Dundee agrees to sanctions in RRSP scam

(August 12, 2003) Dundee Securities has agreed to review its compliance procedures and pay $150,000 in costs after one of its registrants apparently masterminded a scam involving the purchase of shares using funds in locked-in RRSP accounts. The Ontario Securities Commission (OSC) says Brian Verbeek processed hundreds of transactions worth more than $17 million while working at three different firms from 1998 to 2001.

The OSC is continuing its investigation of Verbeek, who is no longer working in the industry. “The case is not closed,” says Frank Switzer, the OSC’s director of communications.

The OSC says from 1998 to 2001, newspaper ads were placed across Canada offering “fast financial assistance” to people wishing to access funds in their locked-in RRSP.

Under the scheme, clients liquidate the money in their locked-in RRSP accounts to purchase stocks, usually in a start-up company chosen by the promoter, who loans 60% to 70% of the value of the investment and keeps the balance as an “administration fee.”

“The reality is that the stocks the promoter recommends are virtually worthless,” the OSC says in a scam warning posted on its Web site. “You often get no funds from the promised loan, and you may be forced to pay tax on the de-registered money even though you did not receive it.”

The OSC says CCRA is in the process of identifying and notifying victims of the scam, usually low-income earners who were in financial difficulty.

Verbeek was with Dundee for less than a year, joining the firm from Fortune Financial, which was acquired by Dundee in 1999. He resigned from Dundee in May 2000 and moved to Buckingham Securities later that summer. Verbeek was fired by Buckingham in 2001 “due to numerous client complaints,” the OSC says. Buckingham’s registration was suspended by the OSC that same year.

Although Dundee agreed it failed to adequately supervise Verbeek and his suspect transactions, the firm was unaware of the scheme. In fact, after the OSC issued an investor alert about locked-in RRSP scams in 1999, Dundee’s senior vice-president of compliance went to Verbeek’s office to show him a copy of the warning. Verbeek told the Dundee exec that he was not involved in any loan arrangement with clients and that he was not receiving commission for those types of transactions.

Still, the OSC says the more than 250 new client application forms submitted by Verbeek should have raised some red flags at Dundee. “Despite the fact that Verbeek denied any knowledge of any loans, Dundee did not adequately follow up with concerns regarding Verbeek’s involvement in these transactions.”

Filed by Doug Watt, Advisor.ca, dwatt@advisor.ca