74, 75, 98 and 99 of the Act do not apply to the Respondents, pursuant to section 161(1)(c) of the Act, until June 5, 2002 (the Temporary Order).
¶ 5
The Hearing will be held at the 12th Floor Hearing Room, 701 West Georgia Street, Vancouver, BC, on Wednesday, June 5, 2002, at 10:00 am. 2002 BCSECCOM 452
¶ 6
At the Hearing the staff of the Commission will bring the following applications:
1. that the matter be adjourned for 90 days to permit the conclusion of the proceedings related to the Information and Warrant of Arrest; and
2. that the Temporary Order be extended until such time as the Hearing is completed and a decision rendered.
¶ 7
The Respondents may be represented by counsel at the Hearing and may make representations and lead evidence. The Respondents are requested to advise the Commission of their intention to attend by contacting the Commission Secretary at PO Box 10142, Pacific Centre, 5th Floor, 701 West Georgia Street, Vancouver, BC, telephone: (604) 899-6500; email: commsec@bcsc.bc.ca.
¶ 8
Determinations may be made in this matter if the Respondents or their counsel do not appear at the Hearing.
¶ 9
May 24, 2002
Steve Wilson
Executive Director
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2003 BCSECCOM 575
Hearing Adjournment
Amr I. Elgindy (also known as Anthony Elgindy, Tony Elgindy and Anthony Pacific), Mary Faith Elgindy, Pacific Equity Investigations and Derrick W. Cleveland
Section 161 of the Securities Act, RSBC 1996, c. 418
The British Columbia Securities Commission will hold a hearing to determine whether it is in the public interest to make orders under the Act against Amr I. Elgindy, Mary Faith Elgindy, Pacific Equity Investigations and Derrick W. Cleveland. The matter has been adjourned, by consent, to December 17, 2003 at 10 am at the British Columbia Securities Commission, 12th Floor, 701 West Georgia Street, Vancouver, British Columbia, when the parties will inform the Commission of their readiness to set a date for the hearing.
August 19, 2003
Joyce C. Maykut, Q.C.
Vice Chair
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2003 BCSECCOM 833
Hearing Adjournment
Amr I. Elgindy (also known as Anthony Elgindy, Tony Elgindy and Anthony Pacific), Mary Faith Elgindy, Pacific Equity Investigations and Derrick W. Cleveland
Section 161 of the Securities Act, RSBC 1996, c. 418
The British Columbia Securities Commission will hold a hearing to determine whether it is in the public interest to make orders under the Act against Amr I. Elgindy, Mary Faith Elgindy, Pacific Equity Investigations and Derrick W. Cleveland. The matter has been adjourned, by consent, to April 1, 2004, at 10 am at the British Columbia Securities Commission, 12th Floor, 701 West Georgia Street, Vancouver, British Columbia, when the parties will inform the Commission of their readiness to set a date for the hearing.
December 16, 2003
Adrienne Salvail-Lopez
Vice Chair
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2004 BCSECCOM 192
COR#04/035
Variation Order
Amr I. Elgindy (also known as Anthony Elgindy, Tony Elgindy and Anthony Pacific), Mary Faith Elgindy, Pacific Equity Investigations and Derrick W. Cleveland
Section 171 of the Securities Act, RSBC 1996, c. 418
Background
¶ 1 On May 24, 2002 the Executive Director of the British Columbia Securities Commission:
1. issued a Notice of Hearing to give Amr I. Elgindy (also known as Anthony Elgindy, Tony Elgindy and Anthony Pacific), Mary Faith Elgindy, Pacific Equity Investigations and Derrick W. Cleveland (collectively, the Respondents) an opportunity to be heard before the Commission considers whether it is in the public interest to make certain orders; and
2. ordered under section 161(2) of the Act that the exemptions described in sections 44 to 47, 74, 75, 98 and 99 of the Act do not apply to the Respondents, pursuant to section 161(1)(c) of the Act (the Temporary Order).
¶ 2 On May 24, 2002, the Commission ordered under section 151 of the Act that, among other things, Global Securities Corporation (Global Securities) hold all funds, securities, exchange contracts and other property that it has on deposit, under control, or for safekeeping for any of the Respondents or over which any of them exercises control or direction (the Freeze Order).
¶ 3 On June 5, 2002 the Commission extended the Temporary Order until the Hearing is held and a decision rendered in this matter.
¶ 4 Account Number 019-936U-3, in the name of 33588 Yukon Inc. at Global Securities (the Account) is subject to the Freeze Order. Both Mary Faith Elgindy and Anthony Elgindy have trading authority over the Account.
¶ 5 On December 19, 2003, the Commission issued a Variation Order under section 171 of the Act that, among other things, allowed Global Securities to use cash proceeds in the Account to purchase enough securities to close out outstanding short positions in the Account.
¶ 6 On or about March 3, 2004, the United States District Court Eastern District of New York issued a stipulation and order pertaining to the Account (the Stipulation and Order). The Stipulation and Order state that Global Securities is authorized to liquidate all securities in the Account and to remit the funds to the Clerk of the United States District Court for the Eastern District of New York (the Clerk of the Court).
¶ 7 The United States Attorney Eastern District of New York, Mary F. Elgindy, and Amr I. Elgindy, individually and as president and owner of 33588 Yukon Inc., each agreed to the Stipulation and Order.
¶ 8 Global Securities has informed Commission staff that:
1. As of March 9, 2004 the Account holds approximately $942,505.12 USD in cash and -$1,363.00 USD in equities.
2. The negative equity balance represents outstanding short positions in the Account (the Short Positions).
3. To date, Global Securities has not been able to acquire the necessary securities to settle the Short Positions.
4. Global wishes to retain $2,726.00 USD in order to purchase securities to settle the Short Positions.
The Order
¶ 9 The Commission, considering that it would not be prejudicial to the public interest, orders under section 171 of the Act that:
1. The Freeze Order is varied to permit Global Securities to withdraw the entire outstanding cash balance from the Account, except for $2,726.00 USD, and to send the withdrawn funds to the Clerk of the Court in the manner prescribed by the Stipulation and Order (the Transaction);
2. Global Securities complete the Transaction and provide the Executive Director with a record of the Transaction within four business days of receiving this Variation Order; and
3. Within four business days of settling the Short Positions, Global Securities must remit any remaining funds in the Account to the Clerk of the Court in the manner prescribed by the Stipulation and Order and provide the Executive Director with a record of the remittance.
¶ 10 March 12, 2004
¶ 11 Douglas M. Hyndman
Chair
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2004 BCSECCOM 464
Hearing Adjournment
Amr I. Elgindy (also known as Anthony Elgindy, Tony Elgindy and Anthony Pacific), Mary Faith Elgindy, Pacific Equity Investigations and Derrick W. Cleveland
Section 161 of the Securities Act, RSBC 1996, c. 418
The British Columbia Securities Commission will hold a hearing to determine whether it is in the public interest to make orders under section 161 of the Act against the above respondents.
The matter has been adjourned, by consent, to December 15, 2004 at 10 am at the British Columbia Securities Commission, 12 Floor, 701 West Georgia Street, Vancouver, British Columbia, when the parties will inform the Commission of their readiness to set a date for the hearing.
Temporary orders, outlined in the notice of hearing dated May 24, 2002 and as varied from time to time, remain in effect until the hearing is held and a decision is rendered.
August 6, 2004
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