The Alberta Court of Queen’s Bench has upheld an appeal from the Alberta Securities Commission (ASC), which sought to overturn a lower court ruling that purported loan agreements used in an investment scam were not securities. The court sided with the ASC, ruling that the agreements were securities and it ordered convictions against three men accused of violating securities law.
Earlier this year, a provincial court judge dismissed charges against three men who were accused on trading without registration and illegal distribution of securities, among other things, on the basis that the loan agreements they used to raise more than $1 million from investors did not qualify as securities. The ASC appealed that ruling, and the Alberta Court of Queen’s Bench has now found in favour of the regulator.
According to the ASC, the purported loan agreements in question were made between OCI Q Corp. and 24 investors, who were promised returns of between four and 200 times their money, in exchange for funds that would be used to “help a poor Filipino fisherman probate his late aunt’s massive estate, which was possibly worth billions of dollars. She had allegedly accumulated this wealth while in the employ of former Philippine dictator, Ferdinand Marcos.”
Those returns never materialized and the investors lost all of their money. Rand Tyler Stevenson, Brent Ray Derricott, and Robert Michael Smylski were subsequently charged with trading in the securities of OCI Q Corp. without registration or a prospectus. Smylski was also accused of breaching prior ASC orders prohibiting him from trading securities. And Stevenson and Derricott were accused of making misleading or untrue statements to investors.
At the trial, the judge in the case ruled that each of the loan agreements were separate and distinct private transactions between OCI Corp. and the lender and that they did not meet the definition of securities. However, Justice D.K. Miller found that the trial judge erred in ruling that the loan agreements should not be considered securities under the law.
In its decision upholding the ASC’s appeal, the court said that in applying any of the four definitions of what constitutes a security under Alberta securities law to the facts of the case “will reveal that the loan agreements are securities within the definition of the Securities Act. This is especially the case when one brings to the interpretive framework of securities legislation the fact that it exists to protect investors and the public and to ensure that investors are afforded a minimum level of material information in order to make their investment decision.”
The court ruled that “the provincial court judge erred in law in finding that the loan agreements were ‘private transactions’ and therefore do not fall within the definition of securities.” As a result, it ordered that the accused be convicted on several counts that they were acquitted of in the lower court.
The case was referred back to the provincial court on Dec. 1 to fix a date for sentencing in the case.