CALGARY – November 13, 2018 – The Alberta Securities Commission (ASC) has found that financial planner Vernon Ray Fauth of Calgary breached three sections of the Securities Act (Alberta) in connection with the sale of investments in Espoir Capital Corporation (Espoir).
Specifically, an ASC panel ruled that Fauth illegally dealt in securities of Espoir, made misrepresentations to Espoir investors and perpetrated a fraud on investors. Although he told investors their investment funds were safe because they would only be used to make certain types of secured investments, in reality, he used the funds in other ways that were not disclosed to investors. This included diverting funds to other businesses Fauth or his family owned or controlled and using funds to make payments to earlier investors in "the manner of a Ponzi scheme."
In the decision, the panel found that the misrepresentations and fraud “constituted an ongoing scheme." The panel also found that Fauth "consciously misled investors and knowingly put their money at risk" by "using investment funds in ways which were not only unsecured but, in some cases, undocumented," despite assurances from Fauth that investors’ money was being placed in safe and secure investments.
This proceeding now moves into a second phase to determine what (if any) orders for sanctions and costs ought to be made. A schedule of deadlines for written and oral submissions for this phase can be found in the decision, which is available on the ASC website at albertasecurities.com.
The ASC is the regulatory agency responsible for administering the province’s securities laws. It is entrusted to foster a fair and efficient capital market in Alberta and to protect investors. As a member of the Canadian Securities Administrators, the ASC works to improve, coordinate and harmonize the regulation of Canada's capital markets.
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