The Ontario Securities Commission (OSC) has granted an exemption to allow a brokerage firm to maintain its registration while it reorganizes, or seeks a buyer, in the face of a court decision that will leave it with insufficient capital.
Thursday’s OSC Bulletin published a decision by the OSC granting an exemption to two brokerage firms, Caldwell Securities Ltd. (CSL) and e3m Investments Inc., that allows the CEO of e3m, Robert Goldberg, to start working for CSL, while also remaining head of e3m; which, it says, will allow e3m to maintain its registration “for purposes of reorganizing its affairs and/or soliciting prospective purchasers.”
According to the decision, the firms applied for the exemption after agreeing to a proposed transaction that would see e3m’s client accounts transferred to CSL, and certain employees, including Goldberg, to join the firm.
That transaction stems from a capital deficiency at the firm “arising out of an Ontario Superior Court judgment against it,” the decision explains.
“Although e3m is appealing this judgment, the proposed transaction will allow e3m to accumulate and maintain sufficient assets to satisfy this judgment,” it says; adding that the firm is required to remain registered as an investment dealer, and as a member of the Investment Industry Regulatory Organization of Canada (IIROC) until the judgment is satisfied.
The decision notes that e3m has agreed to certain conditions on its registration including that: it will not trade or open any new accounts; it will accumulate sufficient assets to satisfy the court judgment against it; and, that it will only distribute assets with the approval of the OSC and IIROC; among other conditions. These conditions are to remain in place until the firm’s registration is surrendered, or it’s sold and the buyer seeks to remove the conditions. In the meantime, the firm is also being granted “inactive status” by IIROC, it notes.
In granting the exemption, the OSC decision notes that dual registration will allow e3m to retain its IIROC membership and its investment dealer registration while it reorganizes and solicits potential buyers. It also says that the firms have policies in place to address any conflicts; although these are unlikely, given e3m’s inactive status. The relief terminates in two years, or when e3m is sold, or its registration is terminated.