The Ontario Securities Commission (OSC) has found that a former investment advisor defrauded investors by trading and advising without registration, and that his company traded without issuing a prospectus.
In a decision released July 19, an OSC hearing panel found that Shaun McErlean, a former advisor, and his company, Securus Capital Inc., breached securities laws in connection with raising approximately $14 million from eight offshore investors.
The OSC reports that the panel found that McErlean told investors that their money would be segregated in a separate account and used as collateral for investments in guaranteed, high-return trading. Instead, the funds were used to pay personal expenses, to repay previous investors and to invest in private companies in which he or his family members had a financial interest, the OSC says.
Ultimately the panel found that McErlean’s dishonest acts caused investors’ funds to be placed at risk or lost entirely. It ordered a hearing for August 13 to set a date for a future hearing on sanctions.
According to the decision, McErlean, who represented himself at the OSC hearing, largely tried to blame others. “His explanation for his seemingly deceitful actions were either his signature was forged, someone changed documents without his knowledge, or his inability to pay was someone else’s fault,” it notes.
“At the beginning of his testimony he told the panel he was going to include a lot of information which might not seem relevant. He also assured the panel that at some point it would become relevant. He certainly carried through with his first assurance; he was less successful with his second,” the panel added.
The decision notes that McErlean was previously licensed as a rep with a mutual fund dealer, and later as a registered rep with CIBC Wood Gundy. In January 2009, the firm suspended him for not disclosing an outside business activity and for what they deemed to be irregular banking activities.
He was later disciplined by the Investment Industry Regulatory Organization of Canada (IIROC) for personally compensating two of his clients for losses in their accounts without knowledge or approval of his firm, unauthorized discretionary trading, and providing clients with falsified documents. As a result of the IIROC hearing, he was banned for five years, subject to conditions upon future registration, fined $75,000, and charged $15,000 in costs. He has filed a request for the OSC to review IIROC’s decision.