The New Brunswick Securities Commission has settled an enforcement action against a New York-based lawyer that saw $1.7 million lost in bad investment loans.

The NBSC said Wednesday that it has settled a case against James MacCallum, who is from the Moncton area but is now based in Jamestown, NY, and a company he controls, Andrew Mitchell Holdings (AMH), after he defaulted on more than $1.7 million of promissory notes issued to a small group of New Brunswick investors.

Under the settlement, they have been banned from trading securities directly with the public, banned from registration, ordered to disgorge $1.775 million, and they must pay $50,000 in penalties and $10,000 in costs. However, the settlement notes that MacCallum has been suspended from practising law in New York, and is presently insolvent.

The commission reports that MacCallum and AMH defaulted on five promissory notes issued in 2009. “The $1.7 million raised was purportedly used to fund various investments, including investments in real estate, a life insurance policy and a promissory note issued by a third party,” it notes, adding that neither MacCallum nor AMH was registered to trade in New Brunswick.

The settlement indicates that MacCallum is, “remorseful of his inability to repay the investments and the resulting losses to the investors. This has had an extremely detrimental effect on his family relations and his financial well-being.” It also notes that he has accepted responsibility for his failure to comply with New Brunswick securities law, and cooperated with the commission in the case.

“These types of loans made for investment purposes are the most common source of investor losses seen in our enforcement team’s case load,” said Rick Hancox, executive director of the NBSC. “Investors considering these types of loans should ask themselves: ‘Why is this investment offering such high interest’?”

It cautions investors to do their research and fully understand all the risks involved. “Understanding the risks involved in lending large amounts of money is a very difficult and sophisticated task,” said Hancox. “Only those who have the professional skills to be able to evaluate the borrower’s creditworthiness should consider this type of investment.”