Dear Affiliates and valued customers of Karatbars,
So, Montreal, Québec…cold city, warm hearts.
Karatbars International GmbH urges affiliates to refrain from speculation, editorialization, or other inflammatory comments and to refer to the Company compliance policies as well as the current Terms and Conditions when discussing the following information.
On March 20, 2014, the Autorité des marchés financiers (“AMF”), which is the regulatory and oversight body for the financial sector in the province of Québec, Canada, urged Québec investors to be cautious when purchasing marketing packages from Karatbars, taking the position that they consisted in investment products sold by a company that is not a reported issuer.
On April 17, 2014, at the request of the AMF, the Tribunal administratif des marchés financiers (“Tribunal”) issued orders prohibiting Karatbars and its affiliates from selling its marketing packages in the province of Québec. These orders were issued ex parte, which means that they were issued without warning to Karatbars, who was not present at the hearing to make representations to demonstrate that its marketing packages are not investment contracts and that their sale is not prohibited by the Québec Securities Act.
Although Karatbars disagreed with the order, it scrupulously complied with it. In parallel, Karatbars immediately issued a challenge of the ex parte order. Its challenge was heard over a period of 10 days split between November 2015 and February 2016, where Karatbars’ legal counsel, Davies Ward Phillips & Vineberg LLP (“Davies”) https://www.dwpv.com/en/, sought to inform the Tribunal about Karatbars and its business, products, activities and marketing initiatives, but also about referral marketing and network marketing in general.
The result: Karatbars has prevailed on all points but one. The Tribunal reversed its conclusion on the ex parte order and confirmed, in a very lengthy judgment available here (in French): http://canlii.ca/t/gvl90, that the Karatbars marketing plan is not an investment contract, and therefore, that Karatbars can sell same without the need of being a registered issuer.
In particular, the Tribunal decided that Karatbars affiliates are not passive investors, but rather, are the sales force of Karatbars. The Tribunal further found that the money paid by affiliates for purchasing the marketing plan does not consist in an investment in the company, but rather, is paid in order to obtain marketing materials which are important for their daily work. The only exception to this conclusion concerns the Karatbars World Pool, which was no longer offered after November 2015.
Therefore, this point is moot, as is recognized by the Tribunal in its decision. Finally, the Tribunal commended various aspects of the Karatbars business model, finding that the evidence showed that Karatbars sold its gold at a competitive price, that Karatbars stocked gold without cost and delivered its gold at competitive prices, that Karatbars has sufficient gold to fulfill all its orders, that its gold was of first rate quality, etc.
Considering the foregoing, we expect to resume business in the province of Québec by January 15th, 2017 but have some reprogramming to complete. All affiliate activity in Quebec will, of course, continue to be monitored for compliance with the Company’s policies and procedures. We remind you, without limiting the generality of the foregoing, that affiliates may not promote Karatbars products or hold public meetings or act in a manner which is not consistent with the Terms and Conditions.
Affiliates are reminded that they may not hold hotel meetings and must only use Karatbars materials in their presentations.
For information about Karatbars International GmbH, please see https://www.karatbars.com
The Autorité des marchés financiers (“AMF”) is the regulatory and oversight body for Québec’s financial sector.
The Tribunal exercises its functions in respect of the various market participants to ensure that investors and
clients are protected and to promote efficiency in the markets. http://www.tmf.gouv.qc.ca/en