In a decision released Thursday, an Ontario Securities Commission panel found that three men and their associated companies breached securities laws with two schemes that raised more than US$15 million from 252 investors.
In its decision, the panel found Gordon Driver, Axcess Automation LLC and other companies (the Axcess companies), Steven M. Taylor, Berkshire Management Services Inc. and other companies (the Taylor companies), breached the Ontario Securities Act by committing a fraud upon investors, trading securities without being registered and trading securities without filing a prospectus with the OSC.
Reynold Mainse and World Class Communications Inc. traded securities without registration, but were not party to the fraud, the panel found.
The panel found that two schemes were operated. Both schemes were premised on Driver’s purported use of investors’ funds to trade E-mini S&P 500 futures using proprietary software to generate superior returns. In fact, of more than US$15 million received from investors by Driver, only about US$3.6 million was used to trade in E-mini S&P 500 futures, and Driver incurred a cumulative net loss of about US$3.5 million.
The panel found that despite this, Driver represented that the Axcess Investments were generating substantial returns, clearly knowing that his fraudulent acts would cause deprivation to investors.
The panel held that Taylor was aware of the fraudulent nature of his and Driver’s actions, and made false and misleading representations to investors and put their funds at significant risk.
As part of the schemes, about US$10 million was returned to investors. The panel found that even though not all investors suffered losses, their money was put at significant risk because most of it was diverted to pay Driver’s personal expenses, commissions, or returns to investors. In many cases, investors were paid with proceeds of investments made by subsequent investors.
The panel ordered the parties to appear before the panel on November 7, for a hearing regarding sanctions and costs.
Axcess Capital Advisors Inc. of Calgary is not associated with the events described in the above article.