Proceedings

IN THE MATTER OF THE SECURITIES ACT
R.S.O. 1990, c. S.5, AS AMENDED

AND

IN THE MATTER OF
ANWAR HEIDARY
AND JAMES E. SYLVESTER

STATEMENT OF ALLEGATIONS OF STAFF OF THE ENFORCEMENT BRANCH OF THE ONTARIO SECURITIES COMMISSION

 

Staff of the Ontario Securities Commission ("Staff") make the followingallegations:

PARTIES

1. Anwar Heidary ("Heidary") is an individual who resides in Burlington, Ontario. Atall material times, Heidary was not registered with the Ontario SecuritiesCommission (the "Commission") to trade in securities.

2. James E. Sylvester ("Sylvester") is an individual who resides in Woodstock,Ontario. Sylvester has never been registered with the Commission to trade insecurities.

SALE OF SECURITIES

The Sussex Admiral Group Ltd.

3. Between November 1993 and September 1994, Heidary sold to Ontarioinvestors securities of The Sussex Admiral Group Ltd. ("Sussex"), a corporationorganized pursuant to the laws of Ontario.

4. Between June 1993 and October 1994, Sylvester sold to Ontario investorssecurities of Sussex.

5. The sales of shares of Sussex constituted trades in securities of an issuer thathad not been previously issued.

6. Sussex did not file a prospectus with the Commission and was never issued areceipt for a prospectus by the Commission.

7. Although the distribution of shares of Sussex purportedly relied on the "seedcapital" exemption from the prospectus requirements of the Act found inparagraph 72(1)(p), the requirements of this exemption were not satisfied. Noneof the other exemptions from the prospectus requirements in Ontario securitieslaw was available for the distribution of shares of Sussex.

8. None of the exemptions from the registration requirements in Ontario securitieslaw was available for the sale of shares of Sussex.

9. Both Heidary and Sylvester held themselves out as engaging in the business oftrading in securities and were, therefore, "market intermediaries" as defined insection 204 of the Regulation to the Act. To sell securities which relied upon the"seed capital" exemption from the prospectus requirements of the Act, Heidaryand Sylvester were required to be registered with the Commission to sell limitedmarket products. Neither Heidary or Sylvester had this registration at thematerial time.

1149932 Ontario Inc.

10. Between February 1996 and February 1999, Heidary sold to Ontario investorssecurities of 1149932 Ontario Inc. ("1149932"), a corporation organizedpursuant to the laws of Ontario.

11. The sales of shares of 1149932 constituted trades in securities of an issuer thathad not been previously issued.

12. 1149932 did not file a prospectus with the Commission and was never issued areceipt for a prospectus by the Commission.

13. Although the distribution of shares of 1149932 purportedly relied on the "seedcapital" exemption from the prospectus requirements of the Act found inparagraph 72(1)(p), the requirements of this exemption were not satisfied. Noneof the other exemptions from the prospectus requirements in Ontario securitieslaw was available for the distribution of shares of 1149932.

14. None of the exemptions from the registration requirements in Ontario securitieslaw was available for the sale of shares of 1149932.

15. As Heidary held himself out as engaging in the business of trading in securities,he was required to be registered with the Commission to sell limited marketproducts in order to sell securities of 1149932 in reliance on the "seed capital"exemption. Heidary was not registered in any category at the material time.

OTHER ALLEGATIONS

16. Heidary sold speculative securities of Sussex and 1149932 to unsophisticatedinvestors and failed to assess the suitability of the investments to the needs ofthe investors.

17. In addition, with the intention of effecting trades in shares of Sussex and1149932, Heidary guaranteed returns on investments in those shares to severalinvestors. Heidary promised unrealistic returns on an investment in 1149932shares to other investors.

CONDUCT CONTRARY TO THE PUBLIC INTEREST

18. Heidary acted contrary to the public interest by:

a. trading in securities without being registered with the Commission andwith no available exemption from the registration requirements of Ontariosecurities law;

b. trading in securities which constituted a distribution without a prospectusbeing filed or receipted by the Commission and with no availableexemption from the prospectus requirements of Ontario securities law;

c. failing to adequately assess the suitability of an investment in Sussex and1149932 for investors;

d. guaranteeing returns on investments in Sussex and 1149932 with theintention of effecting a trade in contravention of subsection 38(2) of theAct; and

e. promising unrealistic returns to investors on an investment in shares of1149932.

19. Sylvester acted contrary to the public interest by:

a. trading in securities without being registered with the Commission andwith no available exemption from the registration requirements of Ontariosecurities law; and

b. trading in securities which constituted a distribution without a prospectusbeing filed or receipted by the Commission and with no availableexemption from the prospectus requirements of Ontario securities law.

20. Such other allegations as Staff may make and the Commission may permit.

DATED at Toronto this 7th day of September, 1999.