A corporate executive has agreed to a five-year ban as a director and officer after admitting that his firm breached a cease trade order when it arranged loans that were convertible into common shares.
The Ontario Securities Commission (OSC) issued an order Monday approving a settlement agreement with Michael Beckley, former president and CEO of HydraLogic Systems Inc., finding that the firm violated a temporary cease trade order (CTO) issued by the OSC in May 2010 after the firm failed to file its audited financial statements for the 2009 fiscal year.
The settlement indicates that it violated the CTO in 2011 when it entered into convertible debenture agreements, which gave the lenders the option of converting all or any portion of the amounts outstanding to common shares. It also issued a management circular that didn’t comply with securities rules, it notes.
In terms of mitigating factors, it notes that Beckley had no prior disciplinary record, no previous experience running a public company, and that he obtained legal advice regarding the loans. Also, none of the loans was ever converted into common shares, and the terms were amended after it was discovered that they breached the CTO. Beckley also cooperated fully with the OSC’s investigation, it notes, and did not attempt to conceal the conduct at issue.
Under the agreement, he is prohibited from acting as an officer or director of a reporting issuer for five years.