British Columbia's securities regulator has ordered former Victoria mutual fund salesman David Michael Michaels to pay $23.3-million after ruling he fraudulently advised clients to buy $65-million worth of securities.
Mr. Michaels, who did a weekly radio infomercial on CFAX 1070 radio called "Creating Wealth with David Michaels," has also been permanently banned from participating in B.C.'s capital markets, the B.C. Securities Commission announced Wednesday.
A B.C. hearing panel ruled he fraudulently advised 484 clients to buy more than $65-million in exempt market securities, which are typically sold to sophisticated or wealthy investors without the company having to issue a prospectus.
At least $40-million of the funds was lost, the panel concluded, and most of the rest of the money remains at risk. Mr. Michaels earned $5.8-million in fees and commissions from the sales.
"Michaels' business model was highly predatory in nature," the hearing panel ruled, saying he instilled trust in his clients and then betrayed that trust.
The panel decision said most of his victims "have little or no opportunity to earn income from work or otherwise financially recover lost amounts."
The BCSC ordered Mr. Michaels to pay the $5.8-million he earned in fees and commissions, plus pay a fine of $17.5-million for a total of $23.3-million.
He is permanently banned from serving as a director or officer of a public company, working at a financial firm registered in B.C., or from working as a promoter or in investor relations. He is also permanently banned from trading securities in the province.
Mr. Michaels was accused of acting as an investment adviser without registration and falsely telling clients and radio listeners he resigned his registration with Canada's brokerage industry regulator in 2006 because he foresaw a stock market crash and wanted to get out of the markets. In fact, the BCSC said he resigned because he was under investigation and facing a hearing into allegations of wrongdoing.
Mr. Michaels ran Michaels Wealth Management Group until 2010. The firm was shut down and assigned into bankruptcy in 2011.