Litigation Brief

BC Court of Appeal grants leave to appeal securities commission's interpretation of "interesting" provisions

The Court of Appeal today granted Patricia McLean leave to appeal from a decision of the B.C. Securities Commission that she had argued was procedurally unfair and based on a misinterpretation of a limitation period in the B.C. Securities Act. 

BC Securities Commission imposes sanctions for fraud on Panterra

On October 7, 2010, a panel of the British Columbia Securities Commission (the “BCSC”) ordered that Giuliano Angelo Tamburrino, Andrew Gordon Walker, and Dale Michael Paulson pay over $350,000 in penalties and be prohibited from engaging in certain activities in securities market, as a sanction for their role in perpetuating a fraud on Panterra Resources Corp. (“Panterra”).  In the case of Mr. Tamburrino, who acted as a signing officer for Panterra despite being prohibited by the TSX-V from doing so, the bans are permanent. 

Alberta Securities Commission imposes highest-ever penalty

The Alberta Securities Commission has assessed $4 million in penalties against David Greene and John Jenkins, two insiders of Nevada-based Gold-Quest International Corp. (“Gold-Quest”). The penalty, reported as Gold-Quest International Corp., Re, 2010 ABASC 278, is the highest ever imposed by the Alberta Securities Commission.

Between 2006 and 2008, Gold-Quest raised US$29 million from investors, using both a Ponzi scheme and pyramid scheme, promising investors annual returns of 87%. It also illegally traded in and distributed its shares in Alberta in contravention of the Albert Securities Act, R.S.A. 2000, c. S-4.

The Alberta Securities Commission found that Greene was the guiding mind of Gold-Quest and Jenkins played a significant role in administering the scam and luring in investors. Millions of dollars from investors in Gold-Quest was transferred to Greene’s and Jenkins’s personal accounts to pay for personal items including cars, golf clubs, hotels and restaurants.

As a result of the central roles played by Greene and Jenkins and the egregious nature of their misconduct, the harm done to Alberta investors and to the integrity of the capital markets in Alberta, a penalty of $2 million each was assessed against Greene and Jenkins. Greene, Jenkins and Gold-Quest are also the subject of several SEC enforcement actions with respect to investments by American investors.

To read the full penalty decision of the Alberta Securities Commission, click here.

To read Hakemi & Company's summary of the first part of the hearing, click here.

Alberta Securities Commission finds Hav-Loc statements were misleading

In Hav-Loc Private Wealth Partners Inc., Re, 2010 ABASC 225, Hav-Loc Private Wealth Partners Inc. (“Hav-Loc”), and its president, CEO and sole director, Thierry Gevaert, were found to have made misleading and untrue statements to investors while selling securities. In this proceeding, the Alberta Securities Commission considered the appropriate sanctions and penalties under the Alberta Securities Act, and ordered that each of Hav-Loc and Gevaert cease trade in all securities for five year (except personal trading by Gevaert) and jointly and severally pay a $15,000 administrative penalty and $2,000 in hearing costs. It also prohibited Gevaert from acting as a director or officer of any issuer for five years.

To read the full decision, click here.

Alberta securities firm agrees to pay $40,000 fine for illegal distribution of securities

Hallett Financial Services Ltd. and its principal, Phillip Hallett, have agreed to pay a $40,000 fine as part of a settlement agreement reached with the Alberta Securities Commission over the illegal distribution of securities. The firm sold fixed rate term notes to Alberta investors without being registered and without issuing a prospectus to investors. They raised $1.3 million in the illegal distribution. 

Educational seminars found to be regulated "advice" under the Securities Act

In Kustom Design Financial Services Inc., Re, 2010 ABASC 179

, the Alberta Securities Commission took evidence on Staff's allegations that all Respondents had violated securities laws by illegally trading and distributing securities, and that two Respondents had acted as advisors without being registered to do so.

Kustom put on educational seminars to train the public on the "Biblical principles of finance," and promoted investment in one of the Respondent enterprises, receiving substantial referral fees for doing so. People could also invest directly in Kustom, which would pool the money and then loan it out. Kustom would assist clients in finding money to invest, such as by showing them how to take out loans against a pension. Investors were unsuccessful in attempts to retrieve their principle from either Kustom or from the companies to whom Kustom loaned pooled money.

The Commission found that the people giving money to Respondents were investing in securities, and that Respondents did not follow the registration and prospectus requirements under the Securities Act. The Commission also found that the information given to clients came with assurances of quality which brought the dissemination of that information under the definition of "advice" under the Act, and that the advisors lacked required registration. These actions were deemed to be contrary to the public interest. A schedule was entered on the matter of sanctions and costs.

To read the full decision, click here.

Alberta Securities Commission holds that the MFDA is a "securities regulatory authority", imposes permanent ban based on MFDA decision

The Alberta Securities Commission (the "ASC") has issued a number of prohibitions against a former mutual fund salesperson based on findings of the Mutual Fund Dealers Association of Canada (the “MFDA”).

Wayne Paul Larson was registered to sell mutual funds in Alberta and was employed by a MFDA member. He was terminated in 2006, and the MFDA found he had violated MFDA rules by (1) recommending to clients that they participate in a particular investment without disclosing that the investment was a non-company product; (2) engaging in personal financial dealings with clients; and (3) refusing to attend and give information at an MFDA interview. The MFDA panel ordered that Larson be permanently prohibited from conducting securities related business. Larson did not appeal the MFDA decision and the statutory time allowing for such an appeal had elapsed.

In Larson, Re, 2010 ABASC 64, the ASC found that Larson had notice and an opportunity to be heard at the MFDA hearing, and that the MFDA was a "securities regulatory authority" for the purposes of section 198(1.1)(c) of the Alberta Securities Act, R.S.A. 2000, c. S-4.   The ASC accordingly ordered that Larson be permanently prohibited from (1) advising in securities, (2) becoming or acting as a registrant, investment fund manager or promoter, and (3) acting in a management or consultative capacity in connection with activities in the securities market.

To read the full ASC decision, click here.

Alberta Securities Commission sanctions Wheatfield Inc. and Gordon James Goodbrand

The Respondents Wheatfield Inc. (“Wheatfield”), and Gordon James Goodbrand (“Goodbrand”), president, secretary, treasurer, and sole director of Wheatfield, signed a Statement of Admissions and Joint Recommendation as to Sanction (“Admissions Statement”) with Alberta Securities Commission (“ASC”) Staff, admitting to charges of trading in and distributing securities of Wheatfield without registration, a prospectus, or appropriate exemptions contrary to sections 75 and 110 of the Alberta Securities Act, R.S.A. 2000, c. S-4.  In a decision reported as Wheatfield Inc., Re, 2009 ABASC 619, the ASC reviewed and applied the sanctioning principles of specific and general deterrence. 

The ASC held that although the misconduct was serious, the Respondents appreciated the severity of their malfeasance.  The ASC noted that it had not previously sanctioned the Respondents, and that although the harm borne by the investors was sizable, the Respondents did not benefit from their misconduct.  The ASC concluded that the Respondents posed little risk to investors and the capital market.  In light of these factors, as well as the Respondents' cooperation with the ASC, particularly in formulating the Admissions Statement, the ASC called for moderate sanctions against the Respondents.  In the result, the ASC imposed cease trade orders against the Respondents, an order that the exemptions in Alberta securities laws would not apply to Goodbrand for a period of five years from the date of the decision, an order that Goodbrand resign from all positions as officer or director, and an order that he pay an administrative penalty of $75,000, as well as investigative costs of $7,866.

To read the full ASC decision, click here.

BC Securities Commission imposes sanctions for a US$16 million fraud

In August 2009, the British Columbia Securities Commission (the "BCSC") found that Manna Trading Corp Ltd., related entities, and the individual Respondents behind them, had committed multiple contraventions of the Securities Act by, among other things, lying to investors about how their money would be invested, the returns offered, and the risk associated with the investment scheme.  The Respondents raised US$16 million from 800 investors in BC and elsewhere, of which between US$10 million and US$13 million was lost. On October 22, 2009, in decision reported as 2009 BCSECCOM 595, the BCSC imposed sanctions.

Alberta Securities Commission sanctions KCP Innovative Services Inc. and James Woodrow Baker

In an earlier decision, the Alberta Securities Commission (“ASC”) had found that the corporate Respondent had illegally distributed securities and the individual Respondent had illegally traded and distributed securities, thereby contravening provisions of the Alberta Securities Act, R.S.A. 2000, c. S-4, (the "Securities Act") and acting contrary to the public interest.  In Re KCP Innovative Services Inc., 2009 ABASC 521, the ASC considered the factors relevant to determining sanctions for the impugned conduct.  Among other things, the ASC held that the Respondents’ failure to comply with the key registration and prospectus requirements of the Securities Act constituted serious misconduct; the Respondents’ conduct exhibited disregard for the regulatory requirements that must be strictly observed; the Respondents’ conduct exposed investors to the risk of financial harm, and also may have harmed the  integrity of the Alberta capital market generally; and the Respondents  either benefitted or expected to benefit financially as a result.  In part for these reasons, the ASC ordered the imposition of sanctions, including a $15,000 administrative penalty, and $9,000 in costs against the individual Respondent. 

To read the full ASC decision, click here.