A former mutual fund rep has been banned and ordered to pay over $450,000 in monetary sanctions for engaging in outside business activity that turned out to be a fraud, which saw investors lose $9.8 million.
Following a hearing, a panel of the Canadian Investment Regulatory Organization (CIRO) ordered that Louis Josh Lieff, a former rep with Quadrus Investment Services Ltd. in Concord, Ont., is permanently banned from the industry. He’s also been ordered to pay $238,073 in disgorgement, a $200,000 fine and $15,000 in costs.
The sanctions were imposed in a case where Lieff admitted to violating securities rules by engaging in outside business activity that wasn’t disclosed to his dealer, and engaging in securities-related business outside his dealer. The contraventions stemmed from an investment scheme to buy and resell used vehicles that turned out to be an apparent Ponzi scheme.
According to an agreed statement of facts, between January and August 2021, Lieff recommended and facilitated investments in a scheme that raised $21.5 million from investors — ostensibly to acquire used vehicles below market value from rental agencies and to resell them for a profit at a time when the prices for used vehicles was soaring.
“Investors would provide short-term loans to a third-party business for the purchase of used vehicles and receive an agreed upon return upon the sale of the vehicles,” the panel’s decision said.
For several months, the scheme paid returns to investors, but it soon collapsed — and the operator of the scheme later admitted that investors’ money wasn’t used to acquire used vehicles as promised. In October 2023, he pleaded guilty to three counts of fraud over $5,000.
Ultimately, investors (including Lieff) collectively lost $9.8 million.
According to the panel, there’s no evidence that Lieff “had any knowledge of or involvement in the fraudulent conduct.” It also noted that he lost $139,250 of his own money in the scheme.
In ongoing civil litigation, Lieff and several other investors are suing the alleged perpetrators of the scheme. And in 2022, the Ontario Superior Court of Justice granted an injunction freezing the defendants’ assets in that case.
In the meantime, for his violations of CIRO’s rules, enforcement staff sought sanctions that include a permanent ban, disgorgement of $238,073 — representing the commissions that Lieff generated from the scheme — a fine of $300,000 and costs of $15,000.
While he didn’t oppose the proposed ban, Lieff argued that he couldn’t afford to pay any monetary sanctions.
Ultimately, the panel ordered the sanctions requested by CIRO staff, but ruled that a $200,000 fine was large enough to, “… send the message that there will be serious financial consequences to serious misconduct of this nature and will achieve the objectives of specific and general deterrence.”
It also noted that Lieff accepted responsibility for his misconduct, cooperated with CIRO’s investigation and is “genuinely remorseful for his misconduct and the harm it has caused.”