Poseidon Concepts Corp. -- s. 144
Headnote
Section 144 -- application for variation of cease trade order -- securities of issuer subject to cease trade order because issuer's interim financial reports were not prepared in accordance with Ontario securities laws -- Canadian Derivatives Clearing Corporation ("CDCC") applied for a variation of the cease trade order in order to allow the holders of outstanding put contracts, issued and cleared by CDCC, and providing for the sale of common shares of the issuer (the "Put Contracts"), to exercise their rights to sell common shares of the issuer pursuant to the terms of the Put Contracts, to permit the sellers of the Put Contracts to perform their obligations to purchase common shares of the issuer pursuant to the terms of the Put Contracts, and to permit CDCC and each of its member firms to perform their obligations under the rules of CDCC in connection with the exercise and performance of such Put Contracts, including all requisite acts in furtherance thereof -- variation granted subject to conditions.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 127, 144.
IN THE MATTER OF
THE SECURITIES ACT,
R.S.O. 1990, c. S.5, AS AMENDED
(the "Act")
AND
IN THE MATTER OF
CANADIAN DERIVATIVES CLEARING CORPORATION
AND
IN THE MATTER OF
POSEIDON CONCEPTS CORP.
ORDER
(Section 144 of the Act)
WHEREAS the securities of Poseidon Concepts Corp. (the "Issuer") are subject to a temporary cease trade order issued by the Director on February 26, 2013 pursuant to paragraph 2 of subsection 127(1) and subsection 127(5) of the Act, as extended by a further cease trade order issued by the Director on March 11, 2013 pursuant to paragraph 2 of subsection 127(1) of the Act (the "Cease Trade Order"), directing that all trading in securities of the Issuer, whether direct or indirect, cease until further order by the Director;
AND WHEREAS the Cease Trade Order was made because the Issuer's interim financial reports for the periods ended March 31, 2012, June 30, 2012 and September 30, 2012 were not prepared in accordance with Ontario securities laws;
AND WHEREAS Canadian Derivatives Clearing Corporation ("CDCC") has made an application pursuant to section 144 of the Act for an order varying the Cease Trade Order in order to allow the holders of outstanding put contracts, issued and cleared by CDCC, and providing for the sale of common shares of the Issuer (the "Put Contracts"), to exercise their rights to sell common shares of the Issuer pursuant to the terms of the Put Contracts, to permit the sellers of the Put Contracts to perform their obligations to purchase common shares of the Issuer pursuant to the terms of the Put Contracts, and to permit CDCC and each of its member firms to perform their obligations under the rules of CDCC in connection with the exercise and performance of such Put Contracts, including all requisite acts in furtherance thereof;
AND UPON CDCC having represented to the Commission as follows:
1. The Issuer is an Alberta incorporated corporation having its head office in the Province of Alberta. Although the common shares of the Issuer are listed on the Toronto Stock Exchange, trading was halted after the Alberta Securities Commission (the principal regulator of the Issuer) issued a cease trade order on February 14, 2013 (the "Alberta Cease Trade Order"). The Issuer is a reporting issuer under the Act.
2. The applicant, CDCC, is a federally incorporated corporation which acts as the central clearing counterparty for exchange-traded derivative products (options and futures) in Canada. CDCC is the issuer of and clearinghouse for the Put Contracts which were traded on the Montreal Exchange prior to the imposition of the Alberta Cease Trade Order.
3. There are approximately (i) 1,354 outstanding Put Contracts and (ii) 20 Put Contracts which were exercised prior to the Cease Trade Order but in respect of which final settlement has not occurred due to the Cease Trade Order, which collectively provide for the sale and purchase of approximately 137,400 common shares of the Issuer.
4. As long as the Cease Trade Order remains in place, holders of the Put Contracts are unable to exercise their rights to sell common shares of the Issuer, the sellers of such Put Contracts are unable to perform their obligations under the Put Contracts and CDCC and its member firms may be precluded from performing their obligations under the rules of CDCC in respect of the exercise of the Put Contracts as they may be required to take acts in furtherance of the trades by holders and sellers of the Put Contracts upon their exercise.
5. On March 11, 2013, CDCC notified its members and asked its members to notify affected clients that CDCC had made application to the Commission on March 8, 2013 to allow the exercise of the Put Contracts and that interested parties, and in particular, writers and holders of the Put Contracts, were invited to make written submissions to the Commission by March 14, 2013 with respect to whether CDCC's application should be granted. The notice also advised members that the order sought may include a condition that limits the relief to holders of outstanding Put Contracts who are not current or former members of management or other insiders of the Issuer.
6. CDCC will promptly, following the making of this order, notify its members and ask its members to notify affected clients of the fact that this order will permit the exercise of outstanding Put Contracts but (i) will not permit holders of Put Contracts who do not own common shares of the Issuer to purchase such shares in order to make good delivery upon exercise, and (ii) will not permit holders of Put Contracts who are (a) current or former directors or officers of the Issuer or its subsidiaries, or (b) the beneficial owner of, or person who exercises control or direction over, more than 10% of the outstanding common shares of the Issuer and who has nominated or designated any member of the board of directors of the Issuer or who serves (or whose officers or directors serve) as a director or officer of the Issuer, to sell common shares of the Issuer under Put Contracts.
7. A similar order varying the Alberta Cease Trade Order was issued to CDCC by the Alberta Securities Commission on March 1, 2013. Although the securities of the Issuer are also subject to cease trade orders in British Columbia and Québec, the British Columbia Securities Commission issued a similar variation order on March 12, 2013 and CDCC has applied for similar relief in Québec.
AND WHEREAS CDCC has broad discretion under the CDCC rules, subject to the terms of the Cease Trade Order, to address the position of holders of Put Contracts who do not currently own common shares of the Issuer;
AND WHEREAS the Director has considered the submissions of CDCC and staff of the Commission and the rationale for the Cease Trade Order, and has concluded that the issue of this order, to the extent reasonably possible, balances a number of competing interests in all the circumstances, and achieves the objective of preserving the integrity of the capital markets;
AND WHEREAS the Director is satisfied that it would not be prejudicial to the public interest to make this order;
IT IS ORDERED, pursuant to section 144 of the Act, that the Cease Trade Order is hereby varied solely to permit (a) the holders of outstanding Put Contracts issued and cleared by CDCC to exercise their Put Contracts, whether or not such holder is a person described in paragraph 6(i) or 6(ii); (b) the holders of the Put Contracts to sell common shares of the Issuer under the terms of the Put Contracts; (c) the sellers of such Put Contracts to perform their obligations to purchase common shares of the Issuer under the terms of the Put Contracts; and (d) CDCC and its members to carry out their respective obligations under the rules of CDCC, including all requisite acts in furtherance of the trades described in (a), (b) and (c), provided that this order shall not apply to permit the sale of Issuer common shares by a person described in paragraph 6(i) who does not currently own common shares, or who is an insider or other person described in paragraph 6(ii), and provided further that the Cease Trade Order shall otherwise remain in effect, unamended except as expressly provided in this order.
DATED at Toronto on this 19th day of March, 2013.