The chief executive officer of scholarship trust plan Global RESP Corp. has been accused of improperly taking $2-million in "finder's fees" for helping the plan invest $30-million in notes of a tiny bank.
The Ontario Securities Commission levelled allegations Thursday against Sam Bouji, who is chairman and CEO of Global RESP, a major scholarship plan that claims to have over $460-million in assets and have 110,000 Canadian children enrolled in registered education savings plans.
The regulator alleges Mr. Bouji directed Global RESP to buy notes of London, Ont.-based Pacific and Western Bank of Canada, earning $2-million in finder's fees and commissions for the transaction. The fees were paid to a private company he owns called Global Maxfin Capital Inc.
The OSC said the transaction gave rise to a conflict of interest, but the deal wasn't referred to the fund's independent review committee as required and the conflict was not disclosed in the plan's prospectuses to investors in 2009 and 2011. The prospectuses instead stated there were no conflicts of interest, the OSC said.
The regulator also said Mr. Bouji was not registered to advise in securities when he directed the purchase of the notes, and said the investment was contrary to the advice given by the plan's registered portfolio advisers from Scotia Asset Management LP. They warned the fund that Pacific and Western Bank was not on its approved issuer list, was not rated by a recognized ratings agency and the notes would have little liquidity, the OSC said.
Reached Thursday, Mr. Bouji said he had no immediate comment on the allegations.
The OSC also alleged Mr. Bouji acted improperly in 2011 when Pacific and Western Bank notified Global RESP that it wished to retract $10-million of the notes it had issued.
The bank offered to replace the note with a 10-year GIC and to pay a fee to the scholarship plan to cover costs of the transaction. The OSC alleged no fee was paid to the plan, and Mr. Bouji's private company instead received $450,573.
The OSC statement of allegations says the regulator did a compliance review of Global RESP for the period of June 1, 2010, to May 31, 2011, and concluded the fund had failed to establish and maintain systems of control and supervision, failed to meet its suitability obligations for investors and "failed to deal fairly, honestly and in good faith with its clients."
A statement from Mr. Bouji, posted on the fund's website last July, said the fund has been working closely with regulators who had found deficiencies within the organization. The statement said the fund was changing its training and development policies and improving its policies and procedural methods.
"We are fully embracing the recommendations that the regulatory [sic] have presented to us," his statement said.