Maitland Capital allegedly operated a boiler room scheme from two locations in Toronto, says a notice of hearing and statement of allegations issued by the OSC on January 24, 2006.
The company raised approximately $5.5 million through the sale of its shares to approximately 1,200 investors across Canada and internationally.
OSC staff says Maitland hired salespersons to call investors and sell the shares, including several who were paid a commission ranging from 17% to 20% of the amounts paid for the purchases.
Not only Maitland Capital, but twelve of its employees were allegedly involved in the proceedings and/or scheme; Allen Grossman, Hanouch Ulfan, Leonard Waddingham, Ron Garner, Gord Valde, Marianne Hyacinthe, Dianna Cassidy, Ron Catone, Steven Lanys, Roger Mckenzie, Tom Mezinski, William Rouse and Jason Snow were all named in the reasons for decision released by the OSC.
After the January hearing, the commission ordered Maitland and its officers, directors, employees and/or agents in securities to cease all trading temporarily. The order was extended several times to stop all trading during the proceedings.
On May 19, 2006, the OSC also authorized a quasi-criminal proceeding under section 122 of the Act against Maitland, Grossman, president and director, and Ulfan, secretary-treasurer.
An Ontario judge found all three guilty on March 23, 2006, with both men sentenced o 21 months in jail and two years of probation. Maitland was fined $1 million.
Specifically, Judge Sparrow convicted all of the following offences:
- trading in securities of Maitland without registration contrary to subsections 25(1) and 122(1)(c) of the Act;
- trading in securities of Maitland without a prospectus contrary to subsections 53(1) and 122(1)(c) of the Act;
- giving prohibited undertakings as to the future value or price of the securities of Maitland with the intention of effecting trades contrary to subsections 38(2) and 122(1)(c) of the Act;
- making prohibited representations regarding the future listing of the securities of Maitland on a stock exchange contrary to subsections 38(3) and 122(1)(c) of the Act.
Ulfan was convicted of the offence of authorizing, permitting or acquiescing to the making of that misleading or untrue statement, contrary to subsection 122(3) of the Act.
Grossman testified he believed Maitland was exempt from the registration and prospectus requirements under the “accredited investor” exemption in National Instrument 45-501 – Prospectus and Registration Exemptions.
He claimed not to know what the term “accredited investor” meant, but Justice Sparrow rejected his claim of ignorance, finding it “inherently incredible” in light of his experience in the investment industry.
She ruled many of the investors didn’t qualify as “accredited investors”, and neither Grossman nor Ulfan had taken the steps to ascertain whether clients fell within the definition.
The OSC handed out a dozen sanctions, prohibiting the company and the two men from acquiring and trading securities. They had to resign all titles.
On February 15, 2012, Staff filed an agreed statement of facts between the OSC and Steven Lanys, who worked as a salesperson for Maitland. He admitted to trading without a registration exemption or a prospectus, and to making prohibited representations to Maitland investors.
Yesterday, the OSC imposed a three-year trading ban against Lanys, along with an order to pay disgorgement of $91,407.
Valde, Waddingham, Cassidy and Garner—all employees of Maitland—were also ordered to cease acquiring and trading by the OSC for a period of three years, with the exception that each of them will be permitted to trade securities for the account of their respective registered retirement savings plans.
There were ordered to disgorge the following amounts: $10,000 for Cassidy; $27,791.25 for Garner; $32,857.59 for Waddingham; and $12,307.50 for Valde.
The OSC says Tom Mezinski, another Maitland employee, allegedly traded without registration, with a prospectus, and made misleading representations to investors as well. Mezinski didn’t appear at the hearing, but still faces a sanctions hearing to determine his sanctions and costs.