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A screenshot for the website of LEAGUE Investment Services Inc. The B.C. Securities Commission is alleging misconduct with IGW REIT, which was promoted by LEAGUE.

The British Columbia Securities Commission has alleged misconduct involving one of Canada's biggest private real estate investment trusts.

Based in Victoria, IGW REIT is nearly a decade old and has amassed investments worth approximately $290-million. At last count, the REIT had roughly 2,200 investors.

The problem, according to the BCSC, is how these investors first heard of the REIT. Some found out about it through League Investment Services Inc., or LISI, which promoted IGW as a good investment through its website, brochures and a marketing document called the Blue Book of Real Estate Syndication.

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LISI is owned by Adam Gant and Emanuel Arruda, and from September, 2010, to June, 2012, the BCSC alleges the two men did not properly disclose that they are trustees on IGW REIT's board. Mr. Gant is also IGW's president.

The two men also own a company called League Assets Corp., which manages IGW REIT's properties. In return, the REIT pays League Assets Corp. management fees that amounted to $7.8-million in 2010.

For failing to disclose these connections, the BCSC alleges the two men acted contrary to the public interest and contravened rules "prohibiting a registered firm from recommending a security of a connected issuer."

"I think it's completely unfounded and without merit," Mr. Gant said, adding that investors were well aware of the cross-ownership.

A hearing has been set for September.

(Tim Kiladze is a Globe and Mail Capital Markets Reporter.)

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