A panel of the British Columbia Securities Commission (BCSC) has ordered FS Group to pay a total of nearly $37 million for the financial company’s part in making misrepresentations to hundreds of investors, illegally selling securities, and unregistered trading.
The panel ordered FS Group’s founders – Aik Guan “Frankie” Lim and Scott Thomas Low – to each pay $2 million. Both have also been banned forever from BC’s investment markets. The BCSC panel also ordered FS Group former general manager Darrell Wayne Wiebe to pay $75,000 and banned him from the province’s investment markets for at least 10 years.
On top of the individual penalties, BCSC ordered the FS Group to pay $32.8 million in disgorgement.
All three – Lim, Low, and Wiebe – ran FS Financial Strategies and six other companies under the FS Group label, which mainly operated in the insurance business.
According to a release from the BCSC, FS Strategies Services sold securities in the form of subscription agreements for units of 3i Capital; the company promised investors an annual return of 8%. Other FS Group companies convinced investors to purchase securities in the form of unsecured loan agreements, promising annual interest of 10% to 12%, payable monthly.
FS Group sold $29 million of securities without filing a prospectus. BCSC also said that some companies in the FS Group sold $32 million of those securities without the proper registration required to trade in securities.
The group admitted to raising more than $47 million from 389 investors from a period spanning 2012 to 2017 – without disclosing that the FS Group was not profitable, was not earning enough to cover for expenses and to pay investors, and that it was covering the shortfall by raising more money from investors, BCSC said.
BCSC determined that it is unlikely that the FS Group can repay investors what it still owed them. After the regulator issued a temporary order against FS Group in 2017, the Insurance Council of British Columbia suspended or terminated the licenses of Lim, Low, Wiebe, as well as each FS company that was licensed to sell insurance.
The regulator, in 2018, determined that FS Group had committed investment fraud.
“The seriousness of the misconduct was magnified by the significant amount of money and large number of investors involved, and the duration of the misconduct,” the BCSC panel said in a statement.
