B.C. investors to partially recoup losses from fraud

Investors defrauded by a former mutual fund salesperson will get some of their money back.

The British Columbia Securities Commission (BCSC) has obtained money from the sale of property belonging to David Michael Michaels, as well as a cash payment from Michaels, the BCSC said Thursday in a release.

In 2014 a BCSC panel found that Michaels committed fraud against more than 480 investors. He illegally and fraudulently advised clients to purchase high-risk, prospectus-exempt securities, advising clients to borrow against their homes to make the purchases.

Michaels was paid $5.8 million in fees and commissions, and at least $40 million of the $65 million his clients invested was lost. The panel banned him from the securities industry and ordered him to pay more than $23 million in fines. When Michaels didn’t pay, the BCSC started two lawsuits, relating to property in Hawaii and Victoria, B.C.

Michaels settled the lawsuits with the BCSC in June 2018, agreeing to hand over his Hawaii property and to pay $50,000. The Hawaii property was sold in December 2018, and the money given to the court-appointed receiver, Grant Thornton Limited.

Grant Thornton holds about $1.1 million from Michaels to return to investors—about 20% of the net amount Michaels obtained from the fraud. Each investor will receive a pro-rated share of this amount (minus the receiver’s fee) based on the money each lost, the release says. The receiver has sent a notice explaining the claims process to investors, most of whom are seniors living in or around Victoria.

The release also says the payments won’t affect the BCSC’s ability to continue to collect against Michaels’ outstanding sanctions.

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.