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11 charged in Norshield scandal

Date: Thursday, April 1, 2010
Author: Nicolas Van Praet , Financial Post

Quebec’s securities regulator has launched penal proceedings against eleven individuals it says illegally sold four investment products linked to collapsed hedge fund Norshield Assset Management (Canada) Ltd.

The Autorité des Marchés Financiers said Wednesday it filed charges against the men in Quebec Court and imposed fines against them of $976,000. The charges are for having contravened securities regulations and are non criminal but police could eventually lay criminal charges in the case, said Autorité spokesman Sylvain Théberge.

“We’re talking here about smaller people” involved in the Norshield scandal rather than executives tied to the company itself, Mr. Théberge said. “But it was important for us to send a strong message that even [these lesser people] need to be condemned.”

The Ontario Securities Commission spearheaded the major investigation into the $1-billion hedge fund. It ruled earlier this month that three Norshield executives breached Ontario securities laws and compromised the integrity of Ontario’s capital markets in a complex investment scheme that allegedly fleeced retail investors of tens of millions of dollars.

Norshield executives John Xanthoudakis, Dale Smith and Peter Kefalas failed to deal fairly, honestly and in good faith with investors, the OSC ruled, while Norshield and related company Olympus United Group failed to keep and maintain proper books and records on the Norshield investment structure.

Norshield was placed in receivership in 2005 after a rush of client redemption requests. OSC officials say most of the $159-million plowed into the funds by 1,900 Canadian retail investors has been lost.