Weekly Wrap: The Regulator Beat

Weekly Wrap: The Regulator Beat

Weekly Wrap: The Regulator Beat Toronto consultant to pay SEC $6M for alleged take-over scheme
The U.S. Securities and Exchange Commission (SEC) has charged a Toronto-based consultant and three associates with conducting illegal reverse takeovers to list China-based companies on the U.S. markets to manipulate trading and reap millions of dollars in profits, the regulator announced Monday.
S. Paul Kelley has agreed to pay US$6 million amid allegations that the accused acquired controlling interests over two U.S. shell companies to orchestrate reverse mergers with the Chinese firms, China Auto Logistics Inc. and Guanwei Recycling Corp. The SEC says a U.S. stock promoter, Shawn Becker, and others, were hired to tout the two companies' unregistered stock to investors. At least nine Hong Kong-based companies were created to hold their shares and conceal the accused’s identities.
Kelley and two Americans, Roger Lockhart and Robert Agriogianis, have agreed to settle the charges which include: violations of antifraud, securities registration, and securities ownership reporting provisions; disgorgement of ill-gotten gains, prejudgment interest and financial penalties; and penny stock bars.
In addition to millions of dollars in fines, Kelley will be barred from the securities industry and from participating in penny stock offerings. Lockhart will pay more than $3 million and is banned from penny stock dealing. While, Agriogianis has entered cooperation agreement including a penny stock ban, and financial sanctions to be determined in court.
The SEC is still pursuing litigation against Becker and another Canadian resident, George Tazbaz. Allegations have yet to be proven in court.

BCSC orders hearing in alleged Inverlake Property fraud case
The British Columbia Securities Commission (BCSC) ordered a hearing Thursday into the alleged fraud and distribution of securities by business owner Alfredo Miguel (Michael) Yong in two multimillion-dollar land deals.
The BCSC allege that Yong promoted and sold shares in his business Inverlake Property Investment Group Inc. - which gave investors ownership interest based on one share per acre of land - between March and May 2008.
At least 28 investors, mainly B.C. residents, and corporate entities paid an initial $19,500 per share
. According to the commission, Yong purchased the land from the owner for about $3.2 million, but Yong sold the price-per-acre for almost double, telling investors he paid $6.2 million for the land.
The commission staff says Yong perpetrated fraud by inflating the share purchase price and not telling investors that he stopped making mortgage payments and consented to a foreclosure application, which returned the land to the original owner in January.
Yong is also accused of promoting and selling shares to at least 19 investors and corporate entities at approximately $53,000 per share for ownership interest in the Wheatland Business Park Ltd. - another of Yong's businesses - between July and August 2008. He told investors the land would be developed and sold for profit.
In both cases, neither company filed a prospectus, and there were no exemption prospectus requirements. In the Inverlake case, approximately 24 investors purchased 46 shares for $949,650, while 15 investors purchased 20 shares for $1,090,470 in the WBP case.

OSC cites a need for greater fee disclosure by fund managers
The Ontario Securities Commission (OSC) released a notice Thursday suggesting that fund managers could do a better job of revealing fee details and expenses charged.
The notice, Report on Staff's Continuous Disclosure Review of the Fees and Expenses Disclosure by Investment Funds, recommends clearly disclosing fees and expenses to increase transparency and clarity on what services are paid out of the management fees, which services are charged as operating expense and how all fees and expenses are allocated.
"Investors should not have to refer to the management or trust agreement to determine whether a particular cost is covered by management fees or charged as a separate operating expense to the funds," it says.
The OSC also noted that firms use generic phrasing in their disclosure, forcing staff to refer trust or management agreements for a more detailed explanation.

OSC charges Toronto man with unregistered trading
The Ontario Securities Commission (OSC) has charged a Toronto man, Daniel Tiffin, and his company, Tiffin Financial Corp. (TFC), for alleged trading without registration.
Tiffin faces one count of trading without registration, one count of trading in securities without a prospectus, and one count of trading in securities when they were prohibited from trading by an OSC cease trade order that was issued on December 22, 2009.
Tiffin is scheduled to appear in court on June 10 in Newmarket, Ont. 
The accused has been banned from trading in securities.

MFDA fines ex-fund salesman $175K
an former mutual fund salesman has been fined $175,000 for misappropriating client funds, according to the Mutual Fund Dealers Association of Canada (MFDA).
Reginald Roskraft - while mutual fund salesman a sub-branch of Sterling Mutuals Inc.
in Barrie, Ont. - allegedly misappropriated $111,799 from three clients between 2009 and 2011, the MFDA says. Roskraft resigned from the firm in 2011. 
In all three cases, Roskraft convinced the clients to write cheques or take out advances on their credit cards to make payments that were to be invested by Roskraft on their behalf into Sterling accounts. The accused showed them screenshots of fake accounts that he said were theirs when they inquired about their investments.
Roskraft  - who has been permanently banned from conducting securities related business with an MFDA member - was also fined an additional $75,000 for failing to cooperate with the self-regulatory organization's investigation and hearing panel.

IIROC orders Vancouver advisor to pay $48K
The Investment Industry Regulatory Organization of Canada (IIROC) fined a Vancouver advisor $48,000 for allegedly recommending unsuitable investments and unauthorized discretionary trading. An investment advisor with Leede Financial Markets Inc., Catherine Jones, failed to properly ensure a margin account was appropriate for a client, engaged in discretionary trading and misrepresented unsolicited trades as solicited and used a personal email to contact the client, in 2009 and 2010, according to IIROC documents.
The accused has also been given a three-month suspension followed by one year of strict supervision. Jones - who is registered as a representative with Global Securities Corp. in Vancouver, must pay an additional $15,000 in costs.


Related Stories:

Weekly Wrap: The Regulator Beat

Weekly Wrap: The Regulator Beat