BCSC alleges that Surrey investment management firm failed to carry out its duties and to ensure investments were suitable for clients

VANCOUVER, BC, Dec. 8, 2020 /CNW/ - The British Columbia Securities Commission (BCSC) alleges that a former registered investment fund manager and portfolio manager and two of its directors failed to exercise sufficient care, diligence and skill in calculating the value of one of its funds, and did not ensure that the fund was a suitable investment for clients.

Surrey-based Chartwell Asset Management Inc., which was also registered as an exempt market dealer, managed several funds. One of them, the Magna High Income Fund, loaned most of its assets – US$5 million – to Health Capital Receivables Funding Special Purpose Corporation I, by 2011.

The loan arrangement bore several indicators of risk. Health Capital missed payments or was late making payments, requested an extension or modification of the payment schedule, and didn't provide information about its finances.

The BCSC alleges that Chartwell calculated the net asset value of the Income Fund without having sufficient information about Health Capital. Chartwell also failed to re-evaluate the Income Fund's valuation despite the risk indicators.

Health Capital defaulted on the loan agreement in 2017, leading Chartwell to suspend client redemptions from the Income Fund.

The BCSC alleges that Chartwell violated the B.C. Securities Act's requirement that investment fund managers exercise "the degree of care, diligence and skill that a reasonably prudent person would exercise in the circumstances."

The BCSC also attributes the violation to directors Gregory Paul James Cameron of Surrey and Wah Bo Chew of Burnaby because they authorized, permitted or acquiesced in the alleged misconduct. Chew served as Chartwell's president, vice president and secretary; Cameron succeeded him as president and also served as its chief executive officer.

In addition, the BCSC alleges that Chartwell and two of its advising representatives and chief compliance officers – Matthew Evans Cameron of Surrey and Eric Mayrhofer of Coquitlam – caused 146 clients to be invested in the Income Fund without having sufficient information about the Income Fund's loan to Health Capital. By doing so, they breached their duty to take reasonable steps to ensure that the investment was suitable for those clients. Chartwell's alleged misconduct is also attributed to Gregory Paul James Cameron and Wah Bo Chew, for authorizing, permitting or acquiescing in it.

Chartwell surrendered its registration as an investment fund, portfolio manager and exempt market dealer in January 2020.

The BCSC's allegations against Chartwell and the four individuals have not been proven. The commission will schedule a hearing date in February 2021.

About the British Columbia Securities Commission (www.bcsc.bc.ca)  

The British Columbia Securities Commission is the independent provincial government agency responsible for regulating capital markets in British Columbia through the administration of the Securities Act. Our mission is to protect and promote the public interest by fostering:

• A securities market that is fair and warrants public confidence
• A dynamic and competitive securities industry that provides investment opportunities and access to capital

Learn how to protect yourself and become a more informed investor at www.investright.org

SOURCE British Columbia Securities Commission