IDA issues warning regarding fraudulent solicitation fees

The IDA says the Ontario Securities Commission has informed it that some soliciting agents have undertaken certain conduct that is unbecoming in order to increase solicitation fees. The accusation is that soliciting agents have been fudging the books to obtain maximum solicitation fees.

Fees are sometimes paid by offering firms to soliciting agents in the course of certain types of offers, including cash offers, share exchanges and rights offerings. These fees are paid through a transfer agent. These fees have been paid for each of its clients’ shares tendered into the offer, with a maximum payment per beneficial owner.

“What is of concern is that it appears that soliciting agents have employed a variety of means in order to increase solicitation fee claims,” says the IDA. “For example, existing house positions have been notionally broken down or additional client account names used for inflated claims. By these means, it would appear to the transfer agent that several beneficial owners were tendering into the offer where in truth, it was only one position beneficially owned by one party.” This sort of padding allows agents to claim extra fees.

The IDA says, “The Association would like to remind Members that this type of activity is dishonest and fraudulent and is in violation. It is the Association’s intention to vigourously pursue, by means of disciplinary action, such activity in the future.”