A Hearing Panel of the Investment Dealers Association of Canada has found Octagon Capital Corp. guilty of participating in a distribution of securities that was not in accordance with the provisions of the Ontario, Alberta, and British Columbia Securities Acts.

In its liability decision dated April 3, the hearing panel found that, between July 2002 and June 2003, Octagon facilitated the distribution of two issues of Bright Star Venture (BSV) debentures by way of private placement to 97 client accounts. The accounts were opened by Barry (Sai-Kwong) Leung, at the material time an approved erson with Octagon. Octagon facilitated the distribution without performing the necessary due diligence and ensuring that the debentures had been approved for distribution either by way of a prospectus having been issued, or that the clients were qualified to invest in the debentures under rules permitting distribution in the absence of a prospectus.

The panel found that there was no evidence that Octagon knew that this distribution was part of an RRSP stripping scheme until May 2003. Octagon took steps to cease the activity on June 12, 2003.

In addition, the hearing panel found that there was insufficient evidence to support two further sets of allegations.

The one allegation referred to that, between 2003 and 2004, Octagon failed to make adequate inquiries into six accounts, under the name of Benil to ensure that such accounts were not being directed by someone who they knew, or ought to have known to have, had a history of securities violations and/or an association with organized crime.

The second allegation alleged that, between 2003 and 2004, Octagon failed to notify clients that there was a potential conflict of interest involving their Registered Representative and Musicrypt Inc., a publicly traded company listed on the TSX Venture Exchange, in which they were investing.

For its misconduct, Octagon has been fined $50,000.