OSC seeks to muzzle Costello

(March 28, 2003) Financial commentator Brian Costello would effectively be prevented from conducting investment seminars, if an Ontario Securities Commission panel accepts the sanction recommendations of its staff, released today. The proposal suggests sanctioning Costello for a period of three to five years for failing to register as a financial advisor and seeks investigative costs of $300,000.

If the sanctions are approved, Costello would not be allowed to mention any specific securities in his seminars and would have to reveal that he has been reprimanded by the OSC, is not registered as an advisor, and is not qualified to recommend investments in specific securities.

Last month, the panel ruled that the popular media commentator violated the Ontario Securities Act by not registering as an advisor and failing to disclose numerous conflicts of interest.

Costello held a 47.5% interest in Ontario dealer The Financial Planning Group. OSC staff alleged that Costello conducted seminars arranged by FPG between 1994 and 1997 in which he recommended two limited partnerships, Synlan and Enervest, without disclosing he had a financial interest in FPG. Staff also argued that Costello promoted the investments in his newsletter, also without disclosing his personal stake.

Costello should also be forced to submit to an expert review of the practices and procedures he follows with respect to the content of all of his investment-related activities, such as seminars, speeches, newsletters, Web sites, and radio and television broadcasts, OSC staff says.

“You can’t punish him by taking away registration, because he’s not registered, so you have to put a box around him,” says OSC spokesperson Eric Pelletier. “They’re trying to prevent him doing the things he was doing.”

In its submission, OSC staff says the sanctions are “fashioned to ensure that the potential for Costello to engage in similar conduct in the future is minimized” and to deter others from engaging in similar conduct.

Joseph Groia, Costello’s lawyer, argues his client should not face any sanctions. “Mr. Costello’s past conduct is not such that it warrants the total devastation of his career allegedly for the protection of Canadian investors and public confidence in the capital markets,” Groia says in his written submission.

Hearings on the written submissions are scheduled for Monday.

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