Preventive Measures - Cease trade and freeze orders issued in the matter of Fer de Lance Foundation
Decisions and Freeze and cease trade orders Securities
Montréal – On October 28, 2009, the Bureau de décision et de révision en valeurs mobilières (BDRVM) handed down a decision authorizing the Autorité des marchés financiers (the "AMF") to publish a cease trade and freeze order as issued on July 17, 2009 in the matter of Fer de Lance Foundation (the "Foundation").
On July 17, 2009, the AMF obtained a cease trade order that prohibited the distribution of investment contracts issued by the Foundation and by Fer de Lance Foundation Turks et Caicos (FDL Turks and Caicos Foundation) by both organizations as well as by Jean-Pierre Desmarais, Michel Hamel, George E. Fleury and Paul M. Gélinas. The BDRVM also froze the funds, securities and other assets of the Foundation and of the FDL Turks and Caicos Foundation.
In its decision handed down in July, the BDRVM stated that it was particularly concerned about the following allegations and facts as presented by the AMF:
- The Foundation, Paul M. Gélinas, Michel Hamel, George E. Fleury and Jean-Pierre Desmarais were distributing a form of investment in Québec that is governed by the Securities Act, namely, an investment contract, without a prospectus or prospectus exemption;
- The Foundation and Paul M. Gélinas were acting as securities dealers without being registered as such with the AMF;
- The Foundation was not registered with the Canada Revenue Agency as a registered Canadian charity;
- Various investors were promised high profits (24% to 60% of the capital invested) that seemed out of proportion to what the market can usually offer under such circumstances;
- None of the investors met by investigators ever received any profit as stipulated in the investment contract they acquired, despite repeated requests in this respect.
The BDRVM also expressed concern about the information document provided by the Foundation, which seems clearly insufficient to properly inform investors and help them make an informed decision. This document describes the Foundation's approach in vague terms: "The Foundation's approach is simple: Uses its network and capability to intervene as a key player in financial engineering for profitable projects, earn profits and therefrom funds the implementation of its goals."
In conjunction with the order issued on July 17, the Ontario Securities Commission also froze the Foundation's bank accounts at the request of the AMF. The funds frozen in Ontario were subsequently transferred to Québec and included in the freeze order issued by the BDRVM.
The Autorité des marchés financiers (the "AMF") is the regulatory and oversight body for Québec's financial sector.
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