An action this week by the British Columbia Securities Commission shows why advisors and firms should have to share their registrations and qualifications to represent clients in this country.
In a settlement agreement with the BCSC, Bank Gutenberg AG, Gutenberg Management AG, and Gutenberg Group AG have admitted they traded securities on behalf of B.C. residents, contrary to the legal requirement to be registered.
The agreement states that from at least January 2010, Bank Gutenberg promoted itself through its website and by visits by bank employees to Vancouver as providing offshore securities brokerage services. It adds the website disclaimer identified no specific restrictions on dealing with residents of British Columbia.
In spite of steps by the respondents to comply with the registration requirement, says BCSC, staff identified at least two B.C. residents that had accounts with Bank Gutenberg in the names of offshore corporations they controlled. It adds these individuals provided instructions to Gutenberg Management employees, directly from B.C., to trade in B.C. reporting issuers listed on the TSX Venture Exchange through their Bank Gutenberg accounts.
Over the relevant period, the total volume of transactions (including sales and purchases) in the 16 Bank Gutenberg accounts in B.C. was approximately $327.8 million, says BCSC. BCSC staff identified two B.C. clients and suspect there may be more. However, they cannot confirm this fact because they say they cannot obtain access to Bank Gutenberg’s records.
Some, but not all, of the B.C.-based trading was for clients based in B.C, says BCSC staff, beyond the two BC clients already identified.
The agreement states that the respondents had additional B.C. connections, including Bank Gutenberg employing two former B.C. registrants with regulatory histories.
As part of the settlement agreement, the respondents have agreed that they breached securities laws regarding registration requirements. They have also agreed to pay $850,000 to the commission in respect of this matter, $50,000 of which represents the cost of the investigation.
All of the respondents have been permanently banned from trading in or purchasing securities, and from engaging in investor relations activities.
The BCSC has thanked the U.S. Securities and Exchange Commission, the RCMP, the Combined Forces Special Enforcement Unit – B.C., and the Swiss Financial Market Supervisory Authority for their assistance throughout this investigation.
View the settlement agreement.