The British Columbia Securities Commission convicted Victoria-area financial adviser David Michael Michaels of orchestrating a massive fraud that cost hundreds of investors a total of $65 million.
As host of a weekly radio show, Michaels drew many elderly investors to his program, CBC News reported Wednesday.
“We are generating over $67,000 in monthly income for our clients,” he boasted on his show. “For me and my clients, give me the most rate of return for the least amount of risk.”
Teresa Mitchell-Banks, head of the BCSC, said Michaels’s “entire business was a fraud.” Her agency found that between 2007 and 2010, Michaels acted as an investment adviser without being registered as one.
The BCSC said Michaels used a weekly radio infomercial in Victoria to promote his business, telling potential investors that he gave up his registration as a stockbroker because he had lost faith in the market and resigned when he foresaw the impending market crash.
According to the securities commission, Michaels, a former mutual fund salesman, actually lost his license when he was investigated by the Investment Dealers Association of Canada back in 2006.
In its conviction of Michaels, the BCSC found him guilty of improperly advising 484 clients to buy $65 million worth of market-exempt securities without being registered.
It also found Michaels pocketed $5.8 million in commissions for himself by talking seniors into buying the securities by taking out loans on their homes. The average age of his victims was 72.
The BCSC said that “virtually all of the roughly $65 million invested by Michaels’s clients is now worthless, leaving many of them financially destitute, while their home-equity loans remain.”
Penalties against Michaels could include a lifetime market ban and millions in fines, Mitchell-Banks said. Criminal charges have not been filed.
The BCSC’s August 6th decision and findings can be viewed here.
Julie DiMauro is the executive editor of FCPA Blog and can be reached here.