In a written decision this week, the New Brunswick Securities Commission sent a strong message that it will not tolerate fraudulent behaviour targeted towards local investors.

The commission’s hearing panel assessed penalties of $100,000 each against Limelight Entertainment Inc., Carlos Da Silva, and David Campbell for failing to comply with New Brunswick securities law. David Campbell also received an additional penalty of $50,000 for his blatant disregard of an earlier order to cease trading securities. Campbell and Da Silva were both ordered to pay $5,000 each for the costs of the hearings.

The panel found that the respondents, who were experienced in the securities industry, had contravened the Securities Act and acted contrary to the public interest by making illegal distributions of securities and making prohibited representations to New Brunswick investors. The panel found evidence that Limelight fraudulently made 50 distributions to 40 New Brunswick investors intentionally defrauding these investors of almost $80,000. The sums lost were significant to the individual investors and damaged their confidence in New Brunswick’s capital markets. The panel noted that none of the money had been returned.

“This decision demonstrates that the Commission is very serious about its mandate to protect investors and its role as an advocate for well regulated capital markets,” says Rick Hancox, executive director of the NBSC.

The order, released this week, outlines the panel’s reasons for the harsh financial penalties, the largest assessed by the Commission since its formation in 2004. The panel considered the actions of the parties to be “an attack on New Brunswick investors, an attack on New Brunswick’s capital markets and an attack on the Commission’s credibility as a regulator.” The panel indicated that they found the conduct of the respondents to be “totally reprehensible” and that these penalties and their collection will reinforce its message that the commission will use “all its resources in preventing any type of fraudulent activity involving New Brunswick’s investors and capital markets.”

None of the respondents bothered to file materials in the proceedings, provide any evidence or contest the evidence presented by commission staff. Nor did they appear before the panel to testify. The panel stated that Limelight, Da Silva and Campbell exhibited a complete disregard for securities law and demonstrated that they were indifferent to the seriousness of their actions and the harm they had caused to New Brunswick investors and capital markets.

New Brunswick investors made up a portion of the total distributions across Canada. Evidence showed that large amounts of money taken by Limelight through its illegal distribution were withdrawn by Da Silva and Campbell and deposited into the bank accounts of their own personal corporations. The NBSC worked with other securities regulators on this case.

Limelight Entertainment Inc. was promoted as operating in the entertainment industry, involved in the production of music, books, television and live entertainment shows. The commission issued permanent cease-trade orders against Limelight Entertainment Inc., Limelight Capital Management Ltd. in April 2006, and against Carlos Da Silva and David Campbell in June 2006.