British Columbia joins other jurisdictions in banning W.H. Stuart principal

The British Columbia Securities Commission (BCSC) announced April 12 that it has made an order under Section 161 of the Securities Act, to ban Marilyn Dianne Stuart permanently from trading or purchasing any securities in the province and from holding any position as a director or officer. The order follows those made by other commissions after Stuart plead guilty to one count of fraud over $5,000 in the Ontario Court of Justice in late 2019.

At the time, the court’s justice sentenced Stuart to two years, less one day, to be served in the community. Stuart was also ordered to pay restitution in the amount of $1.1-million to the Mutual Fund Dealers Association of Canada (MFDA) Investor Protection Corporation (now the Canadian Investor Protection Fund of the New Self-Regulatory Organization of Canada), and was banned from any engagement in any capacity in roles where Stuart would have authority over the property of another person.

The Ontario Court of Justice found that Stuart defrauded investors of their investment funds in W.H. Stuart Mutual Ltd. between January 2004 and May 2013. The firm held itself out as a firm which would guarantee returns between five and 10 per cent annually. “Stuart’s clients consisted of mostly retired people who had transferred their pensions to W.H. Stuart on the promise of getting this return. The clients expected their money to be invested in cash or cash equivalents,” the BCSC’s reciprocal order states. Instead, the firm paid funds to other investors to give the impression that returns had been met. “It was a Ponzi scheme,” they add.

According to MFDA documents, the scheme involved approximately $6-million from more than 180 clients. She also misappropriated or failed to account for more than $800,000 obtained from 30 additional clients.

More, Stuart was a part owner of the technology company providing the firm’s in-house computer database which clients had access to for monitoring their accounts. “Stuart used this software to support the Ponzi scheme by manipulating information given to investors.” The MFDA’s indemnity fund paid out $7.2-million in the case. The regulator ordered a fine of $7-million and referred the matter to law enforcement.

The BCSC decision goes on to discuss an even earlier decision wherein the Alberta Securities Commission found that Stuart orchestrated a scheme to circumvent securities law when the firm sold limited partnership units to Alberta investors without a prospectus. At the time, a hearing panel declined to order any prohibitions preventing Stuart from trading or acting as a director.

“The size and scope of Stuart’s misconduct demonstrates that she is a significant risk to the public and capital markets. We find that she is unfit to participate in the capital markets of British Columbia and that permanent prohibitions are warranted,” they conclude.