WATCH ABOVE: A Vancouver Island man has been found to have defrauded hundreds of people of millions of dollars – many of them seniors. Rumina Daya reports.
A Vancouver Island man has been found guilty by the British Columbia Securities Commission of perpetrating a massive fraud, affecting hundreds of British Columbians, many of them seniors.
The Commission panel has found that David Michael Michaels advised 484 clients to purchase over $65 million of exempt market securities.
Exempt market securities are securities sold under exemptions from prospectus requirements.
Michaels was allegedly paid $5.8 million in fees and commissions for his sales.
The panel says that at least $40 million of the $65 million his clients invested is lost, and the remaining $25 million is at risk.
The panel also found that Michaels advised his clients to sell their stocks, bonds and mutual funds and purchase high-risk exempt market securities instead.
He also advised his clients to borrow against their homes.
The panel found that in giving this advice, Michaels made misrepresentations to his clients, deceived them and betrayed their trust.
The Commission panel says Michaels acted as an adviser without being registered.
He is a former mutual fund salesperson.
It is alleged that Michaels illegally advised his clients between June 2007 and December 2010.
WATCH: Global BC reporter Rumina Daya tries to interview David Michael Michaels
Teresa Mitchell-Banks, the Director of Enforcement with BC Securities Commission, calls it a significant case and says what Michaels did was ‘despicable’ because he knew the risk.
“Mr. Michaels deliberately targeted senior clients. He said that the average age of his clients was 72,” says Mitchell-Banks. “This is a retired population. We consider them to be vulnerable. He put them in high-risk securities after persuading them that their traditional investments were unsafe.”
Michaels also held weekly infomercials on CFAX 1070 radio in Victoria.
The panel says Michaels testified that he used the C-FAX program to draw the public to investment seminars that he hosted in Victoria and Vancouver.
It is alleged the C-FAX programs drew 20,000 listeners a week.
Michaels claimed in the hearings that his clients were fully aware of what they were getting themselves into.
But Mitchell-Banks says putting a long, complicated document in front of a senior and asking them to sign it does not constitute full disclosure.
“He knew exactly what he was doing,” she says. “He persuaded those people by the force of his own efficacy and persuasion that he was putting them in a much safer investment. In fact, he was putting them in a much higher risk investment.”
The panel is considering appropriate sanctions against Michaels.
“We will be asking for very substantial penalties,” says Mitchell-Banks.
She says the Securities Act allows them to ask for a fine of a million dollars per transaction.
The panel will also be considering a punishment affecting Michaels’ ability to practice.
It does not appear he is facing any criminal charges at the moment.