A Canadian Investment Regulatory Organization (CIRO) hearing panel has fined Donald Warren Metcalfe $2.5-million and has thrown the former approved person out of the industry by permanently banning him from approval in any capacity, after it was determined that he engaged in and enabled fraudulent conduct committed his employer in an effort to buy planning firm, PI Financial Corp.
Metcalfe is also being sanctioned for failing to attend an interview with the regulator’s enforcement staff. In addition to the fine and ban from registration, Metcalfe was ordered $68,908 in costs.
The approved person with Chippingham Financial Group Limited and PI Financial was formerly the president and chief operating officer at Chippingham and later the executive vice chairman and member of the board of directors at PI.
Chippingham’s founder, Gary Man King Ng was sanctioned for the same scheme in 2022 after Ng acquired a 100 per cent controlling interest in PI, financed by two lenders who put up the $100-million purchase price based on collateral Ng did not own or control.
“With respect to the respondent, the notice of hearing alleges that the respondent perpetrated a fraud as he directly and actively participated with Mr. Ng in the falsification and distribution of false and/or fictitious account documentation to the lenders,” the regulator’s decision on the merits states.
Although Metcalfe asked the regulator to consider that he acted under instructions and pressure from Ng and that his actions were carried out under duress, the panel found that Metcalfe signed pledge agreements on behalf of PI, despite the fact that the documents were falsified and despite the fact that he had no authority to sign such a document on behalf of the firm. The account statements sent to the two lenders were in fact based on the accounts of PI Financial clients, some were altered to show a 10-fold increase in the account’s market value, and Ng also pledged the same collateral to both lenders, telling them that this was done in error.
“This was not an error. Mr. Ng, despite not actually owning the J Accounts, had purported to pledge them to lender two without disclosing to lender two the prior security interest thereon which had been granted in favour of lender one,” the decision states.
The panel further found that Metcalfe was an obviously willing participant in the scheme to convince the lenders. Evidence also demonstrated that Metcalfe’s claims that he did not have any discussions with the lenders were also false.
“The evidence before the panel clearly confirms the finding of the report of a special committee of the board of directors of PI, dated May 13, 2020, which concluded that the actions of Mr. Ng and the respondent involved fraud and forgery and are egregious and willful.”