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An Ontario court has dismissed allegations of unregistered trading against two men who helped create a website for a company that securities regulators argued was used to raise funds from foreign investors improperly.

Justice Peter West of the Ontario Court of Justice dismissed charges brought by the Ontario Securities Commission (OSC) against Mark Lowman and Dave Jarrett. It alleged that Lowman and Jarrett violated securities laws by trading securities without registration, issuing securities without a prospectus, and representing that securities would be listed on an exchange.

According to the court decision, the charges stem from Lowman’s and Jarrett’s role in helping set up a website for a company, Asia Global (later known as Asia Power), that was seeking to raise money from investors. Several foreign investors did purchase shares in the firm from sales reps purportedly working for foreign brokerage firms. The key issue for the court was whether the website’s creators were responsible for the alleged illicit trading that took place in the company’s shares.

The decision indicates that the OSC argued that the purpose of the website was to get investors excited about investing in the company, and that the two men were therefore involved in selling shares to investors. “The OSC staff submits the only reasonable interpretation of the content of the website is that it was created to induce trading,” the court noted. “The OSC staff also submits the website existed for the purpose of indirectly soliciting securities transactions.”

The defence in the case argued that the Crown failed to prove that merely making a website for a company constitutes “an act in furtherance of trading.” The defence pointed to the absence of evidence that any of the investors or sales reps had any contact with Lowman or Jarrett, or that they “ever took a single step in furtherance of trading in shares of Asia Global.”

The court ultimately ruled in favour of the defendants and against the OSC, the judge noting: “In my view, there is a significant gap in the evidence the OSC staff submitted that demonstrates a connection or link between Lowman and Jarrett [and] any of the purported sales representatives, their companies or to the solicitations and representations the sales representatives made to the seven investors.

“I find there is a further equally reasonable inference available on the evidence, namely, that the purported sales representatives found the Asia Global website, saw an opportunity and created a scenario of their companies being a preferred underwriter of Asia Global Energy pre-IPO shares, which they were offering as a result at substantially reduced prices. This scenario allowed the purported sales representatives to make ‘cold calls’ and representations, which were designed to induce investors to purchase Asia Global shares that, in fact, did not exist. I find these activities were done without any knowledge or involvement of Lowman or Jarrett.

“It is my view,” West concluded, “the evidence does not prove beyond a reasonable doubt the websites were created for the purpose of exciting the reader to purchase shares and I find the creation of the website was not an act in furtherance of a trade.”

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