BCSC drops case against Panamanian traders
The province’s securities watchdog has agreed to a settlement with a Panamanian brokerage house over the unregistered trading of securities on behalf of British Columbians through offshore companies, and simultaneously discontinued proceedings against the two former B.C. investment advisers who founded and directed the company.
From 2010-13, Panama-based investment dealer Verdmont Capital, S.A. traded securities, without being properly registered to do so, on behalf of more than 100 B.C. residents who held accounts “either in their own names, or in the names of offshore companies controlled by them,” according to the agreed statement of facts in last Thursday’s settlement agreement between Verdmont and the B.C. Securities Commission.
The BCSC alleged the case involved stock transactions worth more than $46 million.
In a news release Friday, the BCSC announced Verdmont paid $350,000 in the settlement.
Not mentioned in the news release was the fact Verdmont’s directors have avoided being punished by the regulator. The same day Verdmont entered the settlement agreement, the commission discontinued proceedings against Verdmont co-founders Glynn Fisher and Taylor Housser, both of whom were registered as investment advisers in B.C. during the 1990s.
The hearing for Fisher and Housser on allegations of unregistered trading and advising was scheduled for later this month. According to a notice of discontinuance dated Thursday, BCSC executive director Peter Brady said it wouldn’t be detrimental to the public interest to halt proceedings against Verdmont’s principals.
Asked about the settlement and discontinuance of proceedings, Fisher said in an email to Postmedia: “The outcome was the best that could be reached.”
Fisher said he’s no longer with Verdmont and is still in Panama, where he is “currently involved in several businesses, none of them in a regulated capacity,” and Housser is now “farming in Panama.”
Verdmont, Fisher said, was “an incredibly successful business” for 10 years and “one of the largest and most profitable brokerage houses in Latin America,” until “regulatory actions taken by both the BCSC and SEC negatively impacted the profitability of our company and made it very difficult to attract new clients due to the negative publicity.”
The SEC action mentioned by Fisher is a lawsuit filed last year by the U.S. regulator, which is ongoing.
In February 2015, the U.S. Securities and Exchange Commission sued Verdmont and three Belizeand Cayman Islands-based companies, alleging a multimillion-dollar scheme involving “aggressive and extensive promotion campaigns” for penny stocks of “shell companies.”
“The defendants’ unregistered sales of securities generated more than $75 million in proceeds on penny stocks that were virtually worthless and whose prices fell to their former token levels within months of the Defendants’ sales,” according to the SEC complaint.
Earlier this year, Housser and Fisher contended they weren’t subject to deposition by the SEC, and reached a compromise allowing them to be questioned in a “neutral location” outside the U.S., according to court filings. An agreement was reached whereby the Verdmont co-founders would be deposed in London, England, “at the cost and expense” of the SEC.
But when Verdmont submitted their expenses and applied for reimbursement, a federal judge described the application as “preposterous.”
“The SEC understood that agreement to authorize reimbursement of all ‘reasonable commercial’ expenses,” wrote U.S. District Judge William H. Pauley III in a June decision. “Apparently, Verdmont’s principals understood it to authorize a bacchanalian adventure.”
The SEC offered to make travel arrangements, Pauley wrote, but Verdmont’s counsel declined, claiming Verdmont had “already made reservations.”
Fisher, Housser, and their counsel flew first-class to London, booked two US$700-a-night rooms in a five-star hotel, and racked up a US$1,000 bar tab, court documents show.
Pauley wrote: “What takes this application into uncharted territory is the fact that Fisher and Housser apparently billed the SEC for a two-day jaunt to Madrid, where they recuperated from their undoubtedly strenuous depositions. There, they incurred another $1,500 in lodging and assorted beverages at the Hotel Orfila, and savoured jamon iberico, and lomo alto de buey, a Spanish beef tenderloin.”
“The request that the government reimburse Verdmont’s principals for their saturnalian revelries is beyond the pale,” wrote the judge. “While no one could be faulted for enjoying the finer things Europe has to offer, it is generally ill-advised to seek reimbursement from the public fisc.”
The SEC’s reimbursement obligations were limited to a per diem and “reasonable commercial prices” for airfare, Pauley ruled, adding “the SEC need not reimburse any charges incurred during the deponents’ junket to Spain.”
Fisher said this week the SEC had reimbursed Verdmont for most of the claimed expenses.
“They ended up paying us over 80 per cent of the claimed amount,” Fisher wrote in an email to Postmedia.
“So the whole ‘exquisite,’ ‘preposterous,’ ‘beyond the pale’ is beyond our comprehension. If you’ve been to Europe, you are well aware a $100 bottle of wine and jamon iberico, is definitely not viewed as ‘preposterous.’ ”
Verdmont filed for liquidation earlier this year, and is no longer operating.
The SEC action against Verdmont continues.