Pezim’s penalty: Will the VSE be able to survive?

The British Columbia Securities Commission (BCSC) is keeping the industry guessing as to what penalties, if any, will be handed out to Vancouver promoter Murray Pezim and two of his associates. Analysts say they expect to see a fine of up to $50,000 for the principals of Prime Resources Group (VSE) and Calpine Resources (VSE) or a trading suspension of one year.

“It’s anyone’s guess as to what the commission’s decision will be and how Murray will react to it,” said Andrew Muir, a research analyst with Yorkton Continental Securities in Vancouver.

While the commission has ruled that Pezim and colleagues John Ivany and Lawrence Page committed no insider-trading violations, they were found guilty of the less serious charge of failing to disclose drill information to the public.

As the Vancouver exchange is currently attempting to improve its image after some unflattering publicity, the decision is being construed as an indication of its future direction.

Among the commission’s findings were that Prime and Calpine failed to disclose drill results on Calpine’s Eskay Creek property that represented material changes in the affairs of both companies before they granted or repriced options in July and August, 1989.

As directors and senior executives of Prime and Calpine, Pezim, Page and Ivany have been asked to argue as to what penalties should be handed out under the securities act. Analysts now expect his process to delay the final resolution of the trial until late December.

However, being exonerated of the insider-trading charge is a big victory for the three executives, said Muir who, like other mining observers, is pleased with the initial outcome of the trial.

He believes the final decision will lead to greater disclosure of information by companies listed on the Vancouver exchange. “People won’t want to take the chance (of being accused of withholding information),” he said.

But if the BCSC had provided clearer guidelines as to what constitutes insider trading in the first place, the 3-month trial that began in July wouldn’t have been necessary, said Stephen Semeniuk, vice- president of research at L.O.M. Western Securities Ltd.

“Part of Prime’s problem is that the company got caught up in the difference in what constitutes material information for juniors and majors,” he said. “Having the case dragged on like this is bad for the market.” The commission also ruled that:

— Calpine failed to disclose on a timely basis the fact that Prime bought a 2-million-unit private placement announced by Calpine in July, 1989. Calpine also misled the Vancouver Stock Exchange by failing to disclose the buyer of the private placement and by falsely representing that the private placement was to be brokered by Prime Equities.

— Prime failed to make timely disclosure of a default by Canarim Investment Corp. (now L.O.M. Western Securities Ltd.) under a guaranteed agency agreement in respect of one million units of a 5-million-unit public offering by Prime in September, 1989.