Tuesday, May 29, 2007
Misappropriating up to $30-million
of client assets isn't a small feat.
But that's what Ian Thow, a director
and branch manager at the Victoria
office of Berkshire Investment Group
Inc., is alleged to have done
between January, 2003, and May,
Thow, who crossed the Canada-U.S.
border almost two years ago, is set
to face a hearing before the B.C.
Securities Commission that starts
this morning. The chances are that
Thow, who worked for Berkshire, a
unit of Burlington-based AIC Ltd.,
for six and a half years, won't be
In theory, Thow, who was licenced to
sell only mutual funds, has no
money, given that he was petitioned
into bankruptcy in September, 2005.
Mike Cheevers, who works for the
receiver, Wolridge Mahon Ltd., said
yesterday he has been able to garner
"one or two cents on the dollar" for
Thow's clients, who claim they are
owed more than $40-million.
The notice of hearing details the
main allegations against Thow. The
main one is the misappropriation of
Thow, who prior to working with
Berkshire was with Investors Group,
told his clients he could invest
their funds in shares of National
Commercial Bank of Jamaica. A short
time earlier, AIC -- a mutual fund
manager controlled by Michael
Lee-Chin -- had bought 75% of the
bank. Thow also told his clients he
could get them shares in Berkshire's
initial public offering and in
high-yielding mortgages. "Thow's
representations were all false,"
said the notice of hearing.
But the clients were not aware Thow
couldn't do what he had promised.
They gave him the cash and Thow
"falsely represented to the clients
that the client funds had been
invested in the securities."
When it was all over, Thow was up to
$30-million better off -- the same
amount the clients were worse off.
Nothing much is expected today, even
though the BCSC has set aside about
two weeks (over four separate
sessions) for the hearing. The main
reason: Thow isn't likely to appear
and the BCSC's only real power is to
bar him from the industry and impose
a fine. But if he isn't planning to
come back to Canada, it's tough to
know how the penalties will be
Meanwhile, another regulator, the
Mutual Fund Dealers Association of
Canada, has also been trying to get
to the bottom of the Berkshire/Thow
matter. The entity is the national
self-regulatory organization for the
distribution side of the Canadian
mutual fund industry and was
established nine years back.
According to its Web site, "The MFDA
regulates the operations, standards
of practice and business conduct of
its members and their
representatives with a mandate to
enhance investor protection and
strengthen public confidence in the
Canadian mutual fund industry."
While it has spent almost two years
on the matter, it seems there is a
lack of urgency about the process.
One can't imagine Eliot Spitzer, the
former attorney- general of New York
who did a lot to clean up some of
the abuses of the financial-services
industry, taking as long. The trick,
as Spitzer showed, is to use the
powers that are available, including
breaking new ground.
With the MFDA, the question remains:
How long does it take to investigate
a firm's compliance department for
matters that some claim were brought
to Berkshire's attention years back?
As a result, there is a clamouring
"They, the MFDA, have the power to
do something, so why not do it?"
said one client who has lost money
as a result of investing with Thow
and makes the reasonable assumption
that member firms are responsible
for the conduct of all their
employees at all times. While
clients need to be diligent, they
can't be expected to be fully
conversant with all the nuances of
Calls to the MFDA yesterday seeking
a comment were not returned. In the
past, the MFDA has said it is
working as fast as it can and that a
thorough investigation takes time.
Calls to Berkshire were not
returned. In the past, it has said
it has "conducted mediations with 17
complainants," which may be code for
settling with clients of Thow who
gave him capital to invest in