The B.C. Securities Commission issued sanctions against four individuals that include trading bans and administrative penalties for their part in a mutual fund dealer’s sale of “speculative, illiquid and highly risky” securities to conservative clients.

In its decision, the BCSC imposed sanctions against Lindy Arnot, George Price, Donald Gordon-Carmichael and Leonard Friesen for their involvement in Canadian Global Investments Corp. and related companies. Danny Bilinski was a principal and the directing mind of the Canadian Global Financial group of companies, which included Canadian Global Investments, a Langley-based mutual fund dealer.

In January 2002, a commission panel ruled that the mutual fund dealer, its principals and some salespeople violated the “conflict of interest”, “fair dealing”, “know your client” and “suitability of investment” rules in selling speculative, illiquid and highly risky securities to clients. The high-risk securities included securities in a bowling alley development and an ostrich farm operation.

Almost 200 clients of the mutual fund dealer invested $20 million in the high-risk securities. Many of the clients were conservative investors and many lost most of the money they invested. Bilinski and his partner, Robert Lamblin, sold more than 80% of the securities. The commission found that their conduct violated the “fair dealing” rule and was particularly abusive because the securities sold were in companies in which they held an interest and participated in management.

The panel ruled that the dealer and its principals failed to establish and apply proper compliance and supervision procedures. They also failed to comply with conflict of interest rules in selling the high-risk securities.

Arnot is prohibited from becoming or acting as a director or officer of any issuer for at least one year. Price is barred from trading for five years and from acting as a director or officer of any issuer for at least five years and he must pay an administrative penalty of $20,000. Gordon-Carmichael is banned from trading for two years, and prohibited from becoming a registrant until he meets certain proficiency requirements. Friesen is banned from trading for two years and is prohibited from becoming a registrant for at least two years, he must also pay a $20,000 penalty.

The cease trade order imposed on Columbia Ostrich VCC securities will remain in effect. Bilinski and Lamblin could not appear before the commission for the submissions on sanctions because of medical reasons. The panel will reconvene at a later date to hear submissions from the pair and the companies that they controlled. Bilinski and Lamblin are no longer registrants and temporary orders banning them from trading in securities will remain in effect until a decision is made on their sanctions.

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