A Victoria-area financial adviser has been accused of illegally selling more than $65 million worth of high-risk securities to hundreds of investors, many of them seniors, leaving a trail of financial devastation.
In a notice of hearing made public Thursday, the B.C. Securities Commission alleges that from June 2007 to December 2010, David Michaels — doing business as Michaels Wealth Management — advised 484 clients to buy more than $65 million worth of “exempt-market” securities without being registered to advise in securities.
The notice also alleges he “repeatedly and falsely” claimed that he gave up his earlier registration as a stockbroker because he had lost faith in the stock market when, in fact, he had relinquished his licence in the face of an investigation.
In earlier interviews, Michaels repeatedly said he never advised his clients to buy any of these securities.
But the B.C. Securities Commission notice tells a different story. It says Michaels targeted retirees through monthly seminars, a weekly radio show on CFAX and one-on-one meetings, and that he promoted the securities as being less risky than publicly traded stocks and, in some cases, recommended that investors borrow against their homes to finance the purchases.
The securities were, in fact, extremely risky. They included investments in a couple of oil-and-gas start-ups as well as a company that bought insurance policies at a discount from terminally ill people, and a long-term-care facility development in Sidney.
According to the notice, Michaels collected nearly $5.8 million in commissions and marketing fees from the issuing companies during the period cited by the commission.
For investors, the investments were disastrous: “Almost all of the roughly $65 million invested by Michaels’ clients is now worthless, leaving many of them destitute while their home-equity loans remain,” the notice alleges.
One of Michaels’ clients was 57-year-old Megan Hanwell of Victoria. After listening to Michaels’ program, she attended one of his seminars.
At his suggestion, she invested $120,000 in Focused Money Solutions Inc., a Calgary company that bought life-insurance policies at a discount to their face value from policyholders who wanted the money right away, rather than waiting until they died.
“That’s a lot of money for me,” Hanwell said. “It was my retirement money and my father’s retirement money.”
She said Michaels represented the investment as a safe way to earn a decent return. She was to be paid $1,000 interest per month, but after three months, the cheques stopped.
“I feel stupid and I feel duped. I thought I had done my due diligence,” she said.
Asked what she thinks of the securities commission action, she brushed it off as “too little, too late.”
Steve and Karen Hopwood, of Courtenay, said they attended one of Michaels’ presentations in Nanaimo in August 2009, where he was pitching the Bethel Centre long-term care development in Sidney.
On Michaels’ recommendation, they invested $100,000 in the project and were to receive 12 per cent per year ($1,000 per month). But after two months, the payments stopped; the project went into foreclosure.
They also invested $100,000 in an Oklahoma oil-and-gas deal called Pepper Creek Ltd. Partnership, which was to pay 15 per cent per year ($1,250 per month). It has also collapsed.
A hearing date has not been set. If the allegations are proven, Michaels could be permanently banned from the B.C. securities market.
He could also be fined $1 million per offence and ordered to make full restitution to his victims.
B.C. Securities Commission notice of hearing for David Michaels
