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SEC Charges Owner of Film Distribution Company with Defrauding Publicly Traded Fund

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Washington, D.C.–(Newsfile Corp. – May 22, 2020) – The Securities and Exchange Commission today announced charges against William Sadleir, the owner of a film distribution company, for defrauding a publicly traded fund of at least $13.8 million. 

The SEC alleges that BlackRock Multi-Sector Income Trust (BIT), a registered closed-end management investment company, invested approximately $75 million in Aviron Group LLC, a film distribution company founded, owned, and operated by Sadleir.  The complaint alleges that Sadleir represented that the investments would be used to support the company’s distribution of films.  Contrary to these representations, Sadleir allegedly used a sham company as a vehicle to fraudulently divert and misappropriate BIT funds and issued fake invoices seeking BIT funds for services that were never provided.  Sadleir allegedly used the funds to pay personal expenses, including his purchase, furnishing, and renovation of a Beverly Hills mansion.

“When private companies and individuals solicit or accept investments, including from investment companies, they must comply with the federal securities laws,” said Adam S. Aderton, Co-Chief of the Enforcement Division’s Asset Management Unit.  “We allege that Sadleir raided millions from BIT and its investors, and rather than using those funds for investment purposes he spent them lavishly on himself.”

The SEC’s complaint, filed in federal court in Manhattan, charges Sadleir with violating the antifraud provisions of the federal securities laws and seeks disgorgement of ill-gotten gains, civil penalties, and permanent injunctive relief. 

In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today filed criminal charges against Sadleir. 

The SEC’s investigation, which is continuing, is being conducted by Salvatore Massa, Vincent T. Hull, and Brian Fitzpatrick of the Asset Management Unit, and Dugan Bliss and Kerri L. Palen of the New York Regional Office.  The case was supervised by Andrew Dean of the Asset Management Unit.  The SEC’s litigation will be led by Mr. Bliss and Mr. Massa.  The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York and the Federal Bureau of Investigation. 

SEC Announces Virtual Conference on Municipal Securities Disclosure

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Washington D.C., May 22, 2020 — The Securities and Exchange Commission today announced that it has rescheduled its conference entitled “Spotlight on Transparency: A Discussion of Secondary Market Municipal Securities Disclosure Practices” for June 16, 2020. The conference is open to the public via live webcast from 1 p.m. to 4 p.m. ET at www.sec.gov, and will be archived on the Office of Municipal Securities (OMS) webpage for later viewing. 

The conference will bring together a variety of municipal securities market participants, including issuers and investors, to discuss the state of secondary market disclosure in the municipal securities market, including COVID-19 related disclosure and potential opportunities for regulatory and industry improvement.  Areas of focus during the conference will include voluntary disclosure practices of municipal issuers; buy-side perspectives of the state of secondary market disclosure; and emerging issues and trends in the municipal securities market and their potential impact on secondary market disclosure practices.  The full agenda is available here.

In addition to outside municipal securities market participants, Chairman Jay Clayton, Commissioner Hester Peirce, Commissioner Elad Roisman, Commissioner Allison Herren Lee, and staff from OMS including Director Rebecca Olsen will participate in the conference. 

OMS coordinates the SEC’s municipal securities activities and administers the Commission’s rules pertaining to municipal securities brokers and dealers, municipal advisors, investors in municipal securities, and municipal issuers.  OMS advises the Commission on policy matters relating to the municipal securities market and is responsible for policy development, coordination, and implementation of Commission initiatives to improve the municipal securities market.  Visit the OMS webpage to learn more information about the municipal securities market and the work of the Office of Municipal Securities, and contact the office with any conference-related questions at 202-551-5680 or municonference2020@sec.gov.

SEC Shuts Down Fraudulent Investment Adviser Targeting Senior Citizens

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Washington D.C., May 22, 2020 — The Securities and Exchange Commission today announced that it has filed an emergency action and obtained a temporary restraining order and asset freeze against a California-registered investment adviser and his entities to halt an ongoing Ponzi scheme targeting senior citizens in Southern California.

According to the SEC’s complaint, from at least January 2018 through the present, Paul Horton Smith Sr. offered and sold securities in his company Northstar Communications LLC, and used his investment advisory firm eGate LLC and insurance and estate planning company Planning Services Inc. to market the securities.  Smith and Northstar through free workshops and other investor events allegedly promised investors guaranteed annual interest payments between 3 percent and 10.5 percent if they invested in so-called “private annuity contracts.”  In reality, as the complaint alleges, Smith did not invest the funds raised in any securities and instead used new investor funds to pay investor returns in a Ponzi-like fashion.  According to the complaint, Northstar raised more than $5.6 million from at least 35 investors and paid out $5.2 million to those investors as interest payments or principal returned.  Smith also allegedly used investor funds to settle investor fraud lawsuits. 

The SEC’s complaint, filed on May 19 and unsealed late yesterday in U.S. District Court for the Central District of California, charges Smith, Northstar, eGate, and Planning Services with violating the antifraud provisions of the federal securities laws. The complaint seeks injunctions, the return of ill-gotten gains plus interest, and civil penalties.

On May 20, in addition to granting a temporary restraining order and an asset freeze, the court ordered an accounting and appointed a temporary receiver.  A hearing is scheduled for June 3, 2020, to consider continuing the asset freeze, issuance of a preliminary injunction, and appointment of a permanent receiver.

“As alleged in our complaint, Paul Horton Smith Sr. raised millions of dollars by touting his purported investment expertise and guaranteeing returns,” said Michele Wein Layne, Director of the SEC’s Los Angeles Regional Office.  “Investors should be wary of investments promising no risk and high returns, which are classic warning signs of investment fraud.”

The SEC’s Office of Investor Education and Advocacy has issued investor alerts on frauds targeting seniors and Ponzi scheme red flags.  Additional information is available on Investor.gov and SEC.gov. 

In a parallel action, the U.S. Attorney’s Office for the Central District of California announced on May 21 that it filed a criminal complaint against Smith.

The SEC’s investigation was led by David S. Brown with assistance from Dora Zaldivar, and was supervised by Finola H. Manvelian in the Los Angeles Regional Office.  The litigation will be led by John B. Bulgozdy and supervised by Amy Jane Longo.

The SEC appreciates the assistance of the U.S. Attorney’s Office for the Central District of California, the Federal Bureau of Investigation, and the California Department of Business Oversight. 

Bank of Lithuania’s Response to the Covid-19 Crisis: Responsible Action or Over-Regulation?

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The Covid- 19 Pandemic has created many novel situations that are unlikely to disappear in the near future. Like in the majority of novel post- apocalyptic scenarios, the uncertainty of the a new world order, especially in the financial sector, is always looming upon not only the governmental sector, but also on the private sector, which leads to many legal lacunas.

Within the EU financial sector, it is still uncertain whether the crisis has entered into its second act, or if it is still at the overture level.

The Bank of Lithuania, for example, has demonstrated great resilience with the initial response to the Crisis, that was remarkable in comparison to the initial response of ESMA. The Bank has issued six points of reference to the financial institutions which are regulated under the Bank which are crucial for each Electronic Money Institution’s (hereinafter- EMI) reporting duties and financial duties.

For instance, part of these requirements are in direct correlation to the Market Abuse Regulation, 5 AMLD, PSD2, and MiFID II. When discussing the Market Abuse Regulation, the Bank has issued a notice that processes and business decisions issued within the quarantine time are considered inside information, and should be disclosed under the appropriate framework.

Bank of Lithuania is also aware that regulated entities, especially EMIs and Payment Institutions (hereinafter-PI) which have not been working from their usual headquarters, but on a remote basis, still have to continue their financial and regulatory report as usual. Documents should be sent on a password controlled basis, and physical documentation should not contain confidential or sensitive information.

In regards to trading activity and trading in a regulated environment, the Bank has announced its intentions for allocating means for legal enforcement for proper functioning of the market in Lithuania. By this, the Bank has decided to examine requests for suspended trading only after receiving well- reasoned submissions, which are objective, reasoned and legally justified.

This is not the first time that the objective, reasoned and legally justified criteria has been raised in a European context.  The criteria is remarkably similar to the Subsidiarity and Proportionality principle of EU jurisprudence, which has been discussed countlessly in the Treaty of Maastricht, the Single European Act (SEA), and in T29/92, which established that the subsidiarity principle does not constitute sufficient grounds to tackle the legality of an EU legal act, especially in trade aspects between Member States and Association Agreement Countries.

In the financial services realm, this is one of the few times that this has occurred. Implementing the Subsidiarity and Proportionality Criteria in the Lithuanian context, has surpassed the EU Agency level (ESMA) and has been directly implemented by the Lithuanian Regulator.

It may seem to some that this leap is the first sign of over-regulation in Member States, which tend to over-regulate in times of crisis, yet this measure can also be deemed as responsible action. The fact that the Bank of Lithuania has managed to implement the measure in a short time frame, with minor and almost non-existent instructions from ESMA, proves once again that in cases of financial services, mutual and not exclusive competence is the golden route for financial institutions.

EMIs and crypto exchanges that have been licensed in Estonia in comparison, which have lately been scrutinized by regulatory enhanced enforcement, have not received any formal notification in regards to the Covid-19 crisis, and have not received an extension for financial and regulatory reporting, bearing in mind the July 1st deadline that is looming on the entire crypto industry in Estonia.

EMIs in Lithuania on the other hand, have received specific instructions on their financial and regulatory reporting, and the widely anticipated API open banking system will be presented during the Payment Council later this year.

Be that as it may, EMIs that are licensed in Lithuania need to bear in mind that additional enhanced procedures are anticipated from the Bank, and they need to prepare themselves for the regulatory whirlwind that will hit the compliance and operational desks within the foreseeable future.

About the author: Ella Rosenberg
EU Law Regulatory Consultant at Porat Group and CEO of the Israel-EU Chamber of Commerce and Industry. She primarily deals with high risk industries in Israel and Europe. Ella holds an LLB in EU Law from the European Law School, Maastricht University and an LLM in Commercial and Company Law from Erasmus School of Law, Erasmus University Rotterdam. Ella consults on AML in the crypto currency industry, Blockchain, AI, drone regulation, EU firearms regulatory framework, Art industry, financial arbitration and tokenization of maritime logistics. She also focuses on Foreign Trade Agreements of the EU and Israel, TRIPS and GATT agreements, WTO Law and EU Legal Policy. Ella serves as a member of Europe Forum in Israel, and actively consults the public and governmental sector in Israel on the EU Regulatory Framework.

Peak Year-End 2019 Audited Financial Results Beat Company Forecasts

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Montreal, Quebec–(Newsfile Corp. – May 21, 2020) – Peak Positioning Technologies Inc. (CSE: PKK) (“Peak” or the “Company”) today announced its financial results for the year ended December 31, 2019, highlighted by revenue greater than the $9.3M the Company had initially forecasted for the year. All amounts expressed are in Canadian dollars.

2019 Financial Highlights:

  • Total Revenue of $11.7M

  • Adjusted EBITDA of $1.5M

  • Cash Flow from Operations of ($272,840)

  • Net Loss of $1.8M

Comparative Summary of Key Financial Metrics for 2018 and 2019

2019 2018
Revenue $11,708,653 $1,681,534
Expenses1 $10,173,036 $3,260,765
Adjusted EBITDA2 $1,535,617 ($1,579,231)
Net Income (Loss) ($1,830,361) ($3,608,920)

 

1 Expenses do not include interest, taxes, depreciation (including impairment of intangible assets) loss on extinction of debt, gain on bargain purchase and amortization
2 Adjusted EBITDA equals net income (loss) before finance costs, taxes, depreciation, amortization and impairment of intangible assets, loss on extinction of debt, gain on bargain purchase and amortization

2019 Operating Highlights:

  • Addition of several banks and lending partners to the Cubeler Lending Hub

  • Over 1,100 loans extended by the ASFC subsidiary to Chinese SMEs with no reported loan defaults

  • Almost 500 loans managed by the ASCS subsidiary on behalf of banking partners with no reported loan defaults

  • Expansion of services to cities of Xi’An and Jiangyin

  • Creation of the ASSC subsidiary

  • Several enhancements to the Lending Hub platform, including addition of a supply-chain module and ability to recognize and analyze bank statement data from over 300 banks

  • Analyzing data on almost 20,000 small, medium and micro enterprises through the Lending Hub by end of the year

  • Agreement to acquire the Jinxiaoer loan brokerage platform

Review of 2019

Peak’s ASFC subsidiary first appeared in the second quarter of 2018, marking the beginning of its operations as a financial technology (Fintech) company exclusively. Therefore, 2019 was Peak’s first full year of operation as such. From a financial standpoint, the Company was able to exceed its revenue and EBITDA objectives for the year. From an operational standpoint, the Company picked up where it left off in 2018 and continued to make inroads into the Chinese commercial credit space through its Cubeler Lending Hub platform and the services provided by its subsidiaries. Several financial institutions, including some of China’s largest banks, became members of the Hub in 2019 and extended credit to small and micro enterprises based on the platform’s credit analysis capabilities. The low default rate for credit extended through the platform, coupled with its processing efficiencies and cost-savings, are value-propositions that continue to resonate with and account for its adoption rate among financial institutions.

The success of the Lending Hub led to the expansion of the Company’s services in the cities of Xi’An and Jiangyin in 2019, and to the creation of its new ASSC subsidiary to help meet the specific credit needs of manufacturers and their supply-chain partners. The demand for ASSC’s services dominated the second half of 2019, which saw the subsidiary’s revenue account for a significant portion of the Company’s total 2019 revenue, despite having operated for less than 5 months during the year.

While Peak was focused primarily on the business development initiatives during the first three quarters of 2019, more emphasis was put on research & development and enhancements to the Lending Hub in the final quarter of the year. The Company spent a large portion of the quarter on the development and implementation of features to better meet its clients’ needs and discussed the best ways to integrate the Jinxiaoer loan brokerage platform, which the Company agreed to acquire, into the Lending Hub. With the pending integration of Jinxiaoer and the Lending Hub, Peak wrapped up 2019 poised to have a seamless and all-encompassing offering for virtually all stakeholders in the small and micro businesses credit space, including business owners, loan brokers and lenders.

Outlook for 2020

After spending the past 18 months proving to various participants and stakeholders in the commercial lending industry in China (banks, non-bank lenders, SMEs, loan insurance companies, government entities, service providers, etc.) that its analytics and AI based Lending Hub platform can be used to bring speed, transparency, cost reduction, risk minimization and overall efficiency to the commercial lending process, the Company’s focus in 2020 will be on growth and expansion. Armed with the established demand for its services, Peak sees 2020 as a break-out year, in which its services reach some of the country’s most important commercial markets and cities.

The fact that there are over 100M potential Lending-Hub-member small and micro enterprises in China represents both a tremendous opportunity and a challenge for the Company. The opportunity is obvious, in terms of the number of transactions and the amount of data that those enterprises could account for on the platform. The challenge is in reaching out to those 100M+ small and micro enterprises to let them know about the Lending Hub and why they should be a part of it. This is a major reason why Peak decided to acquire the Jinxiaoer platform, whose relationships with loan brokers catering to the financing needs of small and micro enterprises in cities across China, the Company plans to leverage in order to expand its services.

The positive impact of the Lending Hub concept, where small and micro businesses and lenders are brought together using analytics and AI for the benefit of local economic activity, began to impact manufacturers and their supply-chain partners in the city of Jiangyin in late 2019, which caught the attention of the city’s municipal government officials. Manufacturers and their supply-chain partners, who were either not able to obtain credit in the past to acquire materials or were told that they had maxed out their credit by their banks, were suddenly routinely getting approved for credit by ASSC’s financial partners. It would be in Jiangyin’s best interest, known as the manufacturing capital of Jiangsu province, to support the Company’s initiatives to help its manufacturers and their supply-chain partners get access to credit, particularly in the era of COVID-19, as demand for certain products such as masks and other personal protection equipment pours in from every part of the world. Peak plans to work with those officials on business development initiatives that could be replicated in other cities and further contribute to helping the expansion of its services in those cities.

In summary, the continuous expansion of the Lending Hub, with the addition of more lenders, brokerage companies, broker sales reps, Jinxiaoer Service Centres, and small and micro businesses, all leading to more transactions and more data, including loan repayment data, to make the Hub’s predictive algorithms increasingly more efficient will be a priority for the Company in 2020. Peak will also look to branching out its service offering into at least 20 cities by the end of the year.

As Peak continues to execute its business plan and approaches profitability, the Company plans to take the necessary measures in 2020 to be in position to repatriate a portion of its profits back to Canada as soon as it determines it’s appropriate to do so.

Fiscal 2019 Financial Results Summary

The Company generated $11,708,653 in revenue in its first complete year operating exclusively as a Fintech company (compared to $1,681,534 in fiscal 2018). The significant difference in revenue between fiscal 2018 and fiscal 2019 can be attributed to the fact that some of the Company’s subsidiaries were either not yet created or were only in operation for a part of the year in 2018, while those same subsidiaries were either created or had a full year of operation in 2019.

Expenses (excluding the cost of sales) for fiscal 2019 amounted to $13,539,015, compared to $5,290,454 in 2018.

The net loss for the year was $1,830,361 compared to $3,608,920 in 2018. Full details of the Company’s 2018 financial results can be found in the Audited Consolidated Financial Statements and Management’s Discussion and Analysis (MD&A) for the years ended December 31, 2019 and 2018, which are available at www.sedar.com.

About Peak Positioning Technologies Inc.:

Peak Positioning Technologies Inc. is the parent company of a group of innovative financial technology (Fintech) subsidiaries operating in China’s commercial lending industry. Peak’s subsidiaries use technology, analytics and artificial intelligence to create an ecosystem of lenders, borrowers and other participants in China’s commercial lending space where lending operations are conducted rapidly, safely, efficiently and with the utmost transparency. For more information: http://www.peakpositioning.com

For more information, please contact:

CHF Capital Markets Peak Positioning Technologies Inc. Twitter: @PeakPositioning
Cathy Hume, CEO Johnson Joseph, President and CEO Facebook: @peakpositioning
416-868-1079 ext.: 251 514-340-7775 ext.: 501 LinkedIn: Peak Positioning
cathy@chfir.com investors@peakpositioning.com YouTube: Peak Positioning

 

Forward-Looking Statements / Information:

This news release may include certain forward-looking information, including statements relating to business and operating strategies, plans and prospects for revenue growth, using words including “anticipate”, “believe”, “could”, “expect”, “intend”, “may”, “plan”, “potential”, “project”, “seek”, “should”, “will”, “would” and similar expressions, which are intended to identify a number of these forward-looking statements. Forward-looking information reflects current views with respect to current events and is not a guarantee of future performance and is subject to risks, uncertainties and assumptions. The Company undertakes no obligation to publicly update or review any forward-looking information contained in this news release, except as may be required by applicable laws, rules and regulations. Readers are urged to consider these factors carefully in evaluating any forward-looking information.

Eric Sprott Announces Investment in Ely Gold Royalties Inc.

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Toronto, Ontario–(Newsfile Corp. – May 21, 2020) – Eric Sprott announces that, today, 2176423 Ontario Ltd., a corporation which is beneficially owned by him, purchased 9,375,000 units of Ely Gold Royalties Inc. (Ely Gold), pursuant to a private placement, at a price of $0.80 per unit for aggregate consideration of $7,500,000. Each unit consists of one common share and one-half of common share purchase warrant. Each whole warrant entitles the holder to acquire one common share at an exercise price of $1.00 per share for a period of three years, subject to acceleration in certain circumstances.

Mr. Sprott now beneficially owns and controls 36,496,594 common shares and 19,711,442 common share purchase warrants of Ely Gold (representing approximately 23.2% of the outstanding shares on a non diluted basis and approximately 31.8% on a partially diluted basis). This acquisition resulted in a beneficial ownership increase in holdings of greater than 2% of the outstanding common shares from what was reported on the last early warning report. Prior to this acquisition, Mr. Sprott beneficially owned and controlled 27,121,594 common shares and 15,023,942 common share purchase warrants representing approximately 28.0% of the then outstanding shares on a partially diluted basis.

The units were acquired by Mr. Sprott, through 2176423 Ontario for investment purposes. Mr. Sprott has a long-term view of the investment and may acquire additional securities of Ely Gold including on the open market or through private acquisitions or sell securities of Ely Gold including on the open market or through private dispositions in the future depending on market conditions, reformulation of plans and/or other relevant factors.

Ely Gold is located at 2833-595 Burrard Street, Vancouver, BC, V7X 1K8. A copy of the early warning report with respect to the foregoing will appear on Ely Gold’s profile on SEDAR at www.sedar.com and may also be obtained by calling Mr. Sprott’s office at (416) 945-3294 (200 Bay Street, Suite 2600, Royal Bank Plaza, South Tower, Toronto, Ontario M5J 2J1).

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/56337

CSE Bulletin: Consolidation – Supreme Metals Corp. (ABJ)

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Toronto, Ontario–(Newsfile Corp. – le 21 mai/May 2020) Supreme Metals Corp. has announced a consolidation of its issued and outstanding common shares on the basis of one (1) post-consolidation common shares for every twenty (20) pre-consolidation common shares.

As a result, the outstanding shares of the company will be reduced to approximately 16,091,226 common shares.

The name and symbol will not change.

Please note that all open orders will be cancelled at the close of business on May 21, 2020. Dealers are reminded to re-enter their orders taking into account the share consolidation.

_________________________________

Supreme Metals Corp. a annoncé une consolidation de ses actions ordinaires émises et en circulation sur la base d’une (1) action ordinaire post-consolidation pour chaque vingt (20) actions ordinaires pré-consolidation.

En conséquence, les actions en circulation de la société seront réduites à l’environnement 16 091 226 actions ordinaires.

Le nom et le symbole ne changeront pas.

Veuillez noter que toutes les commandes ouvertes seront annulées à la fermeture des bureaux le 21 mai 2020. Il est rappelé aux courtiers de ressaisir leurs commandes en tenant compte de la consolidation des actions.

Trading on a Consolidated Basis/Négociation sur une base consolidée: le 22 mai/May 2020
Record Date/Date d’enregistrement: le 25 mai/May 2020
Symbol/Symbole: ABJ
NEW/NOUVEAU CUSIP: 868627209
NEW/NOUVEAU ISIN: CA8686272094
Old/Vieux CUSIP & ISIN: 868627100/CA8686271005

 

 

If you have any questions or require further information please contact Listings at (416) 367-7340 or E-mail: Listings@thecse.com

Pour toute question ou information complémentaire, veuillez contacter Listings au 416 367-7340 ou par courriel à: Listings@thecse.com

CSE Bulletin: Consolidation – Global Health Clinics Ltd. (MJRX)

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Toronto, Ontario–(Newsfile Corp. – le 21 mai/May 2020) – Global Health Clinics Ltd. has announced a consolidation of its issued and outstanding common shares on the basis of one (1) post-consolidation common shares for every ten (10) pre-consolidation common shares.

As a result, the outstanding shares of the company will be reduced to approximately 7,943,890 common shares.

The name and symbol will not change.

Please note that all open orders will be cancelled at the close of business on May 21, 2020. Dealers are reminded to re-enter their orders taking into account the share consolidation.

_________________________________

Global Health Clinics Ltd. a annoncé la consolidation de ses actions ordinaires émises et en circulation sur la base d’une (1) action ordinaire post-consolidation pour dix (10) actions ordinaires pré-consolidation.

En conséquence, les actions en circulation de la société seront réduites à l’environnement 7 943 890 actions ordinaires.

Le nom et le symbole ne changeront pas.

Veuillez noter que toutes les commandes ouvertes seront annulées à la fermeture des bureaux le 21 mai 2020. Il est rappelé aux courtiers de ressaisir leurs commandes en tenant compte de la consolidation des actions.

Trading on a Consolidated Basis/Négociation sur une base consolidée: le 22 mai/May 2020
Record Date/Date d’enregistrement: le 25 mai/May 2020
Symbol/Symbole: MJRX
NEW/NOUVEAU CUSIP: 37958W202
NEW/NOUVEAU ISIN: CA37958W2022
Old/Vieux CUSIP & ISIN: 37958W103/CA37958W1032

If you have any questions or require further information please contact Listings at (416) 367-7340 or E-mail: Listings@thecse.com

Pour toute question ou information complémentaire, veuillez contacter Listings au 416 367-7340 ou par courriel à: Listings@thecse.com

SEC Issues Agenda for May 27 Meeting of the Asset Management Advisory Committee

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Washington D.C.–(Newsfile Corp. – May 21, 2020) – The Securities and Exchange Commission today released the agenda for the May 27 meeting of the Asset Management Advisory Committee (AMAC).  AMAC was formed to provide the Commission with diverse perspectives on asset management and related advice and recommendations.

The meeting will include a discussion of matters relating to AMAC’s subcommittees and to COVID-19 and the asset management industry. The meeting will be held by remote means and is open to the public. The meeting will be webcast live on SEC.gov and will be archived on the website for later viewing.

Members of the public who wish to provide their views on the matters to be considered by AMAC may submit comments either electronically or on paper, as described below. Please submit comments using one method only. At this time, electronic submissions are preferred. Information that is submitted will become part of the public record of the meeting. All submissions should refer to File Number 265-33, and the file number should be included on the subject line if e-mail is used.

Electronic submissions:

Use the SEC’s Internet submission form or send an e-mail to rule-comments@sec.gov.

Paper submissions:

Send paper submissions in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, D.C. 20549-1090.

* * *

Asset Management Advisory Committee – Agenda for May 27, 2020, Meeting

9:00 a.m.

Welcome and Opening Remarks

Chairman Clayton; Commissioners Peirce and Lee; Dalia Blass, Director of the Division of Investment Management; and Ed Bernard, Committee Chairman

9:30 a.m.

Updates from the Private Investments Subcommittee and the ESG Subcommittee

10:10 a.m.

Break

10:15 a.m.

Impact of COVID-19 – Introduction

  • Sean Collins, Investment Company Institute
  • Marc Seidner, PIMCO
  • Ben Phillips, Casey Quirk – Deloitte Consulting

12:00 p.m.

Lunch Break

1:00 p.m.

Impact of COVID-19 – Discussion

3:00 p.m.

Break

3:15 p.m.

Summary and Discussion

3:45 p.m.

Adjournment

SEC Adopts Amendments to Improve Financial Disclosures about Acquisitions and Dispositions of Businesses

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Washington, D.C.–(Newsfile Corp. – May 21, 2020) – The Securities and Exchange Commission today announced that it has voted to adopt amendments to its rules and forms to improve for investors the financial information about acquired or disposed businesses, facilitate more timely access to capital, and reduce the complexity and costs to prepare the disclosure. The amendments will update our rules which have not been comprehensively addressed since their adoption, some over 30 years ago.

“This action, which is designed to enhance the quality of information that investors receive while eliminating unnecessary costs and burdens, will benefit investors, registrants and the market more generally,” said Chairman Jay Clayton. “I want to thank the staff for their outstanding efforts to bring their years of experience to modernizing these rules.”

The amendments to the rules and forms are intended to assist registrants in making more meaningful determinations of whether a subsidiary or an acquired or disposed business is significant, and improve the financial disclosure requirements applicable to acquisitions and dispositions of businesses, including real estate operations and investment companies.

The amendments will be effective on Jan. 1, 2021, but voluntary compliance will be permitted in advance of the effective date.

***

FACT SHEET

Amendments to Financial Disclosures About Acquired and Disposed Businesses

May 21, 2020

Action

The Securities and Exchange Commission today announced that it has adopted amendments to the financial disclosure requirements in Regulation S-X for acquisitions and dispositions of businesses, including real estate operations, in Rules 3-05, 3-14, 8-04, 8-05, 8-06, and Article 11, as well as in other related rules and forms.  In conjunction with these changes, the Commission also amended the significance tests in the “significant subsidiary” definition in Rule 1-02(w), Securities Act Rule 405, and Exchange Act Rule 12b-2 to improve their application and to assist registrants in making more meaningful determinations of whether a subsidiary or an acquired or disposed business is significant.  In addition, to address the unique attributes of investment companies and business development companies, the Commission adopted new requirements regarding fund acquisitions specific to registered investment companies and business development companies.

Background

When a registrant acquires a significant business, other than a real estate operation, Rule 3-05 of Regulation S-X generally requires a registrant to provide separate audited annual and unaudited interim pre-acquisition financial statements of that business.  The number of years of financial information that must be provided depends on the relative significance of the acquisition to the registrant.  Similarly, Rule 3-14 of Regulation S-X addresses the unique nature of real estate operations and requires a registrant that has acquired a significant real estate operation to file financial statements with respect to such acquired operation.

Article 11 of Regulation S-X also requires registrants to file unaudited pro forma financial information relating to the acquisition or disposition.  Pro forma financial information typically includes a pro forma balance sheet and pro forma income statements based on the historical financial statements of the registrant and the acquired or disposed business, including adjustments to show how the acquisition or disposition might have affected those financial statements.

Rule 3-05 also applies to registrants that are registered investment companies and business development companies.  Investment company registrants differ from non-investment company registrants in that they principally invest for returns from capital appreciation and/or investment income, are required to recognize changes in value to their portfolio investments each reporting period, and generally do not consolidate entities they control or use equity method accounting.  Due to the nature of registered investment companies and business development companies, under the current rules it is often unclear how to apply these reporting requirements to acquired funds.

Highlights

The final amendments will, among other things:

  • update the significance tests in Rule 1-02(w), Securities Act Rule 405, and Exchange Act Rule 12b-2 by:
    • revising the investment test to compare the registrant’s investments in and advances to the acquired or disposed business to the registrant’s aggregate worldwide market value if available;
    • revising the income test by adding a revenue component;
    • expanding the use of pro forma financial information in measuring significance; and
    • conforming, to the extent applicable, the significance threshold and tests for disposed businesses to those used for acquired businesses;
  • modify and enhance the required disclosure for the aggregate effect of acquisitions for which financial statements are not required or are not yet required by eliminating historical financial statements for insignificant businesses and expanding the pro forma financial information to depict the aggregate effect in all material respects;
  • require the financial statements of the acquired business to cover no more than the two most recent fiscal years;
  • permit disclosure of financial statements that omit certain expenses for certain acquisitions of a component of an entity;
  • permit the use of, or reconciliation to, International Financial Reporting Standards as issued by the International Accounting Standards Board in certain circumstances;
  • no longer require separate acquired business financial statements once the business has been included in the registrant’s post-acquisition financial statements for nine months or a complete fiscal year, depending on significance;
  • align Rule 3-14 with Rule 3-05 where no unique industry considerations exist;
  • clarify the application of Rule 3-14 regarding:
    • the determination of significance;
    • the need for interim income statements;
    • special provisions for blind pool offerings; and
    • the scope of the rule’s requirements;
  • amend the pro forma financial information requirements to improve the content and relevance of such information; more specifically, the revised pro forma adjustment criteria will provide for:
    • “Transaction Accounting Adjustments” reflecting only the application of required accounting to the transaction;
    • “Autonomous Entity Adjustments” reflecting the operations and financial position of the registrant as an autonomous entity if the registrant was previously part of another entity; and
    • optional “Management’s Adjustments” depicting synergies and dis-synergies of the acquisitions and dispositions for which pro forma effect is being given if, in management’s opinion, such adjustments would enhance an understanding of the pro forma effects of the transaction and certain conditions related to the basis and the form of presentation are met;
  • make corresponding changes to the smaller reporting company requirements in Article 8 of Regulation S-X, which will also apply to issuers relying on Regulation A;
  • amend the definition of “significant subsidiary” to provide a definition that is specifically tailored for investment companies; and
  • add new Rule 6-11 and amend Form N-14 to cover financial reporting for fund acquisitions by investment companies and business development companies.

What’s Next?

The amendments will be effective Jan. 1, 2021.  However, voluntary compliance with the final amendments will be permitted in advance of the effective date.

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