An Ontario Securities Commission hearing panel has ruled that merely arranging a meeting to hear about a possible investment opportunity does not necessarily constitute “acting in furtherance of a trade.”

The decision, issued by the OSC Tuesday, concerns a couple (Leslie and Douglas Brown) who helped organize a seminar for an investment opportunity called the Flat Electronic Data Interchange. The seminar offered attendees the opportunity to invest in FEDI, by acquiring “desks” or “seats” for US$125,000 each. FEDI was described as a scriptural-based public trust being funded by contributions from major Arab families. It had three business lines: sales from Arab-initiated purchases of goods and services, sales from Web cafes and electronic debit cards, and project financing that was going to be made available to Third World countries to create labour within those countries.

Two OSC operatives attended the meeting undercover, acting on a tip from the RCMP. OSC staff later brought allegations against the Browns and two others. They alleged the so-called desks are actually securities and that they are being offered without a prospectus or registration. The Browns were accused of acting in furtherance of a trade without registration for arranging the meeting.

However, the OSC panel was not persuaded. It found the couple did not commit acts in the furtherance of a trade and therefore did not contravene the Ontario Securities Act.

The commission found that for a person to act in furtherance of a sale of a security that is in fact being sold by someone else, “there must be at a minimum something done by that person for the purpose of furthering or promoting the sale of the security by the one engaged in that activity.”

The commission said the Browns’ merely invited friends to become acquainted with FEDI, and therefore did not meet this test. OSC staff cited an earlier case in which a promoter supplied a list of names to a firm to aid its improper trading activities. The panel found that this did not apply in this case, as the Browns initiated the meeting and invited people to attend; they did not do so at the behest of the other two individuals who face allegations in this case.

Two other respondents have yet to face a hearing. A date will be scheduled for the case to be heard in August.