The Ontario Securities Commission (OSC) will hold a hearing next week to consider a settlement with the former head of defunct fund manager Crystal Wealth Management System Ltd. concerning allegations of fraud and other misconduct, the regulator announced on Friday.
The June 13 hearing will consider a possible settlement with Clayton Smith, the former ultimate designated person and chief compliance officer at the Burlington, Ont.-based company.
The terms of the settlement will only be revealed if the deal is approved.
Smith “engaged in fraud, and breached his duty to act fairly, honestly and in good faith with clients, while directing the affairs,” of Crystal Wealth, according to the OSC’s statement of allegations.
“Smith, Crystal Wealth and Smith’s holding companies engaged in fraud involving two Crystal Wealth Funds – Crystal Wealth Mortgage Strategy and Crystal Wealth Media Strategy. Smith caused monies to be advanced from the mortgage and media funds, purportedly in connection with the purchase of investments for the funds. In fact, at Smith’s direction, certain of the monies were transferred directly to Smith’s holding company,” the statement adds.
In addition, Smith received payments from an entity that sold investments to one of the funds, without addressing, or disclosing, the conflict. In doing so, the firm and Smith breached their duties to their clients; and that he breached his supervisory obligations, the OSC alleges.
The OSC’s allegations have not been proven.
The firms were put into receivership in April 2017.