An Ontario Securities Commission (OSC) panel has permanent banned a former advisor, and ordered more than $10 million in disgorgement and monetary sanctions, after finding that he defrauded investors by trading and advising without registration, and that his company traded without issuing a prospectus.
In a decision released July 19, an OSC hearing panel found that Shaun McErlean, a former advisor, and his company, Securus Capital Inc., breached securities laws in connection with raising approximately $14 million from eight offshore investors.
Former advisor defrauded investors, says OSC
On Wednesday, the OSC panel handed down sanctions in the case, including permanent trading, registration, and director and officer, bans; $8.9 million in disgorgement; $500,000 in penalties against both McErlean and the firm; and, $250,000 in costs.
Following a hearing on September 21, OSC staff had sought almost $9.4 million in disgorgement, along with a $500,000 penalty and over $325,000 in costs, along with a ban from the market.
According to the decision, McErlean didn’t object to being permanently removed from the securities industry, although it notes that he does wish to own securities in the future, and submits that no evidence has been presented to justify a permanent ban from owning securities.
He also said that the proposed disgorgement order conflicts with contracts that he has signed with the defrauded investors, which could result in legal action being taken against him. However, the panel largely dismissed that argument.
“We are unable to give an credence to this submission since we have not seen those contracts,” it notes, adding, “We cannot concern ourselves with whatever arrangements Mr. McErlean alleges he has made with defrauded investors. Suffice it to say that any monies recovered from the bank account or the commercial property that is returned to investors will reduce the amount of the disgorgement ordered to be paid in this decision.”
Ultimately, it concludes that about $8.9 million in disgorgement is warranted, along with a significant penalty, noting, “Mr. McErlean’s actions demonstrate a clear intention to deceive investors and use their money, at least in part, to substantially improve the financial position of himself and his family.”
It also says that the “relative ease” with which he raised over $10 million from offshore investors “demonstrates a particular need to convince any like-minded individuals that any profits they make will be taken from them, should they engage in fraudulent activity.”
In its initial decision, the panel found that McErlean told investors that their money would be used to fund guaranteed, high-return trading. But that their funds were actually used to pay personal expenses, repay previous investors, and to invest in private companies.