On October 3, 2012, the British Columbia Securities Commission
found that Paul Stiles' craigslist postings for investments
with Velocity Entertainment Inc. ("Velocity") were
contrary to section 50(1)(d) of the BC Securities Act, which
prohibits a person intending to effect a trade in a security from
making a statement that the person knows or ought to know is a
Stiles' 2011 and 2012 craigslist postings represented that
Velocity was a film and television production house in Vancouver,
and sought investments from the public, guaranteeing 12% interest
on investments. Two Commission staff investigators, posing as
investors, corresponded with Stiles, who made further
representations about the investment opportunity, including
non-compounded annualized returns of 200% or 152%-203%,
respectively. Stiles had made similar postings in 2009 and 2010,
and received a warning from the Commission in 2009.
The BC Securities Commission issued a decision against Stiles,
who chose not to appear at the hearing. The Commission noted that
the investment posted by Stiles was both an "evidence of
indebtedness" and an "investment contract" and
therefore constituted a security under the Act. The Commission
found that Stiles made misrepresentations contrary to s. 50(1)(d)
in that Velocity, its address, and bank accounts did not exist,
contrary to Stiles' representations; in representing to the
first investigator that the loan would be secure; and failing to
disclose the risk associated with the loan to the second investor,
despite having been asked. The Commission further found that the
represented returns would be impossible to achieve without
significant risk, and that Stiles would have known that all of the
statements were untrue.
Fraud was not alleged, as neither of the investigators actually
sent funds to Stiles, and therefore the requirement of deprivation
was not met. Nevertheless, the Commission found that Stiles
attempted to commit fraud, which has "the same potential to
seriously impair the integrity and reputation of our markets as do
actual frauds, especially if it were to appear that attempted
frauds drew consequences significantly less serious than actual
In this vein, the Commission ordered that Stiles cease trading
(and is permanently prohibited from purchasing) in securities and
exchange contracts; is permanently prohibited from acting as a
registrant or promotor; is permanently prohibited from acting as a
director or officer of any issuer or registrant; is permanently
prohibited from acting in management or a consulting role in
connection with securities market activities; is permanently
prohibited from engaging in investor relations activities; and must
pay an administrative penalty of $35,000.
A full copy of the Commission's decision can be found here.
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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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