A Victoria-area financial adviser ordered to pay $23.3 million to the B.C. Securities Commission and banned for life from the securities market is planning to appeal, his lawyer said last week.
David Michael Michaels of Mill Bay ran a "highly predatory" businesses targeting seniors, said a commission panel, which imposed the sanctions in a decision released last Wednesday.
Michaels defrauded 484 clients by urging them to invest more than $65 million in total, said the panel, which noted the eventual loss may "significantly exceed" $40 million. Michaels has been ordered to pay the commission a fine of $17.5 million, which would go toward investor education, and forfeit $5.8 million earned through fees, which would help cover investor losses.
He has been permanently banned from taking part in the securities market.
The panel ruled that between June 2007 and December 2010, Michaels illegally and fraudulently advised clients to buy exempt market securities, which are exempt from prospectus requirements.
Sanctions followed an August panel finding that Michaels acted as an adviser without being registered, made misrepresentations and perpetrated a fraud.
The commission’s executive director had sought a penalty of $65 million.
Michaels’ sanctions are the secondhighest financial penalty imposed by the commission, commission executive director Paul Bourke said from Vancouver. "This is very serious conduct and we are trying to deter it in others."
In 2010, Sung Wan (Sean) Kim was ordered to pay $47 million. He is in jail in Korea and has not paid, Bourque said.
Michaels promoted his business through a weekly radio show on CFAX 1070.
The average age of his clients was 72, the panel said. "Most investors of this age have little or no opportunity to earn income from work or otherwise financially recover lost amounts." Michaels advised some clients to borrow money to buy unsuitable investments sold to them through fraud and misrepresentation. The clients lost their investment money and are now repaying loans, the panel said.
His defunct Michaels Wealth Management Group was on Erie Street. The commission said he is from Mill Bay.
Lawyer Grant Smith, representing Michaels, said his client was not available to comment on Wednesday, but plans to appeal.
Smith said that Michaels was legally allowed to sell the securities, which were real. He said the amount of expected losses will be closer to $10 million to $15 million. One large investment has yet to be sold, Smith said.
Barbara Hinch, who turns 94 next month, lost more than $500,000 investing with Michaels. She said she ended up selling her house sooner than would have happened otherwise. Hinch does not expect any money will be repaid.
Investor Helen Dubas, 75, said she lost $167,000. She called the fact Michaels has been permanently banned from taking part in the securities market "wonderful."