The Ontario Securities Commission has imposed sanctions against a group of companies and their executives and directors for distributing securities without being registered.
In a settlement agreement released on Monday, the OSC outlined penalties against Phoenix Credit Risk Management Consulting Inc., Phoenix Pension Services Inc., Phoenix Capital Resources Inc., Rathore & Associates Asset Management Ltd. and 2195043 Ontario Inc.
Also facing sanctions are Jawad Rathore and Vincenzo Petrozza, officers and directors of the companies, and Omar Maloney, an employee of one of the companies. None of the respondents were registered with the OSC.
The OSC found that between January 2007 and June 2009, through the companies, Rathore and Maloney recommended that clients purchase shares of two companies: Great Pacific International Inc. and OSE Corp. Both companies were reporting issuers listed on the Toronto Stock Exchange, carrying on business as oil and gas companies.
Rathore and Maloney told many of the investors that the price of the shares would increase in the future. They also helped facilitate the purchase of the shares by the Pheonix investors in many cases, by participating in three-way telephone calls with the investor and a representative of the investor’s investment dealer.
In cases where an investor did not have a trading account at a registered investment dealer, Rathore and Maloney would in some cases help them open one.
Altogether, clients of Phoenix purchased approximately 11 million GPI shares and approximately 4.9 million OSE shares, worth a total of approximately $16.5 million.
Under an agreement with the president of GPI, who owned and controlled shares of both GPI and OSE, some of the respondents received compensation for referring investors to the companies. Specifically, approximately $3 million in compensation was paid to
Phoenix Pension, R&A and 2195043 for the sale of GPI and OSE shares to the Phoenix investors.
The respondents did not disclose to the investors that they received this compensation.
The OSC found that the respondents’ activities constituted trading in securities without registration. In addition, it says that in their roles as directors and officers, Rathore and Petrozza authorized, permitted or acquiesced in the non-compliance of the companies with Ontario securities law.
The securities commission has ordered Rathore, Petrozza and Maloney to jointly pay an administrative penalty of $250,000 and costs of $100,000.
The individuals are also prohibited from trading in or acquiring securities for 15 years, and are prohibited from acting as directors or officers of any registrant, investment fund manager or issuer for 15 years, subject to certain conditions.
The OSC also ordered the companies to disgorge $2.7 million and to cease trading in and acquiring securities for 15 years.