A regulatory hearing panel has ordered that an Alberta man be fined and banned for five years after finding that he violated an earlier cease trade order (CTO) against him.
The Alberta Securities Commission (ASC) announced that a hearing panel ruled that Nicholas John Felgate must pay a $50,000 administrative penalty plus $41,800 in costs for breaching Alberta securities laws.
Felgate was also banned for five years, but the panel declined to order the $300,000 in disgorgement sought by ASC enforcement staff.
The sanctions follow an October 2020 decision, which found that Felgate failed to comply with a CTO when he took $300,000 from two investors in what were termed as lending agreements.
ASC staff alleged, and the panel agreed, that the arrangements were actually securities. And the panel found that by trading in those securities, Felgate violated a cease trade order that was first issued in March 2018 for unregistered trading and was extended twice.
According to the penalty decision, Felgate accepted the panel’s finding that he violated the CTO but maintained that the agreements were not securities (and stated that finding is being appealed).
On sanctions, he argued that the penalty should be $10,000 with a market ban of four to five years, and no disgorgement ordered.
In setting sanctions, the panel concluded that “Felgate’s misconduct was serious,” and said that the investors may suffer harm as a result. However, the panel was also convinced by his argument that disgorgement was not appropriate in the case.
Among other things, the panel noted that the money isn’t due to be paid back until May 2022, and that there was no evidence that the investors were unhappy with Felagte’s use of their money.
“The request for disgorgement is premised solely on Felgate’s breach of the interim order; the allegation of fraud underlying the interim order has not yet been adjudicated,” the panel said. “In the circumstances, we conclude that ordering disgorgement is not in the public interest for Felgate’s breach of the interim order.”