Regulator orders founders to pay $2 million penalty each and bans them for life
A group of insurance companies operating in British Columbia, Ontario, and Alberta, have been ordered to pay $32.8 million by the British Columbia Securities Commission (BCSC).
FS Financial Strategies and six other companies that comprised the FS Group, were accused by the regulator of misrepresentations to hundreds of investors.
The group began with a single office in Vancouver, modelled as a café, but expanded to 12 offices across three provinces, with 114 employees.
FS Financial Strategies sold securities (as units of 3i capital) promising returns of 8%. Other companies in the group, mostly involved in insurance, offered unsecured loans with annual interest promised of 10-12%.
The FS Group sold $29 million of securities without a prospectus and some of the group’s companies also sold $32 million of securities without being registered to trade in securities.
"Investors were harmed when they invested in FS Group without knowing facts that they ought to have in order to make informed investment decisions," the BCSC panel wrote. It said that it is unlikely investors will be paid what they are owed.
Lifetime bans
Three of the FS Group’s founders have been banned from ever participating in the BC investment markets.
Aik Guan "Frankie" Lim and Scott Thomas Low were also ordered to pay $2 million each.
In addition, the panel ordered the companies' former general manager, Darrell Wayne Wiebe, to pay $75,000 and banned him from BC's investment markets for at least 10 years.
Lim and Low sold $29 million of securities in violation of a 2014 legal commitment to the BCSC, in which they promised not to trade or distribute securities until FS Financial Strategies had filed exempt distribution reports, provided documentation for the prospectus exemptions, and refunded all loans from investors who didn't qualify for the exemptions.
"The seriousness of the misconduct was magnified by the significant amount of money and large number of investors involved, and the duration of the misconduct," the BCSC panel wrote.
Lim, Low and all seven companies that make up the FS Group – FS Financial Strategies Inc., FS Financial Strategies Services Inc., 3i Capital ClearPath Limited Partnership, FS Financial Services Inc., FS Financial Services (Alberta) Inc., Verico FS Capital Inc. and FS Financial Systems Inc. – are permanently prohibited from:
- Trading in or purchasing any securities or exchange contracts, or relying on exemptions in the Securities Act
- Becoming or acting as a registrant or promoter
- Acting in a management or consultative capacity in connection with the securities market
- Engaging in investor relations activities.
