An Alberta Securities Commission (ASC) panel has ruled that a Sherwood Park man illegally traded and distributed the securities of his financing firm.

The ASC found that Raymond Harvey Johnston, a chartered accountant, and his company, Sherwood Financial Services Ltd. (SFSL), which was in the lending business, breached Alberta securities laws and acted contrary to the public interest by illegally trading in and distributing SFSL securities, and making material misleading or untrue statements to investors, and that SFSL failed to file distribution reports.

The panel said that SFSL funded its lending business largely with money raised through investors who lent money to the company, but that no prospectus, offering memorandum or exempt distribution report was filed with the commission.

“Investors paid money to SFSL on the agreement – the promise – of a return in the form of interest payments and the eventual repayment of their principal. In those transactions investors bought, and SFSL sold – through Johnston, in each case – securities,” it ruled. These sales amounted to illegal trades and distributions, it said. And, it said that the term sheets used to sell these investments contained misrepresentations.

However, the panel also found that an allegation of unregistered advising that was made against Johnston was not proven by ASC staff. “This case is, above all, about improper selling of SFSL securities. Numerous serious allegations concerning that activity have been proved,” it said. “Taking into account all the circumstances, we decline to also make a finding of illegal unregistered advising against Johnston.”

The panel did not hand down any sanctions in the case yet. It says that a timetable for a possible hearing on sanctions will be set soon.