Enforcement Roundup – April 2019
In this edition of Enforcement Roundup, we cover multiple enforcement actions from the British Columbia Securities Commission (BCSC), including a criminal prosecution, two sanctions decisions, a settlement agreement, and two BCSC panel finding decisions.
We also look at five Mutual Fund Dealers of Canada Association (MFDA) settlement agreement acceptances, and one Investment Industry Regulatory Organization of Canada (IIROC) settlement agreement acceptance.
A BCSC panel imposed market bans on Hamilton after finding that he engaged in conduct that was abusive to the capital markets in relation to the company he created, Guru Health Inc.
The panel called Hamilton’s actions an “extended, premeditated scheme to deceive the capital markets as to the true ownership and control of Guru.” Although there was no evidence of specific harm to investors, the panel said Hamilton was enriched by the misconduct, and that such deception causes “significant harm to our capital markets.”
Hamilton must resign any position he holds as a director or officer of an issuer or registrant, and is prohibited for seven years from taking any such role. The panel also imposed various seven-year market bans on Hamilton that are detailed in the news release.
A Salmon Arm man – Good – has been charged with fraud under the Criminal Code and violating the Securities Act for allegedly breaching a BCSC order.
The charges – defrauding an individual of more than $5,000 and failing to comply with a BCSC order by engaging in investor relations activities – arise from an investigation by the BCSC’s Criminal Investigations branch. Visit the Criminal Enforcement page for more information on this case.
A BCSC panel imposed a $150,000 penalty on Johnson, the president and chief executive officer of Mountainstar Gold Inc., for making false or misleading statements.
In addition to the penalty, Johnson must resign any position as a director or officer of an issuer or registrant, and is permanently prohibited from taking any such role. The panel also imposed permanent market bans on Johnson that are outlined in the news release.
The panel also permanently prohibited any trading in or purchasing of securities of Mountainstar.
BCSC Settlement Agreement
Hogaboam raised a total of $585,000 from six investors on behalf of the issuing company, receiving $11,700 in finder’s fees. Despite such trading in securities, Hogaboam was not a registrant under the B.C. Securities Act, and he did not have an exemption from the requirement to be registered.
As part of the settlement, Hogaboam promised to pay $20,000 to the BCSC, due immediately. He is also prohibited for four years, or until such time as he pays the $20,000, from various capital market activities.
Hogaboam, who also invested his own and his family’s funds in the issuer and lost over $1 million, cooperated with BCSC staff throughout the investigation and admitted to the misconduct.
A BCSC panel found Furman – who has never been registered under the Securities Act – committed fraud when he raised at least $452,000 from investors.
The panel directed the parties to make submissions on sanctions according to the schedule set out in the findings. You can find out more about the case by reading the news release.
A BCSC panel found that Bruce, Wright, Prinster, and two mortgage investment companies committed fraud against investors by dishonestly spending their investment funds.
Wilson, Wright, Prinster and DominionGrand II Mortgage Investment Corporation were found to have committed fraud with respect to 19 investments for $610,134; Wright, Prinster and DominionGrand Investment Fund Inc. were found to have committed fraud with respect to 21 investors for $506,693.
The panel will impose sanctions after considering submissions from BCSC staff and the respondents.
MFDA Settlement Agreements
In the settlement agreement, Yu admitted that she contravened an MFDA Rule when she altered two account forms in respect of one client by altering information on the account forms without having the client initial the alterations.
Yu paid a fine of $1,500, and must complete the Conduct and Practices Handbook course offered by the Canadian Securities Institute, and comply with the MFDA Rule she admitted to contravening in the settlement agreement.
In the settlement agreement, Hucul admitted that he processed a redemption of $500,000 in a client’s account based upon email instructions received from a third party, contrary to the policies and procedures of the MFDA member and MFDA Rules.
The third party had obtained unlawful access to a client’s email account and subsequently misappropriated the proceeds of the redemption.
Hucul must pay a fine of $10,000, costs of $2,500, and comply with various MFDA Rules.
During the period described in the settlement agreement, Hucul carried on business in the Coquitlam, British Columbia area.
In the settlement agreement, Chen admitted that whilst carrying on business in Surrey, British Columbia, she contravened an MFDA rule by altering account forms without having the clients initial the alterations. Chen also admitted she obtained, possessed, and used to process transactions, four pre-signed client account forms contrary to the same MFDA rule.
Chen must pay a fine of $15,000, costs of $2,500, and shall in the future comply with the MFDA rule she contravened.
In the settlement agreement, Mark admitted she contravened various MFDA Rules whilst she carried on business in the Vancouver, British Columbia area. The contraventions took place at various times during between October 2015 and April 2016, and are detailed in the MFDA news release.
The MFDA has imposed sanctions on Mark including a fine of $15,000 and costs of $2,500. Mark must also comply with MFDA Rules in the future.
In the settlement agreement, Truong admitted that he contravened an MFDA rule when he signed the signatures of four clients on four account forms and submitted the forms to the member for processing. Truong also admitted he misled the member on its quarterly compliance certificate when he falsely indicated to the member that he did not sign client signatures.
Truong must pay a fine of $5,000; costs of $2,500; he is also prohibited from conducting securities related business in any capacity while in the employ of or associated with a MFDA Member for a period of six months.
During the period described in the settlement agreement, Truong carried on business in the Vancouver, British Columbia area.
IIROC Settlement Agreement
In the settlement agreement, Hewat admitted that he contravened Dealer Member Rules when he made unsuitable recommendations with respect to the accounts of three clients, and executed trades in a client account without authorization – Hewat agreed to pay a $10,000 fine.
The violations occurred while he was a Registered Representative with the Kaslo sub-branch of Leede Jones Gable Inc. Hewat is no longer a registrant with an IIROC-regulated firm.
Report a Concern
If you have any concerns about a person or company offering an investment opportunity, please contact BCSC Inquiries at 604-899-6854 or 1-800-373-6393 or through e-mail at [email protected]. You can also file a complaint or submit a tip anonymously using the BCSC’s online complaint form.