The following exert is taken from an article written by David Baines who was a former reporter for the Vancouver Sun, many of his articles were regarding fraud. I cannot comment on all of the stories Mr. Baines has written as I have not seen them however perhaps now no longer with the Sun Mr. Baines feels he is more free too tell the story as it is. We know how the Vancouver Sun and the Province newspapers are complicit in hiding the many crimes of our governments so the truth could never be fully told. The truth comes complete with BCSCs' negligence and/or its involvement in criminal conspiracies in many cases. Thank you Mr. Baines for going a little deeper on the BCSC, we hope you continue to dig, as we know there's a lot of dirt.
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BCSC's two luckiest ex-brokers avoid penalty
2016-12-05 16:02 ET - Street Wire
by David Baines
"Media outlets are under heavy financial pressure these days. Editorial staff and research resources have been cut to the bone. This is good for the BC Securities Commission, especially when it comes to enforcement matters. Reporters, for the most part, have been reduced to re-writing the commission's press releases, which often portray enforcement actions as regulatory triumphs when they might more accurately be described as regulatory failures.
The problem is amplified when it comes to settlement agreements. Settlements are negotiated in lieu of hearings, thereby depriving investors of a full airing of all the facts of the case. Also, settlements usually involve a lot of horse-trading. To expedite a settlement, the BCSC may water down the allegations, soften the wording, and reduce the sanctions. Key elements of the narrative are often removed with no explanation. That makes it difficult if not impossible to assess whether investors have been well served, or short-changed.
This is certainly the case with the settlement agreement that recently-appointed BCSC executive director Peter Brady concluded on Nov. 3 with Verdmont Capital SA, a Panamanian brokerage firm that admitted to trading for more than 100 BC residents without being registered in BC.
Although this sounds like a technical breach, it is not. Verdmont's breach enabled those clients to trade millions of dollars worth of penny stock behind the veil of Panamanian confidentiality laws. Subsequent investigations revealed that two of those clients were Vancouver brokers who went to great lengths to hide their accounts from their employers. Another was a North Vancouver promoter who had already been banned from trading stock in BC. The others have not been identified, but it's a fair bet they weren't dealing in Panama because of the weather.
More disturbing is the likelihood that Verdmont is just the tip of the offshore iceberg. Lang Evans, who heads the commission's special investigations unit, estimated in an earlier interview with The Vancouver Sun that hundreds, perhaps even thousands, of BC residents have offshore accounts, and in an interview with Business in Vancouver, he said these accounts are "very, very difficult to find" because of offshore secrecy provisions. "We can't regulate what we can't see," he said.
While it is clear that illicit offshore trading is a serious threat to investors and, more broadly, to the integrity of the securities market, it is not at all clear that Brady treated the Verdmont case with commensurate gravity. After his predecessor, Paul Bourque, initially cited the two men who founded and directed the firm's operations, Brady turned around and gave them a free pass. He negotiated a $350,000 fine, but that was less than one quarter of the fees and commissions the firm allegedly made from its illicit trades. He got the firm to agree to a permanent ban in BC, but that was meaningless as it was already in liquidation. And he permitted the firm to explain away its transgression as a legal oversight when the evidence suggests a deliberate breach.
To try to make sense of all this, Stockwatch asked Brady for an interview, but he refused all requests. Instead, he funneled all responses through the commission's director of communications and education, Pamela McDonald. Not surprisingly, the emails contain a lot of reassuring words, but few meaningful answers:
"The executive director settles matters when it's in the public interest to do so. In this case, we obtained permanent orders against Verdmont and collected a substantial sanction. Verdmont is no longer operating in BC. This sends a strong message about offshore trading activities in BC's capital markets," McDonald stated in one of her email responses.
To be fair, once a settlement agreement is negotiated, that document is presumed to speak for itself. That limits what Brady can say, but with large gaps in the narrative, it leaves a lingering question: how do we know the settlement is appropriate in the circumstances?
Verdmont was established in 2005 by two former Vancouver brokers, Glynn David Fisher and Taylor Kennedy Housser. Both are well acquainted with Howe Street. During the 1990s, Fisher worked at Georgia Pacific Securities Corp. and Housser at Canaccord Capital Corp.
Operating from Panama City, Verdmont offered worldwide securities and investment management services. It posted restrictions on its website against dealing with US residents, but not with Canadian residents. It frequently brokered private placements for TSX Venture Exchange-listed issuers and became a prolific trader of companies listed on the unruly OTC Bulletin Board and pink sheets in the United States, the sort of stocks that tend to attract regulatory attention. Indeed, it wasn't long before the U.S. Securities and Exchange Commission came calling.
In February 2015, the SEC filed a civil complaint in the Southern District of New York alleging that, during 2012 and 2013, Verdmont and four other brokerage firms -- Cayman-Islands based Caledonian Bank Ltd. and Caledonian Securities Ltd., and Belize-based Clear Water Securities Inc. and Legacy Global Markets SA -- sold stock in four essentially worthless pink sheets companies: Swingplane Ventures Inc., Goff Corp., Norstra Energy Inc. and Xumanii Inc. without those shares being properly registered.
This also sounds like a technical offence, but it is not. According to the SEC complaint, the issuing companies filed registration statements purporting to register the sale of securities to investors in Ireland, Norway, Panama and other far-flung countries when, in fact, the issuers or their affiliates maintained control of the stock certificates. This was the foundation upon which the whole scheme was constructed.
According to the complaint, once the sham offerings had been completed, the issuing companies or their affiliates directed the transfer of stock certificates from the nominee investors through various offshore entities to the brokerage firms. Then in classic pump-and-dump style, the issuers or their affiliates ramped up the promotion and the brokerage firms sold the stock into the market, generating $75 million US in gross proceeds for their clients. Within months, the shares lost virtually all their value, leaving public investors counting their losses.
Neither Fisher nor Housser were named as defendants in the SEC action, and it's not clear the SEC will get the opportunity to prove its allegations against the brokerage firms. The Caledonia entities settled the matter without admitting any fault and agreed to pay a $25-million US penalty, which the SEC waived because the firm is insolvent. Verdmont's attorney recently applied to withdraw from the case because the firm is insolvent and unable to pay its legal bills. The two remaining defendants, Clear Water Securities and Legacy Global Markets, are out of business and appear to have ignored the matter. So at this juncture, the SEC has not established that any of the brokerage firms committed any offences, but it is clear that, wittingly or unwittingly, they all played key roles in a well-orchestrated and very profitable pump-and-dump scheme..."
David Baines full Story can be seen at the source posted below..
ADDENDUM
The original notice of hearing against Verdmont, Fisher and Housser was signed in November 2015 by Brady's predecessor, Paul Bourque. He had served as the BCSC's executive director since April 2010, but never took up permanent residency in BC. Instead he commuted from his Toronto home.
In March 2012, Bourque fired Martin Eady, the commission's director of corporate finance, "without cause." It was an expensive dismissal. The commission was obliged to pay $398,342 in severance.
In September 2012, Bourque announced that Brady, who had previously worked as enforcement counsel at the commission, would replace Eady as corporate finance director. BCSC staff began speculating that Bourque was grooming Brady to become executive director, a prophecy that would soon come true.
At the same time he announced Brady's appointment, Bourque announced that former Crown prosecutor Teresa Mitchell-Banks would replace Lang Evans as enforcement director. (Evans had stepped aside to manage the BCSC's new special investigations unit, which was to focus on illicit offshore securities dealings.) Although Bourque introduced Mitchell-Banks with much fanfare, he quietly fired her "without cause" just three years later, in November 2015. It was another expensive dismissal. The commission paid her $416,858 in severance.
In February 2016, Bourque announced that Brady would replace Mitchell-Banks as enforcement director, but he wouldn't stay there for long. In June 2016, Bourque resigned as executive director to become head of the Toronto-based Investment Funds Institute of Canada (IFIC) and two months later BCSC chairman Brenda Leong announced Brady would replace him.
Bourque's new employer, IFIC, represents the mutual fund industry, a large and highly controversial segment of the securities industry. As president and CEO, Bourque has already been lobbying the provincial commissions including the BCSC - against certain mutual fund reforms proposed by the Canadian Securities Administrators, the umbrella organization for the provincial commissions. The fact that Bourque, just weeks after leaving the BCSC, is now lobbying his former colleagues at the BCSC, raises potential conflicts of interest. Precisely for this reason, the SEC has mandated a one-year "cooling off" period for senior staff who are contemplating such moves, but the BCSC has no such restrictions.
© 2016 Canjex Publishing Ltd. All rights reserved.
More to come..
Christopher Burke
bk1092003@yahoo.ca
250 807 7870
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