Statement of Allegations: In the Matter of Amalgamated Income Limited Partnership and 479660 B.C. Ltd.
IN THE MATTER OF THE SECURITIES ACT
R.S.O. 1990, c.S.5, AS AMENDED
AND
IN THE MATTER OF
AMALGAMATED INCOME LIMITED PARTNERSHIP AND 479660 B.C. LTD.
STATEMENT OF ALLEGATIONS OF STAFF OF THE ONTARIO SECURITIES COMMISSION
Staff of the Ontario Securities Commission (the "Staff") make the following allegations:
Introduction
1. Amalgamated Income Limited Partnership ("Amalgamated") is a limited partnership and areporting issuer in all the provinces of Canada. Amalgamated is engaged in the business ofacquiring, holding and trading units of mutual fund limited partnerships. The units ofAmalgamated were listed on the Montreal Exchange (the "ME") from October 2, 1995 untilDecember 6, 1999. On December 6, 1999 the units of Amalgamated ceased to trade on theME and were listed on the Toronto Stock Exchange (the "TSE"). Amalgamated's unitscontinue to be listed on the TSE.
2. The general partner of Amalgamated is 479660 B.C. Ltd. ("479660"), a companyincorporated under the laws of the Province of British Columbia. The head office of 479660is located in British Columbia. 479660 has carried on business as the general partner ofAmalgamated since on or about November 18, 1994. As more particularly described below,479660 had full power and authority to perform certain duties on behalf of Amalgamatedpursuant to the limited partnership agreement (the "Agreement") entered into between479660 and the parties referred to in the Agreement as the "Limited Partners", datedNovember 18, 1994 (and amended on March 1, 1995 and February 29, 1996).
Acquisition of Units in Limited Partnerships by Amalgamated
3. In or about early 1995, Amalgamated commenced purchasing units in the limited partnerships(collectively referred to as the "Limited Partnerships"). The Limited Partnerships are set outin Schedule "1" to the Statement of Allegations. The units in each of the Limited Partnershipsare voting securities and equity securities within the meaning of subsection 1(1) andsubsection 89(1) of the Act. Most of the purchases by Amalgamated of the units in theLimited Partnerships were made through the facilities of the Canadian Dealing Network.During the material times, the Limited Partnerships referred to in Schedule "1" were reportingissuers in Ontario.
Failure by Amalgamated to Comply With Requirements Under Sections 101 and 107 of the Act
4. During the material times, Amalgamated failed to comply with requirements under section101 and 107 of the Act in relation to its acquisition of units in the Limited Partnerships byreason of the following:
(a) Amalgamated failed to issue and file a news release and failed to file a report asrequired under subsection 101(1) of the Act with respect to acquisitions of units ineach Limited Partnership set out in Schedule "1" following the acquisition of 10% ormore of the outstanding units of the Limited Partnerships, more particularly describedin Schedule "1";
(b) Amalgamated failed to issue and file a news release and failed to file a report asrequired under subsection 101(2) in respect of additional acquisitions of 2% of theoutstanding units of the Limited Partnerships, more particularly described in Schedule"1";
(c) Amalgamated failed to comply with the trading moratorium rules provided for insubsection 101(3) of the Act in relation to the acquisition of units of the LimitedPartnerships, more particularly described in Schedule "1"; and
(d) Amalgamated, as an insider of each of the Limited Partnerships set out in Schedule"1", failed to file the reports required by section 107 of the Act with respect to itsholdings in each of the Limited Partnerships, more particularly described in Schedule"1".
Representations Made by Amalgamated to Staff of the Ontario Securities Commission
5. In or about June, 1998, in connection with Staff's review of a take-over bid circular datedJune 2, 1998 prepared by Amalgamated, Staff requested that Amalgamated address its failureto comply with its obligations to file early warning reports and insider reports under sections101 and 107 of the Act with respect to acquisitions of units of some of the LimitedPartnerships set out in Schedule "1". By correspondence dated June 18, 1998, jointlyaddressed to the then General Counsel of the Ontario Securities Commission and to Staff ofthe British Columbia Securities Commission, Amalgamated, by its counsel, represented thatit would comply with its filing obligations as follows:
"[Counsel] have discussed with Amalgamated LP its obligations to fileadvance warning and follow up reports under section 101 of theSecurities Act (British Columbia) and similar provisions of thesecurities laws of other Provinces as well as its obligation to fileinsider reports where appropriate. As soon as the Notice and theQuebec Offer are out of the way and in the mail, Amalgamated LPwill focus on these filings and work diligently to bring these filings upto date as required." [emphasis added]
Failure by Amalgamated to Honour Representations Made to Staff of the Ontario SecuritiesCommission
6. In or about July, 1999, in connection with Staff's review of a Preliminary Prospectus filed byAmalgamated, it came to the attention of Staff that Amalgamated had failed to comply withthe requirements contained in sections 101 and 107 of the Act with respect to acquisitions byAmalgamated of units in the Limited Partnerships referred to in Schedule "1". In or aboutJuly, 1999, Staff requested that Amalgamated comply with its reporting requirements undersections 101 and 107 of the Act. Contrary to the representations made by Amalgamated inJune, 1998 to Staff set out above in paragraph 5, Amalgamated had not taken any steps tocomply with the requirements under sections 101 and 107 of the Act in relation to itsacquisitions of units in the Limited Partnerships described in Schedule "1".
7. On or about July 30, 1999, Amalgamated filed reports under sections 101 and 107 on aconsolidated basis with respect to its acquisitions of units of certain Limited Partnerships setout in Schedule "1", with the exception of its acquisition of units in Clarington LimitedPartnership 1997, which reports were filed on a consolidated basis under sections 101 and107 of the Act on or about August 11, 1999 after Staff's request.
Amalgamated's Continued Breach of Reporting Requirements Under Sections 101 and 107 ofthe Act
8. Amalgamated failed to file, and to date has not filed, reports required by subsection 107(2)of the Act with respect to changes in its holdings of various limited partnerships occurringbetween June 30, 1999 and September 30, 1999 as described in Schedule "2".
9. Amalgamated failed to file, and to date had not filed, reports required by subsections 101(1)and 107(1) of the Act with respect to its acquisition of 15, 565 units of BPI VII LimitedPartnership, a reporting issuer in Ontario, as described in the Amalgamated press releasedated December 23, 1999. After this trade, Amalgamated held 15.7% of the outstandingunits of BPI VII LP.
10. Further, Amalgamated has not responded to Staff's correspondence dated December 20, 1999requesting information as to whether it has complied with its reporting requirements undersections 101 and 107 of the Act with respect to Amalgamated's acquisition of further unitsin limited partnerships.
Non-Exempt Take-Over Bids
11. During the period from May, 1996 to January, 1999, Amalgamated made nine separateacquisitions (the "Nine Acquisitions") of units in the 20/20 Group 1990 Limited Partnership,AGF Limited Partnership 1990 and AGF Limited Partnership 1991, more particularlydescribed in Schedule "1". The Nine Acquisitions each constituted a take-over bid within themeaning of Part XX of the Act and were made in contravention of the applicable requirementsof Part XX of the Act. Prior to each of the Nine Acquisitions set out in Schedule "1",Amalgamated had acquired units in these Limited Partnerships pursuant to a formal take-overbid under Part XX of the Act. Thereafter, Amalgamated acquired additional units in theseLimited Partnerships, which together with the units it had previously acquired, constituted inthe aggregate more than 20% of the then outstanding units in these Limited Partnerships. TheNine Acquisitions were not made pursuant to the formal take-over bid requirements or anexemption from the take-over bid requirements contained in Part XX of the Act, andaccordingly, were made in contravention of the applicable requirements of Part XX of theAct.
Failure to File Additional Reports and Pay Fees as Required Under the Act
12. Amalgamated failed to file, and to date has not filed, reports in accordance with Form 28 -Annual Filing of a Reporting Issuer as required under subsection 81(2) of the Act and section5 of R.R.O. 1990, Regulation 1015 (the "Regulation") to the Act. Amalgamated failed to filesuch reports within 140 days from the end of its financial years ending on the following dates:December 31, 1995; December 31, 1996; December 31, 1997; and December 31, 1998.
13. Amalgamated filed with the Commission a report dated November 18, 1999 in accordancewith Form 42 in relation to a take-over bid dated November 19, 1999. Amalgamated failedto state accurately in the report the number of securities of each class of securities subject tothis bid. Amalgamated represented in such report that a fee in the amount of $1,741.01 waspayable by Amalgamated pursuant to Sch I: 32(1) to the Regulation. Amalgamated wasrequired by Sch I: 32(1) to the Regulation to pay a fee in the amount of $16,576.97. To date,Amalgamated has not paid the required fee.
14. In connection with Amalgamated's take-over bid dated June 2, 1998, Amalgamated filed anotice of extension and variation dated June 24, 1998 which, among other things, increasedthe maximum aggregate consideration offered by increasing the number of securities soughtunder the bid. Amalgamated failed to file, and to date has not filed, with the Commission areport in accordance with Form 43 as required pursuant to s.203.1(3) of the Regulation.Amalgamated failed to pay, and to date has not paid, a fee in the amount of $6,663.62 asrequired by Sch. I: 32(3) of the Regulation.
15. Amalgamated filed with the Commission a report dated March 12, 1996 in accordance withForm 42 in relation to a take-over bid dated March 6, 1996. Amalgamated failed to stateaccurately in the filed report the value of the consideration offered per security for each classof securities subject to this bid. Amalgamated represented in such report that the fee payableby Amalgamated pursuant to Sch. I: 32(1) to the Regulation was $1,000.00. Amalgamatedwas required by Sch. I: 32(1) to the Regulation to pay a fee in the amount of $17,861.31. Todate, Amalgamated has not paid the required fee.
16. Amalgamated filed with the Commission a report dated April 13, 1995 in accordance withForm 42 in relation to a take-over bid dated April 19, 1995. Amalgamated failed to stateaccurately the value of the consideration offered per security for each class of securitiessubject to this bid. Amalgamated represented in such report that the fee payable byAmalgamated pursuant to Sch. I: 32(1) to the Regulation was $1,000.00. Amalgamated wasrequired by Sch. I: 32(1) to the Regulation to pay a fee in an amount in excess of $11,677.97.To date, Amalgamated has not paid the required fee.
17. Amalgamated failed to file, and to date has not filed, a report in accordance with Form 42 asrequired pursuant to s. 203.1(1)(b)(i) of the Regulation in relation to acquisitions of units incertain Limited Partnerships which are exempt from the take-over bid requirements containedin Part XX of the Act. Amalgamated failed to pay, and to date has not paid, the required feesof $1,000.00 per bid as required pursuant to Sch. I: 32(1) of the Regulation in relation to thetrades set out in Schedule "3" to the Statement of Allegations.
18. Amalgamated has failed to pay fees in the aggregate amount in excess of $58,038.86 asparticularized in paragraphs 12 through 17 outlined above.
Duties of the General Partner, 479660, Under the Agreement
19. The Agreement referred to in paragraph 2 above sets out, among other things, the powers,duties and obligations of 479660, including the following:
(a) the full and exclusive right, power and authority to manage, control, administer andoperate the business and affairs and to make decisions regarding the undertaking andbusiness of Amalgamated (Article 7.1(b));
(b) the full and exclusive right, power and authority to do any act, take any proceeding,make any decision and execute and deliver any document necessary for or incidentalto carrying out the business of Amalgamated for and on behalf of and in the name ofAmalgamated (Article 7.1(c));
(c) the full power and authority to file as and where required documents to be filed withthe appropriate governmental body or authority in connection with the business,property, assets and undertaking of Amalgamated (Article 2.10(d));
(d) the full power and authority to file such documents as may be necessary to give effectto the business of Amalgamated, which business consists of ".... acquiring, directly orindirectly, securities or assets of Mutual Fund Limited Partnerships or of other entitieswhich derive their income from distribution fees and/or redemption fees associatedwith the distribution of mutual fund units of Canadian mutual fund groups ...."(Articles 2.2 and 2.10(e)); and
(e) the full power and authority to employ or retain professionals which, in the discretionof 479660, may be necessary or advisable in the carrying on of the business ofAmalgamated (Article 7.2(g)).
20. 479660, by virtue of its powers, duties and obligations as set out in the Agreement (andreferred to in part in paragraph 19 above), authorized, permitted or acquiesced in thecontraventions of the Act by Amalgamated outlined above contrary to the public interest.
Conduct Contrary to the Public Interest
21. The conduct of the respondents was contrary to the public interest by reason of the following:
(a) During the material times Amalgamated breached the requirements of the Act asfollows:
(i) Amalgamated failed to issue and file a news release and failed to file a reportas required under subsection 101(1) of the Act with respect to the acquisitionof units of the Limited Partnerships set out in Schedule "1";
(ii) Amalgamated failed to issue and file a news release and failed to file a reportin respect of additional acquisitions of 2% of the outstanding units of certainLimited Partnerships set out in Schedule "1" as required under subsection101(2) of the Act;
(iii) Amalgamated further failed to comply with the trading moratorium rulesprovided for in subsection 101(3) of the Act in relation to certain acquisitionsof units of Limited Partnerships set out in Schedule "1";
(iv) Amalgamated failed to file reports required by section 107 of the Act withrespect to changes in its holdings of various Limited Partnerships as set outin Schedule "1";
(b) Amalgamated failed to honour the representations made by Amalgamated to Staff thatAmalgamated would bring its filings up to date as required. Amalgamated did notbring certain filings up to date in relation to Amalgamated's acquisition of units in theLimited Partnerships until well over a year after it made representations to Staff thatit would take steps to comply with its reporting requirements and only afterAmalgamated was advised by Staff that Amalgamated continued to breach therequirements under sections 101 and 107 of the Act;
(c) Amalgamated made nine separate acquisitions of units in certain Limited Partnershipseach of which constituted a take-over bid within the meaning of Part XX of the Act,and were made in contravention of the applicable requirements of Part XX of the Act;
(d) Amalgamated failed to file, and to date has not filed, reports in accordance withForm 28 - Annual Filing of a Reporting Issuer as required under subsection 81(2) ofthe Act and section 5 of the Regulation;
(e) Amalgamated failed to file, and to date has not filed, reports required by sections 101and 107 of the Act referred to in paragraphs 8 and 9 above;
(f) Amalgamated failed to file reports, failed to file accurate reports and make paymentof fees in excess of $58,038.86 as required under the Act and the Regulation , moreparticularly described in paragraphs 12 through 17 herein and Schedule "3"; and
(g) 479660, by virtue of its powers, duties and obligations, as set out in the Agreement,(and referred to in part in paragraph 19 of the Statement of Allegations), authorized,permitted or acquiesced in the contraventions of the Act by Amalgamated contraryto the public interest.
22. Such additional allegations as counsel may advise and the Commission may permit.
DATED at Toronto this 26th day of April, 2000.