Failed fund manager Stableview Asset Management Inc. and its founder, Colin Fisher, have been sanctioned in a settlement with the Ontario Securities Commission (OSC).
The Capital Markets Tribunal approved a settlement that permanently bans Stableview and Fisher from the market and imposes $1.32 million in sanctions, including a $750,000 penalty, $300,000 in disgorgement and $270,000 in costs.
The sanctions follow admissions that the firm and Fisher violated securities rules by ignoring concentration restrictions to invest heavily in a thinly traded penny stock company, and misleading investors about the investment.
According to the settlement, the firm’s funds invested in private debt of penny stock firm Clarocity Corp., while also providing advisory services to the company.
While the company’s finances deteriorated, Stableview continued to value its funds’ investments in the company’s debt at par, and didn’t disclose its exposure to clients in their account statements, the settlement said.
“As a result, [investors] did not know that their investments were primarily concentrated in Clarocity debentures or that the value of their holdings in the fund(s) was in doubt at certain periods given Clarocity’s significant financial issues,” the tribunal noted.
In doing so, the fund manager breached securities laws, the settlement said.
OSC staff uncovered compliance issues at Stableview during a 2019 review. The following year, it was placed into receivership.
As mitigating factors, the settlement noted that Fisher consented to the appointment of a receiver and cooperated with both the regulator’s investigation and Stableview’s receivership — and that investors may not suffer losses from the Clarocity investment after all.
While a proposed class action was launched against Stableview by an investor, the case was ultimately abandoned for several reasons, including the fact that investors may not end up losing any money. Clarocity debt had been converted into equity when the company was acquired out of its own receivership by iLookabout Corp.
The funds’ shares in the new company have since gained value to the point that there were no losses for the funds’ investors, the settlement noted.
“If the iLookabout shares could be monetized at their current trading value, the investors would realize a significant profit,” it said. “However, Fisher acknowledges it is currently uncertain as to when these securities may be liquidated and at what price…”
In approving the settlement, the tribunal concluded that the proposed sanctions will achieve both specific and general deterrence.
“The permanent market participation bans will prevent Mr. Fisher from returning to the industry he has worked in since 2008 and prevent him from earning a living in his profession of choice. This will protect the public and promote confidence in Ontario’s capital markets,” it said.
Additionally, the tribunal noted that the settlement “sends a strong message to registrants that investment parameters must be respected, that conflicts of interest are to be properly disclosed and that transparency and good faith are cornerstones of the registrant-client relationship.”