A Mississauga exempt market dealer is the latest industry player to hold up its hand to having misled investors, choosing to settle with the OSC for millions in disgorgement as well as a hefty trading ban.
The regulator announced the settlement with Gentree Asset Management Inc., R.E.A.L. Group Fund III (CANADA) LP, Canpro Income Fund I, LP, and Normand Gauthier on Thursday – along with an order for a $1.8 million disgorgement and the return of $114,400 to investors in one suspect fund. The agreement also includes $15,000 in penalties and $10,000 in costs.
The three organizations have permanently been banned from trading, although Gauthier will be eligible to resume that activity after 10 years.
While selling securities, the parties misled potential investors; more specifically, Gentree failed to comply with its obligations around portfolio management, record keeping and capital requirement.
Between December 2004 and May 31, 2011, Gauthier and Gentree sold common shares, warrants, and preferred shares of Gentree for approximately $1,785,950.62 to about 60 Ontario investors, not all of whom qualified as accredited investors or met other applicable prospectus exemptions.
In fact, in the months prior to its suspension as a portfolio manager, Gentree’s portfolio management responsibilities were not being properly discharged or supervised by Gentree and Gauthier, the OSC finds.
Gentree violated the know your client and suitability obligations, in part by failing to meet with clients and to ensure that sufficient information was on hand when making or approving all trades. It also did not maintain written records of trade instructions and failed to maintain evidence of portfolio oversight, thereby failing to meet the general record requirements.