Vancouver-headquartered investment firm PI Financial Corporation was purchased under fraudulent pretences, according to allegations set out in a notice of hearing from Canada’s investment regulator.
The Investment Industry Regulatory Organization (IIROC) alleges Gary Man Kin Ng and Donald Warren Metcalfe duped their lenders, who assisted them in buying PI Financial in 2018 for $100 million.
Ng personally guaranteed the loans used to buy the firm, however, “despite his representations, Ng did not actually own, control or have trading authority over the securities accounts pledged as collateral,” according to IIROC. “Instead, ownership and control of the collateral was falsified by Ng and Metcalfe.”
Before buying PI Financial, which is said to employ over 300 people across Canada, Ng, 36, was an Approved Person and a Registered Representative for selling securities. He owned a Winnipeg-based firm named Chippingham Financial Group Limited via various corporate structures referred to by IIROC as the Ng Group. In November 2018, Ng, through the Ng Group, acquired a 100% controlling interest in PI Financial, IIROC stated in a notice of hearing that has scheduled a preliminary appearance on January 6, 2021.
Ng is said to have borrowed $80 million from “Lender One” and $20 million from “Lender Two.”
As security for the loans, “Ng purportedly granted separate, unencumbered security interests to Lender One, and also to Lender Two, over collateral including certain Chippingham securities accounts (later PI Financial accounts) which were owned by him,” stated IIROC, adding such representations were fake.
Ng is accused of “vastly overstating” the value of assets in the accounts and altering securities account statements.
“Metcalfe also perpetrated a fraud as he directly and actively participated with Ng in the falsification and distribution of false and/or fictitious account documentation to lenders,” it said in the November 24 notice of hearing.
In addition to the $100 million to buy PI Financial, Ng and Metcalfe borrowed a further $40 million from Lender Two and then $32 million from a third lender – all based on falsified collateral.
Although PI Financial was 100% owned by Ng, company officials “became aware of the issues concerning Ng’s purported ownership of securities accounts at the end of January 2020, and immediately reported these matters to IIROC,” the notice states.
Both men failed to attend an interview with IIROC enforcement staff over the summer.
IIROC said, “Ng, who was born in 1984, represented himself to others as an extremely successful businessperson who created enormous personal wealth through highly successful technology, real estate and manufacturing investments in Canada and China.”
At the time of the PI Financial purchase, Ng spoke of the deal with BNN Bloomberg, whose hosts noted how unique the deal was, given most investment firms are bought by large corporate entities, not individuals.
Metcalfe, meanwhile, was someone who worked initially with Ng at Chippingham.
Some details of the alleged lies are outlined in the notice. For example, several accounts Ng purported to have a value of $91 million actually had a value of $1.9 million.
IIROC proceedings are civil and not criminal. Should the allegations be proven, Ng and Metcalfe face any of the following corrective measures: a reprimand; disgorgement of any losses; a maximum $5 million fine; suspension or prohibition of activities; and a permanent ban from the industry.