Andrew A. Duffy
Tuesday, October 23, 2007
VANCOUVER -- Berkshire Investment Group's proposed settlement to placate
the Mutual Fund Dealers Association over the Ian Thow affair was
unanimously rejected yesterday.
Shaun Devlin, vice-president of enforcement with the MFDA, could not
comment on specific reasons why the three-member hearing panel rejected
yesterday the proposed settlement worked out between Berkshire and the
MFDA. The entire substance of the hearing, including all transcripts and
submissions, are declared confidential.
"This means the MFDA has a case ongoing, and we are free to take any
action we could have taken previously so we could attempt to negotiate
another settlement with Berkshire or bring about a notice of hearing and
proceed on a contested basis," said Shaun Devlin, vice- president of
enforcement with the MFDA.
It is the first time in the three-year history of the MFDA's enforcement
program that a settlement has been rejected.
Thow's former clients and creditors claim to have been bilked out of
more than $32 million by the former vice-president of Berkshire. They
claim the investment adviser convinced them to invest in schemes that
ranged from a Jamaican bank to loans for Vancouver developers and seed
shares with his former employer. Thow left the company at the end of May
2005, filed for bankruptcy in Canada and the U.S., left Victoria and has
been living in Seattle since August 2005.
The MFDA's hearing was convened to consider the settlement agreement
concerning allegations Berkshire failed to conduct reasonable
supervisory investigations of Thow's activities and to take reasonable
supervisory and disciplinary measures as required.
But while both the MFDA and Berkshire were tight-lipped about the
hearing -- Berkshire counsel Julie Clarke would not discuss the case
after the hearing -- there was plenty of speculation outside the hearing
room where some of Thow's former clients waited for hours on a decision.
"We were hoping for a decision that would have meant a little closure
for everybody but now the long wait begins again," said Brad Goodwin,
whose family claims Thow bilked them out of $1.4 million.
Some observers wondered if the panel, realizing the high profile of the
Thow case, wanted any settlement agreement reached to send a strong
message to the industry and that what they saw in the document was
deemed too lenient.
"I hope that's what's happened, I hope they go back and have a public
hearing or negotiate again and really hammer it this time," said
Devlin would not speculate on whether the profile of the Berkshire
hearing had any bearing on yesterday's outcome, but did note "in every
region the panel is aware of regional concerns."
In a news release, Berkshire expressed disappointment the deal was
rejected, but suggested it intends to pursue a new settlement with the
MFDA rather than face a public hearing. "[Berkshire] will continue to
co-operate with regulators working to settle the matter," it said.
If the MFDA does go to the contested hearing stage instead of a
settlement with Berkshire, penalties can run to a $5 million fine,
termination or suspension of membership or terms and conditions under
which Berkshire can operate.
The panel is not able to award compensation, and any fine levied is paid
into a discretionary fund that Devlin said is used in "the public
Last week, the B.C. Securities Commission, in what it called one of the
most callous and audacious frauds in B.C. history, ruled Thow
perpetrated a multimillion-dollar fraud when he took money his clients
gave him to invest and instead spent it on a luxurious lifestyle.
Sanctions are expected to be handed down next month.