Panel rules Octagon Capital guilty of involvement in illegal private placement

By Laura Lutz

Des Moines, April 24 - Octagon Capital Corp. has been found by a hearing panel of the Investment Dealers Association of Canada to be guilty of facilitating an illegal private placement, according to a news release from the association.

According to the April 3 decision, Octagon participated in the placement of two Bright Star Venture debentures without performing due diligence and without ensuring that the debentures had been approved for distribution, that a prospectus had been issued or that the clients were qualified to invest in the placement.

Those debentures, sold between July 2002 and June 2003, were placed with 97 accounts opened by Barry (Sai-Kwong) Leung, who was an approved person with Octagon at the time.

The accounts were opened to liquidate the clients' holdings in locked-in retirement savings plans, according to the release.

The panel found no evidence that Octagon was aware of the scheme until May 2003, and the placements were ended on June 12, 2003.

A hearing to assess penalties to the company will be held on May 10.

The panel also found that the evidence did not support two other allegations against Ocatgon: that the company had failed to sufficiently inquire into six other accounts and that the company had failed to notify clients about a potential conflict of interest involving Musicrypt Inc.

Octagon is an investment dealer based in Toronto.

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