Securities

Montréal - On March 15, 2016, Judge Serge Délisle of the Court of Québec, district of Montréal, handed down a guilty verdict against Fer de Lance Foundation ("Foundation") as well as Paul M. Gélinas, Michel Hamel, Réjean Duguay and Denis Nadeau. Sentencing hearings are set for September 1 and 2, 2016.

The head of the Foundation, Georges Fleury, pleaded guilty on January 25, 2016 and is therefore not covered by this judgment.

The verdicts are the following:

  • The Foundation was found guilty on 34 charges related to distribution without a prospectus;
  • Paul M. Gélinas was found guilty on 33 charges for aiding with a distribution without a prospectus and 33 charges for illegal activities as a securities dealer;
  • Michel Hamel was found guilty on 34 charges for aiding with a distribution without a prospectus;
  • Réjean Duguay was found guilty on 7 charges for aiding with a distribution without a prospectus and 7 charges for illegal activities as a securities dealer;
  • Denis Nadeau was found guilty on 2 charges for aiding with a distribution without a prospectus and 2 charges for illegal activities as a securities dealer;
  • Georges Fleury pleaded guilty, on January 25, 2016, to 34 charges related to aiding with a distribution without a prospectus.

The investigation conducted by the Autorité des marchés financiers ("AMF") revealed that the Foundation promoted plans to develop "financial engineering" with funds raised through third parties ("sponsors") in a "fully guaranteed capital environment." According to the Foundation, any revenue generated by its activities was intended to provide "compensation" and earmarked for humanitarian efforts.

Based on the evidence presented by the AMF, Judge Délisle concluded that the agreement entered into with the Foundation constituted an investment contract within the meaning of the Securities Act.

Moreover, Judge Délisle noted that the documents produced by the Foundation drew on a vocabulary intended to avoid terms used under the Act. He stressed that any words chosen cannot limit the meaning of the words contained in the Act and avoid its application.

Commenting on the evidence presented with respect to the involvement of each defendant, Judge Délisle stated that Paul M. Gélinas was the main player on behalf of the Foundation. His activities included meeting with investors, explaining the investment proposal and signing the investment contracts.

In addition, Judge Délisle pointed out that any officer or director who authorizes or allows an offence under the Act is guilty of the same offence as that committed by the principal offender. Based on the evidence presented, Judge Délisle concluded that Michel Hamel, in his capacity as director of the Foundation, was aware of its investment activities and authorized these activities or allowed them to take place.

Finally, Judge Délisle noted that Réjean Duguay and Denis Nadeau acted as intermediaries between the Foundation and investors. As did Gélinas, they aided the Foundation with the distribution of investment contracts without a prospectus approved by the AMF or an exemption, and without being registered with the AMF in any capacity whatsoever. It could therefore logically be stated that the Foundation distributed investment contracts without a prospectus approved by the AMF or an exemption.

The Autorité des marchés financiers (AMF) is the regulatory and oversight body for Québec's financial sector.

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