$130K fine, 15-year market ban for private lender who misled investors, BCSC rules
A panel of the B.C. Securities Commission has imposed a $130,000 fine on a Salmon Arm man and banned him from most investment activities for 15 years.
The penalties imposed on Donald Bergman stem from misrepresentations he made in three memorandums to investors in 2014 and 2015. The BCSC panel concluded last July that Bergman's conduct included misrepresentations and false or misleading statements he made to investors.
Bergman was the sole director of All Canadian Investment Corporation, a mortgage lender that provided loans to owners and developers of residential and commercial real estate.
Through the three misleading offering memorandums, the company raised $1.6 million from 56 investors, according to the panel's decision.
The panel found that the memorandums told investors the mortgages they were investing in would be registered and were the first or second mortgages on the properties in question.
However, the company did not register some of the mortgages and cancelled some of the registrations, according to the decision. Additionally, some of the mortgages ranked lower in priority than second, meaning that if the properties had been foreclosed on, other lenders would have been the first in line to recoup their losses.
"Dividends to ACIC investors dwindled in 2015 and stopped altogether in early 2017," the BCSC said in a news release announcing the sanctions decision this week.
"The company has been in the process of liquidation under a court-appointed monitor ever since. Losses for investors, many of whom are elderly, are estimated to be between 82 per cent and 96 per cent."
As punishment for this misconduct, the BCSC's executive director sought a 15-year market ban for Bergman and a $200,000 administrative penalty, as well as an additional $20,256 fine representing funds Bergman gained through his misconduct.
Bergman opposed the monetary penalties and argued for exemptions to the market ban to allow him to make investments in his own name.
"He said he had no assets and minimal income," the panel's decision on sanctions reads.
After weighing arguments from both sides, the panel decided to impose the 15-year trading ban with an exception allowing Bergman to trade securities in his own accounts through a registered dealer.
The panel also imposed an administrative penalty of $130,000, but declined to order the additional $20,256 fine, saying the executive director had failed to provide evidence linking that amount of monetary gain to Bergman's misconduct.
Additionally, Bergman's company, ACIC, is permanently banned from securities markets, a sanction the company did not oppose, according to the decision.
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