Ex-advising rep admitted to placing at least 260 clients with nearly $1 million in collective investments in high-risk fund
The British Columbia Securities Commission (BCSC) has imposed a 15-year ban on a former discretionary portfolio manager who failed to properly asses if investments were suitable for his clients.
The ex-PM, Albert Alan Housego, was registered as an advising representative from 2014 to 2017, and managed four investment funds for Crystal Wealth Management System Limited, an Ontario-based corporation that was investigated by the Ontario Securities Commission for fraud involving two other funds. Crystal Wealth was registered in British Columbia as an exempt market dealer and a portfolio manager, according to the BCSC.
In a settlement agreement dated June 15, the regulator said Housego managed accounts for at least 487 clients on a discretionary basis. During the relevant period, he was the portfolio manager for four out of 15 proprietary funds operated by Crystal Wealth in British Columbia.
In November 2015, one of the funds, the Crystal Wealth Enlightened Factoring Fund, gave a $10-million advance to a prospective gold mining company that represented roughly 50% of its overall portfolio. The money was due to be repaid in November 2016, but the mine investment defaulted.
Rather than recognizing the loss, the Factoring Fund extended the term of the mine investment by one year. It was supposed to be insured by an $18-million performance bond whose effectivity period was from November 2016 to November 2021, which had Crystal Wealth as the named beneficiary.
However, the insurance was cancelled on November 28, 2016, which Housego did not know until afterward.
Because he knew about the mine investment’s roughly 50% weighted in the Factoring Fund’s portfolio, the fact that it had already defaulted once, and that the insurance was cancelled, the BCSC said Housego should have known it was high risk. Still, he placed at least 260 of his clients in the fund, representing collective investments of at least $985,000.
In another violation, Housego admitted that starting on August 12, 2016, he invested approximately $4.25 million from the Factoring Fund and another fund, the Crystal Wealth Enlightened Hedge Fund, in gold subscription agreements with a prospective mining company.
The gold subscription agreements, the regulator said, were presented to Housego in a meeting on August 8, 2016. He received some material regarding the gold agreements, which he spent one day reading.
“Housego did not perform any other due diligence on the Gold Agreements,” the BCSC said, emphasizing his shortfalls in looking into the company’s legal status, operating history, and potential risks and benefits to the funds that invest in the agreements, among other areas.
Even though he did not sufficiently understand the agreements, the BCSC said he placed at least 323 of his clients in the two funds that invested in them. Those investments totalled approximately $6.7 million.
As part of the settlement agreement, Housego has agreed to pay $150,000 to the BCSC. If he fails to repay the amount fully within 15 years, the ban will remain in place until he manages to do so.