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...#2775414 v2 ALBERTA SECURITIES COMMISSION
NOTICE OF HEARING
Citation: CMKM Diamonds, Inc., 2008 ABASC 132 Date: 20080310
Docket: E03791
Securities Act, R.S.A. 2000, c. S-4 (Act)
To: CMKM Diamonds, Inc. (CMKM)
Notice: The Alberta Securities Commission (Commission) will convene at 9:00
a.m. on Wednesday, the 9th day of April, 2008, for a hearing in Calgary,
Alberta, regarding the allegations in this Notice. At the hearing, the
Commission will consider whether, pursuant to section 198(1.1) of the Act,
it is in the public interest to order:
(i) Under section 198(1)(a) of the Act, that all trading in or purchasing
cease in respect of the securities of CMKM until otherwise ordered by the
Commission;
(ii) Under section 198(1)(c) of the Act, that any or all of the exemptions
contained in the Alberta securities laws do not apply to you until otherwise
ordered by the Commission; and
(iii) Such other order as may be appropriate under sections 198, 199 and
202 of the Act.
Location: Alberta Securities Commission, 6th Floor, 300 – 5th Avenue S.W., Calgary,
Alberta.
Procedure: 1. You may obtain disclosure and particulars of the allegations in this
Notice from Deanna H. Steblyk, Litigation Counsel, c/o Alberta Securities
Commission, 4th Floor, 300 - 5 Avenue SW, Calgary, Alberta, T2P 3C4,
telephone 403.297.4417.
2. You may be represented by legal counsel and you or your counsel
may make representations and introduce relevant evidence at the hearing.
3. If you or your counsel fail to attend on Wednesday, the 9th day of
April, 2008, or as directed, the hearing may proceed in your absence and
an order may be made against you without further notice.
See also section 29 of the Act.
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Allegations
Summary of Breaches
1. Staff of the Commission (Staff) alleges that it is in the public interest for the
Commission to issue an order in Alberta against CMKM, based on orders issued
by the Saskatchewan Financial Services Commission, Securities Division (SFSC),
and the Manitoba Securities Commission (MSC).
Parties
2. CMKM is a corporation which was incorporated in the state of Nevada, U.S.A. on
April 18, 2002. It converted to a Texas corporation with the same name effective
April 30, 2007. Its current head office is in Tyler, Texas, and it maintains a
website at
www.cmkmdiamondsinc.com.
3. CMKM:
3.1 has never been registered to trade securities in Alberta;
3.2 has never been a reporting issuer in Alberta; and
3.3 has never filed with the Commission, and the Commission has never issued
a receipt for, a preliminary prospectus or prospectus with respect to the
securities of CMKM.
Circumstances
The Saskatchewan Orders
(i) The Temporary Order
4. On October 26, 2004, the Director of the SFSC determined that it was in the
public interest to issue a Temporary Order (Temporary Order) against CMKM,
among others, pursuant to s. 134 of The Securities Act, 1988 (SK Act). The
Temporary Order provides, inter alia, that:
(a) Pursuant to clause 134(1)(d) of the SK Act that trading in all securities by and
of CMKM, among others, cease forthwith up to and including November 9, 2004;
(b) Pursuant to clause 134(1)(a) of the SK Act, that the exemptions contained in
sections 38, 39, 39.1, 81, 82 and 102 of the SK Act and the exemptions contained
in The Securities Regulations, R.R.S., c. S-42.2 Reg. 1, which provide for
exemptions from the requirements of sections 27, 58, 71 or 104 to 109 of the SK
Act, shall not apply forthwith up to and including November 9, 2004, with respect
to any trade in securities by CMKM, among others.
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5. According to the Temporary Order, the Director of the SFSC had been advised by
SFSC Staff that CMKM, among others, had contravened Saskatchewan securities
laws by trading in the securities of CMKM in Saskatchewan despite the fact that
they were not registered to do so under the SK Act, no receipt had been issued
under the SK Act with respect to those securities, and the SFSC had not issued an
order under the SK Act exempting them and the securities of CMKM from the
registration and prospectus requirements of the SK Act.
6. Further, according to the Temporary Order, the Director of the SFSC had been
advised by SFSC Staff that the respondents named with CMKM in the Temporary
Order had contravened Saskatchewan securities laws by, with the intention of
effecting trades in the securities of CMKM and another company, making
statements which they knew or ought reasonably to have known were
misrepresentations, contrary to the SK Act.
7. The Temporary Order indicates that the Temporary Order could be extended for
such period as the Director of the SFSC considered necessary if sufficient
information was not provided to the Director on or before November 9, 2004, and
that the SFSC would grant a hearing with respect to the matters described in the
Temporary Order at the request of any of the persons or companies named in the
Temporary Order.
8. The Temporary Order was served on CMKM via facsimile on October 26, 2004.
(ii) The Extending Order
9. On November 9, 2004, because the SFSC had not received a request for a hearing
pursuant to the terms of the Temporary Order and had not been provided with
satisfactory information with respect to the matters set out in the Temporary
Order, the SFSC determined that it was in the public interest to issue an Extending
Order (Extending Order) against CMKM, among others. The Extending Order
extended the Temporary Order until such time as the SFSC is provided with
satisfactory information to enable it to make a further order in the matter.
10. The Extending Order was served on CMKM via facsimile on November 9, 2004.
11. As of the date of this Notice of Hearing, the Temporary Order and Extending
Order remain in effect and none of the Respondents named in the Temporary
Order and Extending Order have requested a hearing.
The Manitoba Order
12. On August 17, 2007, the MSC issued a Notice of Hearing naming CMKM based
on the SFSC’s Extending Order.
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13. On October 31, 2007, the MSC determined that it was in the public interest to
issue an Order (MSC Order) based on the Extending Order. CMKM consented to
the issuance of an order by the MSC, and waived its right to a full hearing.
14. The MSC Order provides that:
(a) Pursuant to section 148 of the Manitoba Securities Act (MB Act), all trading in
the securities of CMKM shall cease forthwith until otherwise ordered by the MSC;
(b) Pursuant to subsection 19(5) of the MB Act, the exemptions provided by
subsections 19(1) and 19(2) of the MB Act do not apply to CMKM for an
indefinite period until otherwise ordered by the MSC.
15. As of the date of this Notice of Hearing, the MSC Order remains in effect, has not
been appealed, and the appeal period has expired.
Nexus with Alberta
16. The MSC obtained a copy of CMKM’s shareholder list for the period ending
December 31, 2004 (CMKM Shareholder List) from the U.S. Securities and
Exchange Commission. Included in the CMKM Shareholder List are numerous
Alberta investors.
Relief Sought
17. As a result of the Saskatchewan and Manitoba Orders and CMKM’s sale of
securities to Alberta residents despite the fact that CMKM has never been
registered to trade securities in Alberta, has never been a reporting issuer in
Alberta and has never filed with the Commission, and the Commission has never
issued a receipt for, a preliminary prospectus or prospectus with respect to the
securities of CMKM, Staff contends that it is in the public interest for the
Commission to make a reciprocal order in Alberta against CMKM under
subsections 198(1)(a) and (c) of the Act, pursuant to section 198(1.1) of the Act.
Calgary, Alberta, March 10th , 2008.
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ALBERTA SECURITIES COMMISSION
“original signed by”
John P. Petch, Q.C.
Director, Enforcement
