A B.C. financier banned from trading is expected to plead guilty to withdrawing funds from a bank account subject to a B.C. Securities Commission freeze order.
Lawyer Joel Whysall appeared before Vancouver Provincial Court Judge Jacqueline McQueen on Sept. 13 on behalf of Scott Thomas Low, 74.
He told McQueen Low would be pleading guilty and wished to move the case toward sentencing proceedings.
He faces one charge of a contravention of B.C.’s Securities Act.
The B.C. Securities Commission (BCSC), the provincial regulator, said May 7 that the Vancouver resident has been charged with one count of violating the provincial act by allegedly withdrawing funds from a frozen bank account following an investigation by the commission’s Criminal Investigations Branch of the BCSC.
The commission said freeze orders, now called preservation orders, prevent a person from transferring property — which could include money, physical property and investments — in order to make it available to pay any financial sanctions imposed by a BCSC panel.
“The charge, which has not been proven, is an offence under the act and carries the possibility of fines, imprisonment, probation and/or restitution orders,” the commission said.
The BCSC issued the freeze order during a BCSC administrative investigation, BCSC spokesman Brian Kladko said.
Earlier regulatory action
In April 2020, a BCSC panel ordered a group of B.C., Alberta and Ontario companies to pay a total of $32.8 million for making misrepresentations to hundreds of investors, illegally selling securities and unregistered trading.
The panel ordered the companies’ founders — Aik Guan “Frankie” Lim and Low — to pay $2 million each, and forever banned them from B.C.’s investment markets.
In addition, the panel ordered the companies’ former general manager, Darrell Wayne Wiebe, to pay $75,000 and banned him from B.C.’s investment markets for at least 10 years.
The BCSC said Lim, Low and Wiebe ran FS Financial Strategies and six other companies which were mainly in the insurance business.
Starting with a single office in Vancouver that was modelled as a café, the FS Group eventually opened nine offices in B.C.’s Lower Mainland, two in Alberta and one in Ontario, with 114 employees.
FS Strategies Services sold securities in the form of subscription agreements for units of 3i Capital, promising an annual return of eight per cent, the BCSC said.
The other companies in the FS Group persuaded investors to buy securities in the form of unsecured loan agreements, with promises of annual interest of 10 per cent to 12 per cent, payable monthly.
“Lim, Low and the FS Group admitted to raising over $47 million from 389 investors between 2012 and 2017 without disclosing that the FS Group was not profitable, was not earning enough money to cover its expenses and to pay investors their promised return, and was covering the shortfall by raising more money from investors,” the BCSC said.
The BCSC panel said it was unlikely the FS Group could repay investors what is still owed to them.
After the BCSC issued a temporary order against the FS Group in 2017, the Insurance Council of British Columbia suspended or terminated the licenses of Lim, Low, Wiebe and each FS company that was licensed to sell insurance.
Lim and Low have said the loss of the licences “effectively closed” the FS Group, the BCSC said.
“Investors were harmed when they invested in FS Group without knowing facts that they ought to have in order to make informed investment decisions,” the BCSC panel wrote.
The FS Group sold $29 million of those securities without filing a prospectus, a formal document that explains the details of an investment and the risks involved; nor did it have exemptions from that requirement. Some companies in the FS Group also sold $32 million of those securities without being registered to trade in securities, the BCSC said.
In addition, Lim and Low sold $29 million of these securities in violation of a 2014 legal commitment to the BCSC, in which they promised not to trade or distribute securities until FS Financial Strategies had filed exempt distribution reports, provided documentation for the prospectus exemptions, and refunded all loans from investors who didn’t qualify for the exemptions, the BCSC said.
“The seriousness of the misconduct was magnified by the significant amount of money and large number of investors involved, and the duration of the misconduct,” the BCSC panel wrote.
Lim, Low and the FS Group admitted to the misconduct in an agreed statement of facts in August 2019.
In a separate agreement, Wiebe admitted to acquiescing in the FS Group’s misconduct. As a result of those agreements, the hearing that took place in February 2020 focused on the sanctions to be imposed.
The panel ordered the FS Group to pay a total of $32.8 million in disgorgement, representing the amount they obtained from the misconduct, minus the amount that was returned to investors.
The panel imposed administrative penalties of $2 million each on Lim and Low, and $75,000 on Wiebe.
In addition to the financial penalties, Lim, Low and all seven companies that make up the FS Group — FS Financial Strategies Inc., FS Financial Strategies Services Inc., 3i Capital ClearPath Limited Partnership, FS Financial Services Inc., FS Financial Services (Alberta) Inc., Verico FS Capital Inc. and FS Financial Systems Inc. — are permanently prohibited from:
• trading in or purchasing any securities or exchange contracts, or relying on exemptions in the Securities Act;
• becoming or acting as a registrant or promoter;
• acting in a management or consultative capacity in connection with the securities market; and,
• engaging in investor relations activities.
