New Brunswick Securities Commission

Securities commission calls hearing for salespersons connected to alleged illegal distribution of securities (09/08/28)

NB 1232

Aug. 28, 2009

SAINT JOHN (CNB) - Four New Brunswick salespersons involved in the promotion of an alleged illegal distribution of securities issued by Centre de traitement d`information de crédit (CTIC) and CITCAP Groupe Financier (CITCAP), a shell company related to CTIC, are required to appear in front of a panel of the New Brunswick Securities Commission (NBSC) on Sept. 9.

NBSC staff have filed a motion alleging that Pierre Emond and Armel Drapeau, both of Edmundston, Jules Bossé of Saint-Jacques, and Robert Saintonge of Fredericton, promoted an illegal distribution of CTIC securities. Staff further allege that Drapeau promoted securities issued by CITCAP.

Staff claim that the distribution is illegal because no prospectus was issued by CTIC or CITCAP, and the companies did not properly seek any exemption to the prospectus requirement. Further, the trades were not conducted through any registered securities dealer.

Staff allege that CTIC and CITCAP paid sales commissions in respect to the respondents' participation, although in the case of Saintonge the sales commissions were directed to a third party.

In April 2009, the NBSC issued a consent order that denied CTIC and CITCAP all exemptions under New Brunswick securities law. The NBSC's order was followed in May 2009 by an order from Quebec's securities regulator, l'Autorité des marchés financiers, which declared that the Quebec assets of CTIC and CITCAP be frozen. In July, CTIC and CITCAP began bankruptcy proceedings. The NBSC's investigation into CTIC and CITCAP is ongoing.

NBSC staff believe that the CTIC and CITCAP distribution shows signs of a Ponzi scheme. The initial bankruptcy trustee indicates that money received from investors was being used to pay other investors. The scheme, which is still under investigation, is currently estimated to be in the range of $15 million, $5.7 million of which was in New Brunswick.

"Investors are cautioned to fully evaluate all investment opportunities, especially those that offer a guaranteed return with a high interest rate," said Rick Hancox, executive director of the NBSC. "Investors should know as much about the sale of the investment, including sales commissions paid, as they do about the business that the company operates."

Emond and Bossé were not registered to trade in securities at the time of their alleged participation in the distribution. Drapeau and Saintonge were both registered as mutual funds salespersons at the time of their alleged participation, but the trades were not conducted through their registered dealer. Mutual Fund Dealers Association of Canada rules require that all securities-related business conducted by registered mutual fund salespeople be conducted through their registered dealer. Drapeau is not currently registered.

Staff of the NBSC claim that the trading practices of the respondents were in direct breach of the Securities Act, and their conduct contrary to the public interest. In their motion materials, staff are asking that the respondents be denied all exemptions under New Brunswick securities law until the investigation is complete and a determination on any allegations is made. Staff have also requested that Saintonge's registration be suspended pending completion of the matter.

The hearing is open to the public. and will take place at 85 Charlotte St., Suite 300, Saint John, at 10 a.m.

Previous news releases on this topic may be found at CTIC, CITCAP seek bankruptcy protection, Quebec company admits to wrongdoing, and Quebec company allegedly offered securities illegally in New Brunswick.

The New Brunswick Securities Commission is the Crown corporation that regulates the securities industry in New Brunswick. It is funded indirectly by investors through industry. Its mandate is to protect investors from unfair, improper or fraudulent practices, and to foster fair and efficient capital markets, as well as confidence in those markets.

09/08/28

MEDIA CONTACT: Michelle Robichaud, communications officer, New Brunswick Securities Commission, 506 643-7045 or 1-866-933-2222, e-mail: Michelle.Robichaud@nbsc-cvmnb.ca.

09/08/28