Mike, I came across a similar article and asked the CEO about it. Here is his answer:
Thanks for pointing this out to me xxxxx.
First of all, I was never banned by the BCSC or prevented from being a Director or Officer of a public company.
Here is what I believe was the main issue. In 1997 or 1998, the market for junior mining and oil companies crashed following the Bre-X fraud where ore samples in Indonesia was ‘salted’. In one day the Nesbitt Junior Resource Index fell over 20%. The market for junior resource stocks stayed down or depressed for quite a while due to lack of investor interest. As a result, the funds I was managing had substantial redemptions as our unitholders moved to other sectors. In meeting redemptions, I sold shares I deemed less attractive in the portfolios and retained the ones with what I thought had more substantial potential. However, this caused stock concentrations in some portfolios which were allowed by our prospectus (prepared by our lawyers and approved by the BCSC and other provinces) but this resulted in a technical breach with some sections of the Securities Act. So, the prospectus was in conflict with part of the Securities Act.
In June 2003, I decided to move on and retire from the business. I sold the funds and voluntarily surrendered my license. The BCSC brought the case of breaching the Securities Act regarding portfolio diversification in 2005 I think and it was settled in 2006 after being advised to do so by my lawyers so that I can move on with my life.
There was NO COMPLAINT from the unitholders or shareholders of the funds.
Under the circumstances of continuous redemptions as a result of depressed market conditions for junior resource stocks, I did what I thought was best for the benefit of the unitholders at he time. Afterwards, this proved to be the right strategy as resource stocks or the stocks left took off. Also, one of the biotech stocks I held in excess of 10% in the funds rose almost ten times I think or substantially anyway.
So now you know my background as an analyst and portfolio manager where I was mostly a stock picker for over 30 years. I managed a resource fund in the early 80s in Toronto which became very popular due to its performance and as a result, the money that came into our funds were mainly resource oriented.
Hope this helps. You’ll be glad to know that many of the placees in the Sterling recent issue are stock brokers or former stock brokers, investment advisors or friends I have worked with in the past.
Best Wishes,
Raoul
