Optimal Models and Decisions Inc. - Opportunity to be Heard
IN THE MATTER OF
THE REGISTRATION OF
OPTIMAL MODELS AND DECISIONS INC.
OPPORTUNITY TO BE HEARD BY THE DIRECTOR
SECTION 26(3) OF THE SECURITIES ACT
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Held on:
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September 13, 2005
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Director:
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David M. Gilkes
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Manager, Registrant Regulation
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Capital Markets Branch
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Appearances:
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Charles Piroli
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For the Staff of the Commission
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Max Reydman
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For Optimal Models and Decisions Inc.
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Background
1. In May 1997, Optimal Models and Decisions Inc. (Optimal) was granted registration in the categories of Commodities Trading Manager and Commodities Trading Counsel under the Commodity Futures Act. In January 2004, Optimal was granted registration in the category of Investment Counsel and Portfolio Manager (ICPM) under the Securities Act.
2. Optimal was due to file its audited financial statements with the Ontario Securities Commission (OSC) on June 30, 2005 for the year ended March 31, 2005. On July 4, 2005, Optimal sent a letter to staff of the OSC requesting a 90-day extension for Optimal to submit its financial statements. Furthermore, as Optimal had not been advising on any client assets since September 2004, it requested that the late filing fee for failing to deliver its financial statements on time be waived.
3. On July 8, 2005, the Assistant Manager of Compliance at the OSC advised Optimal that OSC staff was not prepared to grant an extension of the filing deadline or waive the late filing fee. In addition, OSC staff recommended that the Director impose terms and conditions on the registration of Optimal. The terms and conditions required Optimal to submit to the OSC monthly unaudited financial statements for a period of six months.
4. On July 18, 2005, Optimal requested a 30-day extension of the filing date and a waiver of the late filing fee. The Manager of Compliance at the OSC turned down this request in letter dated July 20, 2005.
5. Optimal submitted its financial statements on July 26, 2005, 17 business days past the statutory deadline. OSC staff levied a late fee of $1,700 on Optimal in accordance with the OSC fee rule.
6. In its July 18, 2005 letter, Optimal requested an Opportunity to be Heard (OTBH) by the Director if its request for an extension and a waiver of the late filing fee was denied. Subsection 26(3) of the Securities Act states:
(3) Refusal -- The Director shall not refuse to grant, renew, reinstate or amend registration or impose terms and conditions thereon without giving the applicant an opportunity to be heard.
7. The OTBH was conducted through an oral hearing on September 13, 2005.
Submissions
8. Counsel for OSC staff outlined the three criteria that are considered in determining whether an applicant is suitable for registration: proficiency, integrity and financial solvency. The failure to file audited financial statements is an important factor in determining the continuing suitability of a registrant.
9. Counsel explained that the experience of OSC staff had been that filing extensions and delays could be indicative of a serious underlying financial problem with the registrant. Without those statements it cannot be determined whether the company is in the financial health it claims.
10. Counsel for Optimal explained that it had not been active since September 2004. Optimal had decided to let its registration lapse this year and had no intention to have an audit and file financial statements with the OSC this year. It decided to have an audit when interest to buy the company was received. Due to the timing of this interest, it was too late to file the financial statements by the statutory deadline.
11. Optimal does not know whether the company will be sold. It currently has no business and as a result, Optimal finds the requirement to file any type of monthly financial statements and to pay the late filing fee to be overly onerous.
Decision
12. OSC staff is concerned that the repeated delays in filing its financial statements may be an attempt to hide an underlying serious financial problem by Optimal. On the other hand, Optimal had decided to let its registration lapse when an offer to purchase the company had been received.
13. If Optimal is not engaging in any business, the terms and conditions and late filing fee could pose a burden. However, if the company is sold, it will become active and should be able to pay the late filing fee.
14. To address the two outcomes (whether Optimal is sold or not), terms and conditions will be imposed on the registration of Optimal. The terms and conditions require that if Optimal is not sold that it cannot conduct business; if Optimal is sold the late filing fee will have to be paid. The terms and conditions are attached as Schedule A to this decision.
September 27, 2005
"David M. Gilkes"
Schedule A
Terms and Conditions
Optimal Models and Decisions Inc. (the Firm) shall not open any new client accounts, accept any new business or employ any new representative(s) to act on behalf of the Firm, until such time that (a) the Firm or a majority interest in the Firm has been sold, and (b) the $1,700 late filing fee is paid by the Firm to the Commission relating to the late delivery of the Firm's audited financial statements for the year ended March 31, 2005.