The B.C. Securities Commission’s (BCSC) executive director has issued temporary cease-trade order (CTO) against 13 people and nine companies being investigated in connection with possible securities violations.
According to the order, which was issued to give the regulator’s staff time to complete an ongoing investigation, FS Financial Strategies Inc. and various affiliated companies have raised approximately $36 million from more that 300 investors without filing a prospectus; and that at least some of the investors don’t qualify for prospectus exemptions.
Moreover, the BCSC also reports that its investigation has found that FS Financial Strategies and its affiliated companies did not disclose their precarious financial situation to investors and that the respondents are using money from new investors to make payments to other investors.
In December 2014, several of the respondents agreed to an undertaking to cease trading and distributing securities until they had filed required reports, provided documentation about exemptions and refunded loans from investors who did not qualify for an exemption, the BCSC states.
“These steps have not been completed and the undertakings remain in effect,” the BCSC says. Instead, the regulator alleges that they have continued raising money from investors through newly incorporated companies.
As a result, the BCSC has issued a temporary order prohibiting all the respondents from trading securities; cease-traded all of the FS group of companies’ securities; and issued freeze orders against 11 bank accounts.
“A temporary order is required to stop the respondents from raising money while commission staff complete their investigation,” the BCSC says in its order. “The length of time required to hold a hearing into possible misconduct by the respondents could be prejudicial to the public interest.”
The BCSC will hold a hearing on Feb. 17 to seek an extension to those orders.