Collateral falsified to secure loans in sale of firm, regulator alleges
Gary Man Kin Ng, who purchased a Vancouver-based financial firm in 2018 for $100 million, is accused of falsifying information to secure loans to help execute the deal.
Ng is facing an initial appearance before the Investment Industry Regulatory Organization of Canada (IIROC) on Jan. 6, 2021.
Ng, who said he had plans to amass $50 billion in money management assets in Canada, is accused of “fraudulent conduct” with respect to obtaining loans totalling $172 million and failing to co-operate with IIROC's enforcement staff who were conducting an investigation.
Also named in the hearing is Donald Warren Metcalfe, also accused of fraudulent conduct with respect to loan financing and not co-operating with enforcement staff during their investigation.
Ng, through the Ng Group, purchased PI Financial Corp., one of Vancouver's oldest investment dealers, in 2018 with the help of loans from two lenders.
When the deal went through, Ng, who was founder, chairman and CEO of the small Winnipeg-based firm Chippingham Financial Group, also became executive chairman of PI Financial. Metcalfe was also named as an executive of PI Financial.
The lenders are not named in the notice of hearing, but a U.S. firm loaned $80 million and a Canadian firm another $20 million.
The PI Financial purchase loans were personally guaranteed by Ng, according to IIROC.
As security for the loans Ng granted security interest in Chippingham securities accounts, and later PI Financial accounts, which he said were owned by him and held tens of millions of dollars.
However, IIROC says Ng did not actually own, control or have trading authority over the securities accounts, and he and Metcalfe falsified ownership and control of the collateral used to secure the loan.
For example, Ng allegedly falsified the account statements, summaries and screen captures to vastly overstate the value of assets; created fictitious account statements; and altered securities account statements, changing clients' names to his own name.
IIROC said, in reality, accounts held by Ng totalled about $1.9 million.
Metcalfe perpetrated fraud as he directly and actively participated with Ng, said IIROC.
In 2019 and early 2020, Ng borrowed a further $40 million from the Canadian lender, also based on falsified collateral, said IIROC.
In 2019, Ng borrowed another $32 million from a third lender, also based on falsified collateral.
If the IIROC hearing panel finds that Ng or Metcalfe committed any of the alleged contraventions they could face fines of up to $5 million.
In February 2020, Ng and Metcalfe resigned as employees of PI Financial. The investigation has not uncovered any evidence that investment clients lost money.
PI Financial was sold in July 2020 to a joint venture, controlled by two investment firms, H.I.G. Capital and RCM Capital Management, for an undisclosed amount.
Formed 38 years ago, PI Financial has operations in research, investment banking, advisory, and institutional sales and trading services. It has more than 300 employees across Canada.