An Alberta court has ruled that a former investment advisor is liable for recommending that a former client invest $2 million into his own business venture, which failed.
The Alberta Court of Queen’s Bench handed down the ruling, which found that the former advisor, Chun Him Laurence Lee, breached his duties to a former client, Agar Corporation Ltd. (ACL), when Lee recommended that the company invest $2 million in his new firm, Canada Monetary Corp. (CMC).
According to the decision, Lee was originally ACL’s investment advisor at HSBC. Lee left HSBC in 2010 and later incorporated CMC to invest in early-stage companies. CMC ultimately failed and ceased operations in 2014.
ACL subsequently sued Lee, arguing that it invested $2 million in CMC via private placement without being made aware that Lee was chief executive officer of the company. ACL said it was not made aware of the risks associated with the investment and argued that Lee breached his fiduciary duty to ACL.
The court’s ruling indicated that Lee argued that his advice wasn’t given as an advisor, that the investment wasn’t unsuitable and that ACL was fully informed of the risks and Lee’s role with CMC.
Ultimately, the court sided with the plaintiff in the case, ruling that the advice Lee gave ACL constituted investment advice. The court also found that Lee “breached the fiduciary duties he owed to ACL as its investment advisor” and that he was “liable to ACL in negligence.”
The court ruled that ACL is entitled to $2.1 million in damages, which would return the company “to the position it would have been had Mr. Lee’s false representations not been made or had he not breached his fiduciary duties.”
The court also noted that the failure of CMC had “devastating effect on Mr. Lee, who personally invested almost half of his life savings in CMC.”