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Posts tagged ‘BCSC’

Now on video: The BCSC’s fraud awareness musical

March 18th, 2016

by Greg Klein | March 18, 2016


And you thought those stuffed-shirt compliance officers had no sense of fun. Much to the surprise of patrons at a Victoria coffee shop last week, the British Columbia Securities Commission staged a two-minute musical. The purpose? To warn about some common investment pitfalls, especially the no-risk, high-return kind.

One of the most significant reasons people fall for investment fraud is that they can’t actually recognize an outrageous offer when they see one.—Paul Bourque,
BCSC executive director

“One of the most significant reasons people fall for investment fraud is that they can’t actually recognize an outrageous offer when they see one,” said BCSC executive director Paul Bourque at the video’s March 17 premiere.

“A good rate of return in today’s markets is 4% or lower,” he added. “Not knowing this can make it hard to evaluate much higher returns if someone presents them as an opportunity. If you are offered an investment with high returns and no risk, or that is offshore and tax-free, it’s a scam. You should reject the investment and report it to the BCSC immediately.”

The musical marks the latest feature of the BCSC’s BeFraudAware campaign. Launched in 2011 and emphasized during Fraud Prevention Month, the program uses the Web, TV, radio and print to encourage people to take precautions before investing and to tip off the commission about known or suspected frauds.

Visit the BCSC’s fraud awareness portal.

Visit the Canadian Securities Administrators’ investor awareness site.

Week in review

March 8th, 2013

A mining and exploration retrospect for March 2 to 8, 2013

by Greg Klein

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A city built on gold—and smuggling

“I didn’t ‘out’ anyone in the book and it wasn’t my intention to do that,” said Timmins journalist Kevin Vincent. “If I outed one prominent businessperson, I would have to out everyone in Timmins.” Discussing his book Bootleg Gold in Tuesday’s Northern Ontario Business, Vincent recounted what was once the mining town’s second-largest industry.

A mining and exploration retrospect

“A large percentage of the prominent business community has its roots tied to the gold-smuggling industry,” he told the paper. “In the 1920s, ’30s and ’40s, there was so much gold here every business had to have a set of scales under the counter. If you didn’t, you weren’t in business.”

Highgrading, as it was called, started with miners stealing small amounts, which they sold on a well-organized black market for 50%. “Shift bosses, mine captains and even mine managers were also involved,” Northern Ontario Business stated.

“When the gold was all put together, it was really compiled by just a handful of individuals and they controlled everything,” the paper quoted Vincent. “If you tried to move significant amounts of gold outside of their operation you ran a real, serious risk. Everyone knew it was going on and there were rules of engagement you had to follow.”

The endeavour was pervasive, with spinoff opportunities for seemingly everyone. One way of sneaking loot out of the mine was “inside false teeth constructed by local dentists,” the paper reported.

Due diligence defends against dirty deeds

March has been proclaimed Fraud Prevention Month by Canada’s 13 securities commissions. The regulators have a number of public awareness programs underway, including a provincial tour by the Ontario Securities Commission which highlights the agency’s new Office of the Investor, “the voice of the investor internally at the OSC.” On Tuesday some agencies, including Quebec’s l’Autorité des marchés financiers, cautioned would-be investors to check the registration (here and here) “of any firm or individual selling securities or offering investment advice.”

The following day the British Columbia Securities Commission announced two new features to its Investright program—a guide to private placements for retail investors and a mobile app providing investment advice and up-to-the-minute scam alerts. Like its Ontario counterpart, the BCSC has its own roadshow, this one exposing the province’s top 10 scams.

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Week in review

January 25th, 2013

A mining and exploration retrospect for January 19 to 25, 2013

by Greg Klein

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Canadian company’s employees still held hostage in Colombia

Kidnappers continue to hold five workers abducted from Braeval Mining’s TSX:BVL Snow Mine project in Colombia. According to a Thursday story in Colombia Reports, two Colombian hostages are being held separately from two Peruvians and a Canadian. The government has offered a cash reward while the army said it has 2,700 soldiers searching for the victims.

A Monday Colombia Reports article said soldiers had arrested three of the 20 to 25 kidnappers. The story gave the victims’ names as Canadian Jernoc Wobert, Peruvians Jose Manami and Javier Ochoa, and Colombians William Batista and Manuel Francisco Zabaleta.

Rebels abducted them on January 18 in northern Colombia’s Bolivar department. Among grievances cited by the kidnappers, the National Liberation Army (ELN) listed unequal distribution of mining rights, stated Colombia Reports.

Most Mali operations safe so far

A mining and exploration retrospect

“If you are still in Mali, you should leave immediately,” Canada’s Foreign Affairs department warned on Sunday. But Tuesday’s Toronto Star reported that work continues in most of southwestern Mali’s mining operations while French-led forces battle rebels hundreds of kilometres away. Over 15 Canadian exploration and mining companies operate in the country although some, especially in the northeast, have suspended work.

Endeavour Mining TSX:EDV Neil Woodyer described the turmoil as “part of the nature of the beast, as far as we’re concerned, being miners.” But his company’s properties, like most of Mali’s advanced-stage projects and operating mines, are in the southwest.

Mali is Africa’s third-largest gold-mining country, the Star reported. According to a 2008 estimate cited by the CBC, about 17% of the country’s government revenue comes from gold mining.

BCSC finds sloppy disclosures an ongoing problem

NI 43-101 regulations govern not only news releases and technical reports but also company Web sites, speeches, corporate presentations and other communications considered to be voluntary disclosures. But that fact sometimes slips the minds of company officials.

Of a sample of companies reviewed by the British Columbia Securities Commission between 2009 and 2012, only half met 43-101 standards in their voluntary disclosures. According to the BCSC 2012 Mining Report released Thursday, the problem is especially apparent when reporting PEA results, historic estimates, quality control, lab procedures and identifying the qualified person who takes responsibility for the information.

Yet compliance in non-voluntary disclosures is hardly reassuring. Only 65% of companies made the 43-101 grade. PEAs were especially problematic, flunking out in more than half of all cases for both voluntary and compulsory disclosures. A lack of cautionary language was the most frequent reason.

Non-compliant data verification, resource and reserve estimates, pre‐feas and feasibility studies also raised concerns. A common problem with resource estimates was totalling all categories instead of segregating the inferred numbers.

Among other monitoring activities, the commission targeted 82 companies between February 2011 and September 2012 that were selected because of “poor disclosure we observe in e-mail blasts, news releases and paid promotions on industry‐related Web sites,” the report stated.

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Geologist faces jail

September 18th, 2012

QP admits fraud, prosecutor wants 10 years

By Greg Klein

The former head of gold exploration company Southwestern Resources faces a possible 10-year prison term, the Vancouver Sun reports. John Gregory Paterson, who was the company’s president, CEO and largest shareholder, pleaded guilty to four counts of fraud involving false assay results from the Boka Gold Project in China. A sentencing hearing is underway in Vancouver.

But the process of justice has been slow. As Sun columnist David Baines reports, Paterson scammed shareholders from May 2003 to February 2007, when he issued 25 press releases reporting 446 assay results—of which 433 were fictional. Paterson was the qualified person who signed off on the phoney numbers.

He managed to continue his fraud during a 2005 PEA. His numbers were used to estimate a resource of 966,000 gold ounces indicated and four million ounces inferred.

QP admits fraud, prosecutor wants 10 years

A multi-million-dollar fraud involving false drill results could bring the former head of Southwestern Resources a lengthy prison term.

It was only in 2007 that Southwestern executives and board members became suspicious about persistent delays in completing a pre-feas. In June of that year they launched an internal investigation. Paterson resigned. A delegation to China failed to locate Project Manager John Zhang, who received half a million dollars from Paterson.

The Crown prosecutor told court that Southwestern paid its CEO over $1 million a year from 2003 to 2005, rising to over $2 million in 2006. In his final year Paterson made $372,500 in salary and severance. He gained another $5.6 million by trading Southwestern shares through five brokerage accounts, the Crown added.

A class action lawsuit was settled in September 2008 for $15.52 million. The company put up $8.32 million while Paterson and his wife paid $7.2 million.

In June 2009 the B.C. Securities Commission slapped Paterson with a lifetime ban on trading, acting as a QP or engaging in IR activities. Shortly afterwards the Australasian Institute of Mining and Metallurgy revoked his membership.

The commission stated that due to the lawsuit, Paterson “is unable to pay the approximately $3.5 million to the BCSC that would have been required in this matter.”

The BCSC also found that on July 16, 2007 Paterson dumped 50,000 Southwestern shares at $5.96, knowing the company was about to come clean. When the news broke two days later, Southwestern plunged to $2.90, reducing its market cap by $157.7 million.

In May 2009 Hochschild Mining HCHDF, a JV partner with Southwestern in a Peruvian gold-silver project, took over the company for $0.50 a share. The deal totalled $22.5 million.

RCMP laid charges in December 2010 and the case came to court last September 17.

The sentencing hearing continues in Vancouver where, the Sun reports, Paterson is expected to dispute Crown statements about the extent of damage his fraud inflicted.