Expert: Steven Taylor - 1/6/2010

Question
QUESTION: The company is First Smart Sensors Corp. I purchased shares in the company during the high tech "Klondike" of the late 90ths – during the year 2000. Since then the company has been de-listed. It used to trade on the Vancouver stock exchange under the ticker FSSC. The company is still active and their official website is http://www.thefloodstopper.com/ . I bought the shares through my bank (non-Canadian).

I communicated with company inquiring about the future of the business. In their reply they claim that I am not listed as a shareholder and asked for a copy of the share certificate – "I cannot reply to you until I receive proof from you that you are a shareholder of FirstSmart Sensor Corp. in the form of a copy of your share certificate ( front and back ) so that I know you are a valid shareholder." However I never received any certificate from my broker/bank.

What I do hold are bank statements of my share holdings in the company and also computer print-outs from the bank showing the share purchasing transactions I made in the company during the year 2000. I asked my broker to attain a certificate through their Canadian dealer/correspondent. The reply I got was that that their current dealer/correspondent informed them that it is not possible to obtain any certificate in First Smart Sensors Corp. I understand that the main reason is that since then the bank switched correspondent.

So considering the above, do you have any advice on how to pursue the matter further? 1) How to secure my share holder rights in the company, 2) how to get registered as a share holder and 3) how to obtain a share certificate in the company?

Thanks in advance,



ANSWER: Unfortunately, this happens with Canadian over-the-counter companies. The stock never traded on the Vancouver Stock Exchange - the 4 letter symbol is a dead giveaway. Instead, it traded on the Canadian Dealer Network, an OTC market significantly below the level of the VSE. CDN traded companies came and went quickly, often without warning. In the case of FirstSmart, they seem to have stopped filing their required financial information in 2004, which is why Ontario slapped them with a cease-trade order in 2005. That order remains in effect.

Chances are that when they decides to violate the required reporting regulations, they also dropped their transfer agent (who maintains the shareholder records). By law, they are required to maintain the shareholder register, but considering their track record, who knows if they do it or not. If they do not, it explains why it is not currently possible to obtain a stock certificate - there is no one to issue one. You can contact their last known independent transfer agent, Equity Transfer (www.equitytransfer.com) and see if they have any info. You might also contact the Ontario Securities Commission (http://www.osc.gov.on.ca/en/home.htm) and see if they can provide any guidance for you as well. Considering the tone of their letter, however, it seems they hope you just go away.

Good luck, and I hope you get an answer from someone in authority.

---------- FOLLOW-UP ----------

QUESTION: Thank you for your prompt reply.

Considering the above, what are my legal shareholders rights? Can I put any demand on the company?

Answer
Good question. The rights of individual shareholders varies widely by State or Province of Incorporation. There are massive differences, which is why some less than honest companies tend to incorporate in jurisdictions known to be unfriendly to shareholders and very friendly to management.

Short of hiring your own attorney, I suggest you pose the question to the Ontario Securities Commission and see if they can provide you with some guidelines of your rights as a shareholder of an Ontario Corporation.