League Investment Services Inc.

Director's Decision

In the Matter of Staff’s Recommendation
to Suspend the Registration of
League Investment Services Inc.

Opportunity to be Heard by the Director
Under Section 31 of the Securities Act

1. For the reasons outlined below, my decision is that the registration of League Investment Services Inc. (LISI) should be suspended.

2. By letter dated October 28, 2013, staff (Staff) of the Ontario Securities Commission advised LISI that Staff had recommended to the Director that LISI’s registration be suspended. Staff’s view is that LISI’s solvency concerns make it unsuitable for registration, and that its ongoing registration would be objectionable.

3. LISI is registered in all jurisdictions of Canada as an exempt market dealer (EMD). British Columbia is its principal regulator.

4. LISI is part of the League Group, which exclusively distributes securities of League Group issuers. Adam Gant (Gant) is the controlling mind and management of LISI and its related entities in the League Group. Gant is the ultimate designated person of LISI.

5. On October 17, 2013, over 100 entities in the League Group, including LISI, applied to the Supreme Court of British Columbia for an order granting protection under the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36 as amended (CCAA).

6. The November 6, 2013 decision of Paul C. Bourque, Q.C., Executive Director of the British Columbia Securities Commission (BCSC) suspending the registration of LISI in British Columbia (the BC suspension decision) sets out the following:

Gant, in his affidavit in support of the application for the CCAA order, attested that LISI and its 104 related League Group entities:

  • are under substantial cash flow pressure, and are facing a larger than anticipated number of redemption requests by investors, further straining the League Group’s cash flow
  • no longer have sufficient cash and have ceased meeting their obligations as they become due in the ordinary course of the League Group’s business
  • are facing one active and one imminent foreclosure involving the League Group entities
  • have a number of unsecured creditors including:
    • noteholders of the various Project LP’s
    • inter-corporate debt
    • trade creditors, in particular relating to the Colwood Development
    • professional service firms including law and accounting firms
  • are in arrears with certain property taxes

7. Because the BCSC is LISI’s principal regulator, LISI’s registration became automatically suspended in all jurisdictions of Canada, other than Ontario, pursuant to s. 4A.6 of Multilateral Instrument 11-102 Passport System.

8. Staff submits that the BC suspension decision provides support to Staff’s position that LISI’s registration should be suspended and that its ongoing registration is objectionable. The Director observed in Re Jory Capital Inc. (2012), 35 OSCB 11217 at para. 6, that he was "concerned that it would be inconsistent with the OSC's mandate to provide investor protection and to foster fair and efficient capital markets and confidence in capital markets to permit [a firm suspended by its principal regulator] to remain registered in Ontario."

9. By letter dated November 8, 2013, Farris, Vaughan, Wills & Murphy LLP, counsel to LISI, advised that

[i]n light of the decision of the B.C. Securities Commission, LISI’s principal regulator, to suspend LISI’s registration, and in light of the automatic suspension of LISI’s registration in all other Canadian jurisdictions with the exception of Ontario, LISI does not oppose the suspension of its registration in Ontario.

10. My decision is that the registration of LISI should be suspended for the reasons set out in the BC suspension decision set out below:

Registration is a privilege, not a right, and it places significant obligations on registrants when they deal with members of the public who are potential investors or who are already clients.

The public should not be exposed to the risk of a registrant that is under court protection from its creditors because it cannot meet its obligations as they become due… Instead it is reasonable for clients of a registered firm to expect that the firm is financially viable and not committing acts of bankruptcy.

It is not in the public interest for LISI to continue in the business of trading in securities because it is not in a position to meet the many responsibilities that registrant firms must meet so that investors are protected.

… In my view, LISI is no longer suitable for registration and it is in the public interest to suspend its registration, effective immediately.

11. In my view, LISI is not suitable for registration and LISI’s ongoing registration is objectionable.

“Marrianne Bridge”, FCPA, FCA
Deputy Director, Compliance and Registrant Regulation Branch
Ontario Securities Commission
Dated: November 11, 2013