An Ontario court has certified a class action against former advisor Brian Verbeek of Nepean, Ont. and several companies, including Toronto-based Dundee Securities Corp. The decision lists about 670 possible class members who allege losses of about $17 million.
The plaintiffs allege that Verbeek, while a registered representative with Fortune Financial Corp. and Buckingham Securities Corp. between 1998 and 2001, told clients they could access their RRSPs on a tax-free basis. The claim alleges that Verbeek advised clients to access those funds by using them to purchase the shares of certain Canadian controlled private corporations (CCPC).
The clients were advised that these shares were qualified investments for locked-in RRSPs. The clients then received loans that were backed by the CPCC shares. Those shares later turned out to be worthless and the clients sustained punishing losses. The plaintiffs also allege that the CCPC shares were not qualified investments and that the loans were illegal.
The action alleges liability for breach of contract, negligence and breach of fiduciary duty. One of the defendants’ main arguments is that the situations of each class member lack the kind of close similarity required for a class action. But Justice P.D. Lauwers of the Ontario Superior Court concluded that class actions do not require the “degree of hyper-commonality” that the defendants argued was required.
In a note on the case, Michael Beeforth, a lawyer with Dentons LLP in Toronto, referred to the court’s conclusion that “it is well settled that courts must not set the bar too high on the common issues test. Justice Lauwers approved of the plaintiffs’ position that ‘the investment scheme was a scam and entirely inappropriate for any investor’, which he found to be a plausible assertion of the evidence.”
Beeworth notes that the class action includes two sub-classes, the “Dundee subclass” which includes all class members who worked with Verbeek while with Dundee and the “CWT subclass,” which includes members whose shares were held by Canadian Western Trust Company.
In 2005, the Ontario Securities Commission levied a fine of over $94,000 against Verbeek and terminated his registration. (See Investment Executive, OSC sanctions Ontario broker, Dec. 22, 2005.) As well, Verbeek is no longer permitted to trade except for his own RRSP and cannot hold a director or officer position for any issuer.