Vancouver
Stock Exchange: Borchert, Approved Person Disciplined
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By way of an Offer of Settlement, Gerald Ernest Borchert
("Borchert"), an Approved Person employed by Canaccord Capital Corporation
("Canaccord"), has agreed to the imposition of the following penalties by the
Exchange for violation of Exchange By-Law 5.01(2):
- a fine in the amount of $5,000;
- disgorgement of inappropriate profits in the amount of $19,157;
- a requirement to re-write and pass the examination based on the Conduct and Practices
Handbook for Securities Industry Professionals;
- a requirement to be placed on strict supervision for a period of 6 months, and
- an assessment of investigative costs in the amount of $2,000.
Exchange By-Law 5.01(2) states in part, that an "Infraction"
means any conduct, proceeding or method of business which is unbecoming or inconsistent
with just and equitable principles of trade or detrimental to the interests of the
Exchange or the public.
On December 20, 1996, Exchange listed Maymac Petroleum Corp.
("Maymac") issued a news release disclosing in part that Maymac was attempting
to negotiate an equity financing with Canaccord. Borchert was Maymacs contact at
Canaccord for preliminary discussions.
On January 7, 1997, Maymac issued a further news release disclosing in
part that negotiations (the "Negotiations") for an equity financing with
Canaccord were continuing. Borchert did not consider the preliminary discussions with
Maymac to be "Negotiations".
Borchert terminated the discussions with Maymac on January 8, 1997. The
termination of the discussions was not disclosed to the public. During the period January
9, 1997, to January 22, 1997, Borchert sold short a total of 205,000 Maymac shares for his
own account. Maymac was the most actively traded security on the Exchange during that
period.
On Friday January 24, 1997, the Exchanges Surveillance department
halted trading in the shares of Maymac pending clarification of the market activity due to
heavy trading volumes.
On Monday January 27, 1997, Surveillance contacted Borchert who advised
Surveillance that the Negotiations were off.
On January 30, 1997, Maymac issued a further news release stating in
part that the Negotiations had ceased effective January 27, 1997. Trading in Maymac was
reinstated on February 6, 1997.
Borchert covered his short position on February 6, 1997 and February
10, 1997, realizing a net profit of approximately $19,157.
Borchert ought to have known that his short sales occurred in
circumstances where it appeared that material information had not yet been disclosed to
the public. Borchert acted on this information by selling short Maymac shares. Borchert
thereby violated Exchange By-Law 5.01(2).
No fault was attributed to the Member Firm.
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