BCSC panel issues split decision on sanctions

A British Columbia man and the companies he operated have been fined and temporarily banned from the markets by a regulatory panel — albeit in a split decision.

A B.C. Securities Commission (BCSC) hearing panel handed down the sanctions against Chien-Hua Liu (aka William Liu) and two companies he controlled, NuWealth Financial Group Inc. and CPFS Professional Financial Services Inc., after finding that they violated securities rules in referring investors to an exempt market dealer and an issuer.

Those referrals, which involved investors from B.C. and Hong Kong, resulted in approximately $6.5 million worth of securities purchases.

In 2018, the BCSC panel found that the referrals violated securities rules as they required Liu and the firms to be registered.

Now, the panel has ordered that Liu and NuWealth be banned for two years, and that CPFS be banned for one year.

It also ordered $100,000 in penalties ($40,000 from Liu and NuWealth each, and $20,000 against CPFS), and ordered that Liu and NuWealth disgorge the $326,063 in commissions that they generated from the referrals.

However, one of the panel members, BCSC vice chair Nigel Cave, disagreed with the decision to order disgorgement in the case.

In a dissenting opinion, he said that it would not be “in the public interest” to order disgorgement.

Cave said that, in this case, Liu and NuWealth didn’t generate commissions directly due to misconduct (although the commissions and the misconduct were related); that the commissions were disclosed to investors; and that there is some confusion in the regulatory guidance about whether these referrals require registration or not.

As a result, he said the misconduct should be addressed through market bans and other sanctions.

The majority of panel members disagreed, however, saying in their decision, “In the case of NuWealth and Liu, their misconduct was serious and harmful to investors. The [disgorgement] orders remove the commissions they received that were the incentive for their non-compliance. It would be contrary to the investor protection objectives … to permit Liu and NuWealth to retain the benefit of their misconduct.”

Staff

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