The British Columbia Securities Commission (BCSC) has entered into a settlement agreement with former portfolio manager, Albert Alan Housego, after Housego admitted he failed to properly assess if certain investments were suitable for his clients.
With Crystal Wealth Management System Limited, an Ontario corporation acting as the investment fund manager for 15 of its own proprietary funds (Crystal Wealth was registered in British Columbia as an exempt market dealer and portfolio manager until 2017), Housego managed accounts on a discretionary basis for at least 487 clients. He also managed four out of the 15 funds operated by Crystal Wealth in British Columbia, including a factoring fund, a hedge fund, a bullion fund and a resource and precious metals fund.
After a high-risk investment by one of his funds defaulted, Housego placed at least 260 of his clients in that fund, investing $985,000 in total. Housego also admitted that he breached his suitability obligations when he placed at least 323 clients into two other funds he managed, without understanding the structure, features and the risks of his own fund’s underlying investments. That group’s investments totalled $6.7-million.
In November 2015 the factoring fund advanced approximately $10-million – approximately 50 per cent of the factoring fund’s overall portfolio – to a gold mining company, which defaulted a year later. Instead of recognizing the loss, the fund extended the term by one year. The investment was also supposed to be insured by an $18-million performance bond with Crystal Wealth named as the beneficiary. That insurance was cancelled in November 2016 without Housego’s knowledge.
In the settlement agreement, Housego admitted that he knew the investment represented 50 per cent of the factoring fund’s overall portfolio, knew that the company had already defaulted once, knew that the insurance was cancelled and knew that the investment was high risk, but still placed at least 260 clients into the fund during the month that followed without maintaining sufficient information about some of the clients to assess whether the investments were suitable.
Earlier that same year, Housego was offered the opportunity to invest in gold subscription agreements. Without taking steps to understand the structure, features and the risks of the gold investment, he invested approximately $4.25-million from the factoring fund and the hedge fund before moving $6.7-million for at least 323 clients into the investment portfolio.
Housego has agreed to pay the BCSC $150,000 to settle the matter. In addition to the payment, he is also banned from trading or purchasing any securities or exchange contracts, except in one account in his own name, for 15 years. He is also prohibited from acting as a registrant, promoter or management consultant in connection with any activities in the securities market. “If Housego has not paid the sanction in full within 15 years, the prohibitions will remain in place until he does,” the BCSC writes in its agreement.
