In the Matter of Jack Banks a.k.a. Jacques Benquesus - Appeal against merits dismissed by Divisional Court Appeal against sanctions allowed and matter remitted back to the Ontario Securities Commission

In the Matter of Jack Banks a.k.a. Jacques Benquesus -
Appeal against merits dismissed by Divisional Court
Appeal against sanctions allowed and matter remitted back to
the Ontario Securities Commission

TORONTO – By reasons dated November 21, 2005, the Divisional Court affirmed the Ontario Securities Commission's decision on the merits in the Matter of Jack Banks by stating "there was ample evidence to support the Commission's key finding that Banks was in control of LFI"s [Laser Friendly Inc.] operations at the material time" and allowed the appeal with respect to sanctions. The Divisional Court decision related to Banks' appeal of a decision of the Commission dated April 23, 2003.

The Commission had found that LFI had participated in a transaction referred to as a Regulations S Stock Subscription Roll Program (Roll Program), which required LFI to issue share certificates containing the statement that the shares represented by the certificate were "fully paid and non-assessable". These certificates bore the signature of Banks, the Chief Executive Officer and Director of LFI. The Commission found that the Roll Program had no commercial justification. Having share certificates held in an effective escrow arrangement might have prevented the share certificates from being pledged or otherwise used improperly, but would have rendered the Roll Program useless to the representatives of Helix and Delta, the two companies with which LFI entered into transactions.

The Commission also found that in the State of New York, in the criminal proceeding mentioned in the Statement of Allegations, which related to securities fraud, Banks and Larry Weltman, an employee of LFI, pleaded guilty to having intentionally engaged in a scheme constituting a systemic ongoing course of conduct with intent to defraud. The Commission found that Banks' conduct in connection with the Roll Program and the criminal conduct was contrary to the public interest.

In reviewing the Commission's decision, the Divisional Court also noted that "[g]iven the Commission's unassailable finding as to Banks as a hands on manager, it concluded that in the circumstances of this case Banks failed in his duty as a director and officer of LFI such that his conduct called for an order in the public interest. This conclusion was reasonable."

With respect to the issue of the sanctions imposed by the Commission, the Divisional Court held that Banks' appeal should be allowed, the sanction set aside and the matter referred back to the Commission for a new hearing on sanctions. In so doing, the Court said that "it is common ground that the matter should be remitted back to the Commission to allow the parties to make submissions."

A hearing to allow the parties to make submissions with respect to sanctions will be scheduled by the Secretary to the Commission on a date agreed to by all parties.

Copies of the Commission's Decision, Notice of Hearing and Statement of Allegations are available on the OSC's website at www.osc.gov.on.ca.

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