An Alberta Securities Commission (ASC) hearing panel has ordered a former financial planner to pay more than $3 million in sanctions, costs and disgorgement in connection with a fraudulent investment scheme.
Following a sanctions hearing, the panel ordered Vernon Ray Fauth, a former planner, fund rep and insurance salesman from Calgary, to be permanently banned after it found that he violated securities rules. Fauth was ordered to pay almost $2.6 million in disgorgement, a $400,000 penalty and $250,000 in costs.
In 2018, the panel found that Fauth breached securities rules by selling investments in a company he founded, Espoir Capital Corp., without registration (the sales took place from 2010 to 2012 and he hadn’t been registered since 2003), making misrepresentations to investors, and perpetrating a fraud on investors.
It also noted that he made payments to some investors with money raised from others, “in the manner of a Ponzi scheme.”
“He deliberately misled those he knew were in search of a secure way to generate a return on their money, exposing them to unanticipated risk despite the fact that he knew some investors were using the life savings they had set aside for their retirement,” the panel said in its decision.
“The impact on many investors — both financial and emotional — was devastating, especially for those who were retired or close to retirement, and those who lost their life savings,” it added.
Fauth made no formal admissions, the ASC decision said, though it noted his counsel made “some concession […] that misrepresentations had been made and the actus reus of fraud had been established.”
Fauth answered staff questions and provided documentation during the investigation.