SEC permanently bans Hans Black

U S Securities and Exchange Commission (C:*SEC) 

Monday May 29 2017 - Street Wire

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by Mike Caswell

The U.S. Securities and Exchange Commission has permanently barred Montreal's Hans Peter Black from working in the investment industry. The regulator has found that he improperly funnelled money from clients of his Boston-area investment advisory service into risky Canadian penny stocks. He did so while failing to disclose $1.7-million in payments that he received from those same companies. (All figures are in U.S. dollars.)

The ban, handed down on Friday, May 26, comes on top of $8.8-million in penalties that the SEC previously won against Mr. Black and his firm, Interinvest Corporation Inc. The financial penalty was based upon the same events that led to Friday's ban. A federal judge found that Mr. Black improperly placed client money into four TSX Venture Exchange listings, with client losses amounting to $12-million.

Friday's ban order, which essentially repeats those findings, states that Mr. Black invested client money into the companies over a period of several years. He continued to do so despite direct requests to the contrary from clients. "Evidence of Black's interactions with individual investors confirms that he was willing to deceive them blatantly and repeatedly," the ruling states.

One retired investor specifically told Mr. Black that his risk tolerance was low and that he wanted to sell the gold companies in his portfolio. The judge has determined that Mr. Black dissuaded the investor from selling, claiming that the companies "produced a lot of gold." Mr. Black did this despite the fact that the two companies at issue, Tyhee Gold Corp. and Williams Creek Explorations Ltd., were losing money at the time. Moreover, Williams Creek had not advanced its properties into commercial production and was unable to finance its day-to-day operations. The investor later directed Mr. Black to sell Tyhee Gold shares again, but Mr. Black did not follow those instructions, according to the order.

Meanwhile Mr. Black failed to disclose that he was in a clear conflict of interest, the judge has found. He served on the boards of Tyhee Gold, Williams Creek and the other two companies listed in the order, Wi2Wi Corp. and Amorfix Life Sciences Ltd. The order states that he took active leadership roles at the companies and was able to influence investment and financing decisions. During his time at the companies, he collected $1.7-million in fees and expense reimbursements. He told investors none of this, the judge has determined.

Also misleading, in the eyes of the judge, was Mr. Black's advertising. Interinvest described its investment style as being conservative and risk-averse. Despite this, Mr. Black made investments in companies that he knew were unavoidably risky, the ruling states. He also invested in a company that was in financial distress.

Given Mr. Black's "egregious and recurrent" violations, the judge has determined that a permanent ban is necessary. As an investment adviser, Mr. Black was subject to a duty of "utmost good faith" and was required to make full and fair disclosure of all material facts. He failed in that regard, and he did not appear before the judge to explain his conduct, the decision states. For those reasons, the judge has permanently barred him from associating with an investment adviser, broker or dealer. The judge has also revoked the registration of Interinvest.

The ruling is an initial decision, which means that Mr. Black has 21 days to seek a review. If he does not do so, the SEC will make the order final. The ruling is also one by default, as Mr. Black did not participate in the case.

The SEC did not accuse the four TSX-V companies of any wrongdoing. In the days after the prior charges against Mr. Black, three of the companies issued news about him. Tyhee Gold said that it was contemplating what steps to take in light of the SEC's complaint. (Mr. Black later resigned.) Williams Creek announced that Mr. Black had resigned as chairman and as a director. Wi2Wi stated that Mr. Black no longer had any role with the company. By the time of the charges, he had resigned from the board of Amorfix.

https://www.stockwatch.com/News/Item.aspx?bid=Z-C:*SEC-2475030&symbol=*SEC®ion=C