IN THE MATTER OF THE SECURITIES ACT,
R.S.O. 1990, c. S-5, as amended
- and -
IN THE MATTER HAROLD M. CHAPMAN
SETTLEMENT AGREEMENT BETWEEN STAFF
OF THE ONTARIO SECURITIES COMMISSION
and HAROLD M. CHAPMAN
1. Pursuant to section 5(1) of the "Practice Guidelines - Settlement Procedures in Matters Before the Ontario Securities Commission" of the Ontario Securities Commission Rules of Practice, Staff of the Ontario Securities Commission and Harold M. Chapman ("Chapman") propose to settle the matters described further below.
II. STATEMENT OF FACTS
2. Chapman acknowledges that the facts set out in paragraphs 3 through 15 of this Settlement Agreement are correct.
3. Chapman is an individual resident in the City of Toronto in the Province of Ontario and has been a chartered accountant for approximately 50 years. At the material time, Chapman was a partner in the accounting firm Chapman Matten Welton Winter LLP and was 73 years of age.
4. Chapman has never been registered in any capacity under Ontario securities law.
5. At the material time, Chapman's accounting firm provided auditing and other services to A. & C. Boehmer Limited ("Boehmer"), a private Ontario corporation.
6. Roman Corporation Limited ("Roman") was at all material times a reporting issuer within the meaning of subsection 1(1) of the Securities Act, R.S.O. 1990,c. S. 5, as amended (the "Act"). Roman's common shares are listed and posted for trading on the Toronto Stock Exchange.
7. In or around October, 2001, Roman and Boehmer commenced discussions regarding a potential acquisition transaction (the "Acquisition Transaction"). The Acquisition Transaction was a material fact.
8. Chapman's accounting firm provided services to Boehmer in connection with the Acquisition Transaction.
9. Chapman was involved, on behalf of his accounting firm, in the discussions and negotiations in connection with the Acquisition Transaction. In particular, on or about November 9, 2001, Chapman was present at a meeting with Roman and Boehmer and their respective legal advisers, among others, the purpose of which was to discuss Roman's acquisition of Boehmer and the letter of intent which had been executed in connection with the Acquisition Transaction.
10. Chapman was accordingly a "person in a special relationship" with Roman within the meaning of subsection 76(5) of the Act and had knowledge of a material fact.
11. Prior to any public announcement with respect to the Acquisition Transaction, Chapman purchased (i) 6000 shares of Roman at a price of $1.50 per share on January 28, 2002; (ii) 1200 shares of Roman at a price of $1.41 per share on January 29, 2002; and (iii) 2500 shares of Roman at a price of $1.41 per share on February 22, 2002. The actual cost of Chapman's purchases of Roman shares was $14,217.00.
12. At the time that Chapman purchased the shares of Roman, as described in paragraph 11, he was a person in a special relationship with Roman and had knowledge of a material fact with respect to Roman that had not generally been disclosed.
13. Shortly after the close of trading on February 26, 2002, Roman publicly announced the material fact by issuing a press release about the Acquisition Transaction. On March 1, 2002, Roman also issued and filed a Material Change Report with the Commission disclosing that it had reached an agreement to acquire all of the issued and outstanding shares of Boehmer and that the closing of the Acquisition Transaction was expected to occur on March 1, 2002.
14. By purchasing the Roman shares prior to the public announcement, Chapman earned a deemed profit of approximately $7,511.00. The deemed profit of $7,511.00 is based on the average trading price of Roman's shares in the twenty trading days following the public announcement:
Average Trading Price x No. of Shares Purchased Less Actual Cost = Deemed Profit
$2.24 x 9700 = $21,728.00 - $14,217.00 = $7,511.00
Conduct Contrary to Ontario Securities Law and the Public Interest
15. Chapman's conduct, as described above, constituted a contravention of s. 76(1) of the Act and was conduct contrary to the public interest.
III. CHAPMAN'S POSITION AND MITIGATING FACTORS
16. Chapman admits that he traded with knowledge of a material and undisclosed fact. It is Chapman's position that he was not aware at the time he purchased the Roman shares that such purchase contravened the Act. He represents to Staff that he does not recall receiving any cautionary advice during the course of any meetings he attended with respect to the Acquisition Transaction in regards to trading of Roman shares, and that had he been so advised, he would not have purchased any shares.
17. Chapman is now fully aware and understands that insider trading is a serious matter and is remorseful for his conduct.
18. Chapman has retained counsel to represent him in connection with this matter and has been fully co-operative with Staff in the course of its investigation.
19. Chapman further represents to Staff that his purpose in purchasing the Roman shares was to make a long-term investment in Roman and that he still holds all of his Roman shares to date.
IV. TERMS OF SETTLEMENT
20. Chapman agrees to the following terms of settlement:
- he will make a settlement payment of $10,000 to the Ontario Securities Commission for allocation to or for the benefit of such third parties as may be approved by the Minister under s. 3.4(2) of the Act, upon the granting of consent by the Executive Director to this settlement agreement; and
- he will make a payment of $5,000 to the Commission in respect of the costs of the investigation in relation to this matter, upon the granting of consent by the Executive Director to this settlement agreement.
21. Chapman agrees that he will not, in any proceeding, refer to or rely upon this Settlement Agreement, the settlement negotiations or the process of obtaining the Executive Director's consent to this Settlement Agreement as the basis for any attack on the Executive Director or the Commission's jurisdiction, alleged bias or appearance of bias, alleged unfairness or any other remedies or challenges that may otherwise be available.
V. STAFF COMMITMENT
22. If this Settlement Agreement receives the consent of the Executive Director, Staff will not initiate any other proceeding under the Act against Chapman in relation to the facts set out in Part II of this Settlement Agreement, subject to the provisions of paragraphs 23 and 28 below.
23. If this Settlement Agreement receives the consent of the Executive Director, and at any subsequent time Chapman fails to honour the terms contained in paragraph 20 of this Settlement Agreement, Staff reserves the right to initiate proceedings against Chapman in relation to the facts set out Part II herein and/or refer to this Settlement Agreement in any future proceeding.
VI. APPROVAL OF SETTLEMENT
24. If, for any reason whatsoever, the Executive Director does not consent to this Settlement Agreement:
- this Settlement Agreement and its terms, including all settlement negotiations between Staff and Chapman leading up to the execution of this Settlement Agreement, shall be without prejudice to Staff and Chapman;
- Staff and Chapman shall be entitled to all available proceedings, remedies and challenges, including proceeding to a hearing of these matters before the Commission, unaffected by this Settlement Agreement or the settlement negotiations; and
- The terms of this Settlement Agreement will not be referred to in any subsequent proceeding, or disclosed to any person except with the written consent of Staff and Chapman or as may be required by law.
VII. DISCLOSURE OF SETTLEMENT AGREEMENT
25. This Settlement Agreement and its terms will be treated as confidential by Staff and Chapman until consented to by the Executive Director, and forever, if for any reason whatsoever this settlement is not consented to by the Executive Director, except with the consent of Staff and Chapman or as may be required by law.
26. Any obligation of confidentiality shall terminate upon receiving the Executive Director's consent to this settlement.
27. Staff and Chapman agree that if the Executive Director does consent to this Settlement Agreement, they will not make any public statements inconsistent with this Settlement Agreement.
28. If Chapman fails to honour the agreement contained in paragraph 27 of this Settlement Agreement, Staff reserve the right to bring proceedings under Ontario securities law against Chapman based on the facts set out in Part II of the agreement, as well as the breach of the Settlement Agreement.
29. If the Executive Director does consent to this Settlement Agreement, a copy of the Settlement Agreement shall be published in the Ontario Securities Commission Bulletin and posted on the Commission's website.
VIII. EXECUTION OF SETTLEMENT AGREEMENT
30. This Settlement Agreement may be signed in one or more counterparts which together shall constitute a binding agreement.
31. A facsimile copy of any signature shall be effective as an original signature.
DATED this 27th day of March, 2004
DATED this 17th day of March, 2004
STAFF OF THE ONTARIO
|(Per) "Kathryn Daniels"
Acting Director, Enforcement Branch
|I hereby consent to the settlement of this matter on the terms contained in this Settlement Agreement.
DATED this 17th day of March, 2004
ONTARIO SECURITIES COMMISSION