R.S.O. 1990, c.S.5, as amended
IN THE MATTER OF
YBM MAGNEX INTERNATIONAL INC.
STATEMENT OF ALLEGATIONS OF STAFF
OF THE ONTARIO SECURITIES COMMISSION
Staff of the Ontario Securities Commission (the "Commission") make the following allegations:
1. YBM Magnex International Inc. ("YBM") is a reporting issuer in Ontario, and has been since January 19, 1996. Its shares have been listed and posted fortrading on The Toronto Stock Exchange (the "TSE") since March 7, 1996. YBM was incorporated in Alberta on March 16, 1994 and its head office is presentlylocated in Newtown, Pennsylvania. There were 44,362,092 shares of YBM issued and outstanding as at April 30, 1998.
2. On May 8, 1998, YBM filed an application with the Commission pursuant to Section 80 of the Securities Act, as amended (the "Act"), for an order granting a45-day extension to file and mail to its shareholders its 1997 financial statements. The reason for the request, as set out in a press release dated May 8, 1998, wasthe possibility that YBM would not receive an audit opinion on its 1997 financial statements from its auditors, Deloitte & Touche LLP ("Deloitte") prior to theMay 20, 1998 filing and mailing deadline.
3. On the morning of May 13, 1998, the TSE announced a halt in the trading of YBM securities pending an announcement by YBM. Later that same day theCommission ordered that trading in any securities of YBM immediately cease for a period of fifteen days from the date of the order unless extended by order ofthe Commission (the "Temporary Order").
4. On May 20, 1998 YBM advised the Commission that it would be unable to file its audited financial statements for the year ended December 31,1997 withinthe time limits required by section 78 of the Act as it had yet to receive an audit opinion from its auditors, Deloitte.
5. On May 25, 1998, YBM consented to an extension of the Temporary Order.
II. CONDUCT CONTRARY TO THE PUBLIC INTEREST
6. In YBM's capacity as a reporting issuer in Ontario, its financial disclosure fails to meet the standard required of a reporting issuer in this jurisdiction havingregard to significant concerns respecting the Company's 1996 and 1997 financial statements, including:
- the failure to provide audited financial statements for the year ending December 31, 1997 due to significant unresolved concerns identified by Deloitte;
- the significant uncertainty which exists in respect of the financial statements for the year ending December 31, 1996 for which Deloitte issued an unqualifiedaudit opinion but with which it is now determining whether it will continue to be associated; and
- the failure to disclose the existence, nature and extent of Deloitte's concerns in a timely manner.
7. By reason of the foregoing, Staff alleges that it is in the public interest for the Commission to order that trading in any securities of YBM permanently cease,or alternatively, cease for such period as may be specified by the Commission.
8. Such further and other allegations as Staff may advise and the Commission may permit.
DATED at Toronto, this 26th day of May, 1998.