Ex- stockbroker cited for trying to skirt British Columbia’s know- your- client rules

Aformer Surrey stockbroker has been accused of conspiring to circumvent know- your- client rules in B. C. The Investment Industry Regulatory Organization of Canada has also accused David Hoang, who was working at First Canada Capital Partners Inc. at the time of the alleged offence, of concealing information and failing to cooperate with IIROC investigators.

The case revolves around the B. C. Securities Commission’s attempts several years ago to beef up regulation of trading conducted by Vancouver brokers in U. S. over- the- counter stocks.

The BCSC was especially concerned about large blocks of stock that clients in offshore tax and secrecy havens deposited into Vancouver brokerage accounts, then sold en masse in classic pump- and- dump fashion.

The suspicion was that these offshore clients were simply fronts for people who were promoting and manipulating the stocks.

So in June 2008, the BCSC imposed new rules requiring brokers to make “reasonable efforts” to determine the beneficial owners of those client accounts and their relationship to the issuing companies.

One of the brokerage firms that specialized in U. S. overthecounter stocks was First Canada, headed by Mark Wiltshire.

Wiltshire has had a long career in the brokerage industry. He got his licence in 1986, and worked with 12 different investment firms, many of them controversial.

They included Osler Inc., Davidson Partners Ltd. and Thomson Kernaghan & Co. Ltd., all of which collapsed in scandal. They also included Global Securities Corp., which has attracted more than its fair share of regulatory attention. ( He was not implicated in any wrongdoing at these firms.)

In late 2006, Wiltshire acquired control of a discount brokerage firm called Stox-Trade Investments Inc. and proposed to change the name to First Canada.

He also proposed to change the business from discount brokerage services to “higher risk” dealing in stocks quoted on the OTC Bulletin Board in the United States. IIROC approved this arrangement on condition that he hire a full- time, on- site compliance officer.

Wiltshire agreed, but later permitted the compliance officer to work two days a week from her home, 40 kilometres north of Nanaimo. When IIROC discovered the breach, it fined Wiltshire and his firm $ 40,000.

According to IIROC’S notice of hearing, Hoang began to work as Wiltshire’s assistant at First Canada in September 2008.

Among their clients were six banks, which IIROC identified only by their initials, but I know to be Bank Sal Oppenheim, Centrum Bank, Bank Sarasin, VP Bank and Banca della Svizzera Italiana. All have been prolific traders of dodgy penny stocks listed on the old Vancouver Stock Exchange and more recently, the bulletin board.

IIROC alleges that from February to August 2009, these banks made 282 deposits of bulletin board stock into their accounts at First Canada and issued 107 trade orders.

Under the new know- your- client rules, Hoang was required to inquire into who was behind these accounts. However, IIROC alleges Hoang “accepted orders from Wiltshire’s clients without making any effort to determine the beneficial owner of those securities.”

IIROC also alleges that, to hide his actions, he arranged for brokers in First Canada’s offices in Alberta and Ontario ( where the new rules did not apply) to write up and time stamp the trade tickets. This gave the false impression that the trades were executed outside B. C.

IIROC further alleges he lied to IIROC investigators when he told them he did not accept or place the orders, and failed to attend two scheduled interviews with IIROC investigators.

First Canada went out of business in 2010, and both Wiltshire and Hoang left the brokerage industry in early 2011.

The lingering question is, if Hoang was cited in this matter, why not Wiltshire? Was he aware of his assistant’s activities? Will he also be cited by IIROC? Only time will tell.

• On Wednesday, I noted that the Canadian Federation of Independent Businessman, as part of its campaign against government red tape, had accused Canada Revenue Agency of abusing several small business taxpayers.

I audited two of those diaries and found they were false and/ or misleading. They were also very long in the tooth. One was based on a dispute that CRA had resolved in the taxpayer’s favour seven years ago.

I have since learned that when the author of these reports, Shachi Kurl, CFIB’S director of provincial affairs ( B. C. and Yukon), learned I was auditing them, she called the subjects.

I don’t know what she said, but one of them suddenly refused to talk to me. If her intent was to interfere with my fact checking, she succeeded.

Then she followed up with an email to me ( and a copy to my bosses) suggesting that my attempts to fact- check her work could have adverse consequences for The Vancouver Sun.

“What you may not understand is the potential chill your pursuits have on small business owners in talking about these issues. What may further escape you is that chill has the potential to affect your colleagues and your own publication,” she wrote.

“The Vancouver Sun’s reporters and editors often call CFIB looking to hear from small business members and get their perspectives on any number of issues: taxation, municipal bylaws, economic challenges, or how external factors affect small business ...

“It is not always easy to coax our members to talk to the media, as they fear mischaracterization of their issues by reporters. I don’t expect this experience will make our efforts to help reporters tell these stories, any easier.”

First of all, I view this statement as rubbish. If CFIB members decide not to talk to us because they are concerned that we will scrutinize their comments, then who cares? Who wants to talk to them? Certainly not me.

Secondly, I view this statement as a threat. I think it’s clear that Kurl is suggesting that, if I persist in this sort of routine fact checking, my fellow reporters and my newspaper will suffer adverse consequences.

I asked Laura Jones, the CFIB’S vice- president in Western Canada, whether she authorized and endorsed these comments, but she didn’t respond.