Friday, November 12, 2010

Agoracom versus The OSC: The best bits of the settlement

Here's the link to the OSC settlement agreement in the matter of Agoracom. Here are the best bits (my personal faves are clauses 24 and 25...but check them all out and see what you think):

17. Agoracom’s representatives serviced the client hubs by moderating their discussion forums and posting information and news to the forums. In order to post comments on the discussion forums, users are required to create a username and provide an e-mail address.

18. Tsiolis and Kondakos required their representatives, as part of their daily responsibilities, to post anonymously to some client forums using aliases. To post messages anonymously, the representatives created fictitious usernames and posed as investors blending in with other users, investors and interested persons. Representatives had between 40-50 aliases (some had up to 200) and were required to make up to 2 posts per hub per day or risk having their pay docked. On occasion, Agoracom staff conversed with themselves on the forums using different aliases.
19. During the Material Time:
  1. more than 24,000 alias posts were created from within Agoracom on client and non-client hubs;
  2. more than 670 alias user names were created by representatives of Agoracom and used on client and non-client hubs;
  3. alias posts originated from Tsiolis’ residence; and
  4. posts by Agoracom representatives, using their aliases, were occasionally promotional and promoted purchasing and/or holding stock.
    20. Neither the public users nor the majority of Agoracom’s clients were aware that representatives of Agoracom were posting on their hubs using aliases. In some cases, Agoracom reported the number of posts and shareholder inquiries answered by Agoracom’s representatives to clients on a monthly basis, and failed to disclose that a portion of the posts and shareholder inquiries were created by Agoracom’s own representatives. For certain clients, alias posts by Agoracom’s representatives represented a significant proportion of the postings within the forum.
    21. The Respondents also took steps to actively conceal the alias posting activity by its representatives. In March 2009, when the business development representative, Scott Purkis, revealed that he was an Agoracom representative posting with an alias, the Respondents posted an “Official Statement” stating that these actions were carried out by a single individual and that Agoracom would be taking steps within next sixty (60) days to ensure that this would never happen again. The message posted by the Respondents to the public in relation to Purkis’ alias postings was misleading given that Tsiolis and Kondakos knew and instructed many representatives to create and use multiple aliases to post on several of the client forums. In addition, Tsiolis and Kondakos were aware that representatives continued to post using aliases after this Statement was released.
    22. The posting activity described above, mandated by the Respondents, was undertaken, in part, to create an appearance of greater interest in the securities of some of Agoracom’s clients.


    23. Another feature available on the Agoracom platform is a “private messaging” service which, according to Agoracom’s web site, allows users to have “direct and private contact with other Agoracom members.”
    24. From July 2008 to February 2009, Kondakos intercepted private messages sent between public users for the purpose of gathering information about reporting issuers and issuers, in which he was personally invested.
    25. Kondakos forwarded private messages to a personal friend who was not associated with Agoracom and provided this individual with administrative access to the Agoracom website. This individual also intercepted private messages between public users, and forwarded these private messages to Kondakos.

    There also clause 26 which says...

    "By engaging in the conduct described above, the Respondents have acted contrary to the public interest." which we all shout "No Shit Sherlock". And now the best bits of the Order issued today, November 12th, and linked here:

    1. The settlement agreement is approved.
    2. The registration granted to Agoracom Capital Inc. under Ontario securities law be terminated on the date of the Commission’s order.
    3. The registrations granted to Tsiolis and Kondakos (the “Individual Respondents”) under Ontario securities law be suspended for a period of 10 years commencing on the date of the Commission’s order, and the Individual Respondents are prohibited from becoming or acting as a registrant or as an investment fund manager for a period of 10 years commencing on the date of the Commission’s order.
    4. The Individual Respondents be permanently prohibited from becoming or acting as a director or officer of any client of Agoracom or any client of Agoracom’s affiliates or subsidiaries;
    5. The Individual Respondents be prohibited from becoming or acting as a director or officer of any reporting issuer, registrant or investment fund manager for a period of 5 years commencing on the date of the Commission’s order.
    6. The Respondents will not trade or invest in any client of Agoracom or any client of Agoracom’s affiliates or subsidiaries, save and except for options or placements that are part of a contractual compensation arrangement.
    7. The Individual Respondents be reprimanded.
    8. Within 24 hours of the date of the Commission’s order, the Respondents will issue a press release, pre-approved by Staff (the “Press Release”), which shall include an electronic link to the within Settlement Agreement. The press release shall be posted on the home page of for a period of 6 months commencing on the date of the Commission’s order.
    9. The Respondents will pay $125,000, to be allocated under s. 3.4(2)(b) of the Act to or for the benefit of third parties.
    10. The Respondents will pay the costs of the Commission’s investigation in the amount of $25,000.
    11. The Respondents, jointly and severally agree to make the payments ordered pursuant to paragraphs 9 and 10 above as follows:
      1. $50,000 by certified cheque when the Commission approves this Settlement Agreement; and
      2. 2 post-dated cheques, each in the amount of $50,000.00, dated 9 months and 18 months following the approval of this Settlement

    You'll note a marked difference between the ruling and the Agoracom version of events as posted on their site tonight, too. For example, Georgey says the $150k fine is "....fair given the resources expended by OSC staff..." but as the ruling clearly states, just $25,000 of the $150,000 fine is to cover the OSC costs. There's also the little matter of the 5 year and 10 year bans that he glossed over....but details, yeah?