Veteran, Toronto-based mining executive Murray H. Pollitt has been issued a notice of hearing by the the Ontario Securities Commission alleging violations of the Ontario Securities Act.
Pollitt is president of gold miner River Gold Mines (RIV-T) and chairman of gold explorer Wesdome Gold Mines (WDG-V).
The allegations against Pollitt relate to his position as an officer and director of Pollitt & Co. Inc., a registered securities dealer and member of the Toronto Stock Exchange. Pollitt owns an 80% interest in Pollitt & Co.
In November 2002, Pollitt & Co. was invited to participate as a junior member in a “bought-deal” syndicate led by Scotia Capital and National Bank Financial. The bought deal, being assembled for Agricore United (AU-T), consisted of a $100-million, 5-year, convertible unsecured subordinate debentures with a 9% coupon.
The deal presented to Agricore was accepted by the company at about 3:26 pm on Nov. 11, 2002, and trading in the stock was halted at 3:38 pm.
A number of Pollitt & Co. clients had been buyers of Agricore stock prior to Nov. 11, 2002, and the OSC alleges that Pollitt was concerned that the terms of the bought deal were highly dilutive to existing shareholders.
In a nutshell, the OSC alleges that Pollitt “decided to provide certain clients with a ‘head’s up’ about the bought deal prior to the transaction being generally disclosed by means of a press release.”
In more detail, the OSC alleges that Pollitt “personally contacted, or had contacted at his request, at least five different institutional clients of Pollitt & Co. who were known to have held shares in Agricore. Each of these communications were made subsequent to Pollitt & Co. being invited to participate in the bought deal syndicate at approximately 2:45 pm and prior to the issuance of any press release announcing the bought deal at approximately 3:38 pm.”
Pollitt & Co. was ultimately excluded from the syndicate at 3:36 pm, after Scotia had received a call from an allegedly tipped-off client of Pollitt & Co.
One of the clients that the OSC alleges were improperly contacted was Robert Cassels, who has also received a notice of hearing. Cassels is an investment counsel and portfolio manager with the firm Cassels Investment Management, where he is an officer, director and 70% owner.
The OSC’s statement of allegations against Pollitt and Cassels includes a 2-page transcript of a seemingly incriminating conversation between Cassels and his registered representative at TD Waterhouse.
The notice of hearing for Pollitt and Cassels was issued on Aug. 30, 2004, and an initial hearing for both men is scheduled for Sept. 28, 2004, in Toronto.
Among the possible penalties, if the allegations are proved true, would be the barring of either man from serving as an officer or director of an issuer.
Details of the allegations may be found at: http://www.osc.gov.on.ca/Enforcement/Proceedings/2004/soa_20040830_cassels.pdf
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