Three recent settlement agreements highlight the need for non-Canadian individuals and entities to obtain Canadian legal advice prior to undertaking trading, advising or referral activities with Canadian residents.
- In a February 2015 settlement agreement with the British Columbia Securities Commission (BCSC), Sharon Downing (Downing), a resident of the United States, acknowledged that she engaged in an illegal distribution of securities by acting as a “finder” for a group of companies (the Issuers).
- Downing introduced three Canadian investors to the Issuers and received US$3,231 in commissions.
- Downing agreed to pay to the BCSC a settlement amount equal to the money she earned in commissions. In the settlement agreement it is noted that Downing invested (and lost) $60,000 of her own money with the Issuers – in agreeing to the relatively nominal settlement payment, it is likely that the BCSC took that fact into account.
- Downing was also prohibited, for a period of three years, from (i) subject to certain limited exceptions, trading in securities, (ii) becoming or acting as a promoter or registrant; (iii) acting in a management or consultative capacity in connection with the securities market; and (iv) engaging in investor relations activities.
Bank Gutenberg Settlement
- In a September 2014 settlement agreement with the BCSC, Bank Gutenberg AG (Gutenberg), a Swiss private bank, admitted that it traded securities on behalf of British Columbia residents without being registered to do so.
- Gutenberg solicited trades of securities through its website, where Gutenberg held itself out as being in the business of trading and advising in securities, without (i) prominently displaying a disclaimer that identified the foreign jurisdictions in which the offering or solicitation is qualified to be made; or (ii) taking all reasonable precautions not to sell to residents of British Columbia.
- Gutenberg also traded in securities of British Columbia issuers on behalf of two British Columbia residents without being registered to do so or taking all reasonable precautions not to allow British Columbia residents to engage in any act in furtherance of a trade through Gutenberg.
- Gutenberg agreed to pay a settlement amount of $850,000 and was permanently banned from trading or engaging in any investor relations activities in British Columbia.
Bank Leumi Settlement
- In a March 2014 settlement agreement with the Ontario Securities Commission (OSC), Bank Leumi Le Israel B.M. (Leumi), an Israeli commercial bank with a representative office in Ontario, admitted that it opened accounts for Ontario residents and engaged in trading and advising activities in Ontario without registration or reliance on a valid exemption.
- The OSC did not challenge Leumi’s assertion that it acted in good faith at all material times and simply did not turn its attention to the fact that such trading and advising could be construed as a breach of Ontario securities law. The OSC acknowledged that it was not aware of any harm caused to any Ontario resident by Leumi and that it had not received any complaints regarding Leumi’s dealings with Ontario residents.
- Leumi agreed to pay a settlement amount of $500,000 and to rely on a registration exemption when dealing with Ontario clients on a going-forward basis.