Ontario securities regulators are accusing the founder of failed Uxbridge, Ont.-based First Leaside Group and one of its top salesmen of raising almost $19 million from investors without disclosing that the company was in financial peril.

The Ontario Securities Commission (OSC) unveiled allegations Monday against David Charles Phillips, the founder of First Leaside, and John Russell Wilson, a senior salesman at its investment dealer subsidiary, First Leaside Securities, charging that they “intentionally deceived investors by selling and overseeing the sales of almost $19 million in securities while withholding important information”.

The allegations have not been proven, and the first hearing has been scheduled for June 25.

In the allegations brought down Monday, the OSC says that between August 22 and October 28 of last year, First Leaside Group raised about $18.9 million from investors through a variety of equity and debt offerings, without disclosing to investors that an independent accounting firm, Grant Thornton Ltd., had reviewed the firm, and delivered a report on August 19, 2011, indicating that, “the future viability of the First Leaside Group was contingent on its ability to raise new capital and that there was a significant equity deficit.”

“The fact that Grant Thornton was reviewing the First Leaside Group, the existence of the Grant Thornton Report and the Grant Thornton Report were important facts investors should have known,” the OSC charges. And, it says that by not disclosing them to other salespeople, or to investors, they “dishonestly placed investors’ pecuniary interests at risk.” The OSC says that this amounts to a fraud on investors.

The accounting firm’s report was commissioned by the firm’s lawyers, Cassels Brock & Blackwell LLP, at the urging of the OSC, amid concerns about its viability.

Ultimately, the firm was cease traded in November of last year; and, in February of this year, the firm initiated a court-supervised wind-up; and, at the same time, its various registered subsidiaries (an exempt market dealer and an investment dealer) were suspended by securities regulators. Then, in mid May, the OSC also issued a temporary cease trade order against Phillips, alleging that he was trading after his registration was suspended by helping to raise money for First Leaside companies.

The OSC is seeking sanctions on their ability to participate in securities markets, monetary penalties, disgorgement and costs.