Ontario Securities Commission fines, bans “qualified person” in landmark enforcement over faked science

April 5, 2013

By Daniel Seleanu, Compliance Complete

TORONTO, April 5 (Thomson Reuters Accelus) – In a landmark settlement, the Ontario Securities Commission (OSC) has fined and permanently banned Bernard Boily for falsifying scientific research used in press releases by Bear Lake Gold Ltd., a mining exploration company listed on the TSX Venture Exchange in Toronto. When Bear Lake Gold announced that its research had been tampered with, it suffered a one-day market capitalisation loss of $42 million.

The Boily case is the first to come before the OSC that pertains to the conduct of a qualified person, a position defined as a gatekeeper of technical information under National Instrument 43-101 – Standards of Disclosure for Mineral Projects (PDF) (NI 43-101).

In the agreed facts, Boily admitted that during December 2007 to July 2009 he:

  • Altered certain scientific data that was received by Bear Lake and transferred these results into the company’s assay database. (An assay is an investigative procedure for qualitatively assessing or quantitatively measuring the presence, amount, or functional activity of a target entity, in this case substances related to mineral exploration.)
  • Prepared draft press releases for Bear Lake that contained incorrect and inflated data based on the altered results and which was then issued to the market; and that he
  • Provided independent qualified persons, who were retained to prepare a technical report for Bear Lake (as required by NI 43-101), with altered assay results and assay databases that contained results which were calculated based on these altered results, and he engaged in other misconduct, including the modification of a drill core log.

The OSC halted trading in Bear Lake on July 17, 2009, following which Bear Lake announced that it had become aware of material inconsistencies in its exploration results. Boily admitted that upon resumption of trading on July 28, 2009, Bear Lake suffered a market capitalization loss, on one day alone, of over $42 million.

In reaching the settlement, Boily admitted that he:

  • Perpetrated a fraud in relation to his conduct with the independent qualified persons;
  • Breached the prohibition against issuing misleading and untrue statements to the market;
  • Engaged in conduct which he reasonably ought to have known resulted in, or contributed to, an artificial price for Bear Lake securities; and
  • Engaged in conduct which was not only contrary to the public interest, but abusive to the integrity of Ontario’s capital markets.

In the settlement, Boily agreed to, among other sanctions, a permanent ban from acting as a director and officer of any issuer, an administrative penalty of $750,000, plus $50,000 in costs, and a prohibition from trading for the later of a period of 15 years or as long as the administrative penalty and costs remain unpaid. Boily also agreed not to act as a qualified person for life.

“The terms of this settlement send a strong message that the Commission will not tolerate misconduct by qualified persons, particularly conduct which runs contrary to the important gatekeeper role played by qualified persons in the securities disclosure regime,” said Tom Atkinson, director of enforcement at the OSC.

(This article was produced by the Compliance Complete service of Thomson Reuters Accelus (http://accelus.thomsonreuters.com/). Compliance Complete (http://accelus.thomsonreuters.com/solutions/regulatory-intelligence/compliance-complete/) provides a single source for regulatory news, analysis, rules and developments, with global coverage of more than 230 regulators and exchanges. Follow Accelus compliance news on Twitter at: http://twitter.com/GRC_Accelus)

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