Nov.-Dec. 2000

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OSC Cracks Down on Four Financial-services Web sites

The Montreal Gazette 

Thursday 14 December 2000

   Ontario’s securities regulator capped months of investigations yesterday with a crackdown on four financial-services Web sites operated by people who the agency alleges aren’t registered to sell investments.

   As part of its continuing sweep, the Ontario Securities Commission issued cease-trading orders against four Ontario Web-site operators, who the OSC claims were acting in violation of securities law.  All four are accused of promoting the “unauthorized distribution of securities.” “Our goal is to focus on intervening with potentially fraudulent sites at the earliest opportunity,” Colin McCann, an investigator with the OSC’s enforcement branch, said yesterday. “We have taken this action in order to reduce the likelihood of persons falling victim to scams and also to educate the public that investing with unknown Internet entities should not be undertaken without thoroughly researching the person and the company making the offer.”  A hearing will be held Dec. 20, during which OSC staff will ask for extensions of the orders. For any penalties to be imposed, the OSC enforcement staff must prove its case before a quasi-judicial panel of commissioners.

   The four individuals are: Monte Friesner, a Toronto resident and president of First Federal Capital Corp. The commission alleges that, through First Federal’s Web site (www.firstfederalcanada.com), investors were offered annual returns of 50 to 70 per cent without risk. Friesner, the OSC said, is not registered with the commission and the investment strategy is similar to those known as “prime bank-note” schemes, which offer fictitious investment vehicles. Robert Cranston, the London-based operator of Global Privacy Management Trust, which the OSC alleges promoted an offshore debenture program via the Web site www.gpmt.com. The returns on those programs were claimed to be about 12 per cent a month. The OSC also alleges that Cranston solicited investors to a secure private placement while claiming to be affiliated with a registered market dealer in the province. Terry Dodsley, a resident of Campbellford, Ont., east of Peterborough, who is alleged to have promoted himself as an international investment consultant at www.cashgalore.com/comtrade.htm and ads in small community newspapers. The investment vehicles promoted by Dodsley offered returns of 186 per cent with no or minimal risk, the OSC said. The commission also said Dodsley is not registered to act as an adviser and that no prospectus had been filed with the OSC.

   Warren English, the Pickering-based operator of Offshore Marketing Alliance, which OSC staff claim promoted investment offerings through an electronic mailing list. One particular investment vehicle, the OSC said, directly linked to English offered investors a return of 50 per cent in a 90-day period. He is also not registered to advise or offer securities in Ontario, the commission said.

   McCann said, of the four actions, one started as a result of a complaint and another was a referral from another jurisdiction. The remaining two were undertaken as a result of the OSC’s surveillance of Ontario Web sites. The commission has a staff of four working on a rotating basis two days a week, doing nothing but surfing the Web looking for possible offences. That surveillance unit has been operating for about eight months. “They concentrate on Ontario-based operations, but we pick up some from all over North America,” McCann said. The Ontario Securities Commission has jurisdiction over the Toronto Stock Exchange, Canada’s largest financial market.