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OSC charges Ontario fund manager with fraud

The OSC estimates investors lost $2.1-million (U.S.) in the scheme.

Peter Power/The Globe and Mail

Ontario investment fund manager Keith Summers has been charged with fraud after allegedly raising $4.7-million from investors using false information about the success of his trading operation.

The Ontario Securities Commission alleged Mr. Summers improperly sold securities of Tricoastal Capital Partners LLC and Tricoastal Capital Management Ltd., which he ran as the sole officer and director of both companies. He raised $4.7-million from nine investors in Canada and the United States between 2009 and 2013.

Mr. Summers, a resident of Kitchener, Ont., allegedly told investors he had $15-million to $20-million under management, the OSC said Monday, and was investing in an exchange-traded funds strategy. In fact, the commission said he had substantially less money under management and had quietly abandoned the exchange-traded fund strategy in 2012 after suffering large trading losses.

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His revamped strategy led to larger losses in 2012 and 2013, the OSC alleged.

"To conceal these losses, Summers continued to produce false monthly statements that did not accurately reflect the actual investor holdings by reporting gains each month when the fund sustained losses or was not trading," the OSC said in a statement of allegations.

When a large investor pressed Mr. Summers for audited financial statements, the OSC said he created false statements "on the letterhead of a fictitious auditor."

The OSC estimates investors lost $2.1-million (U.S.) in the scheme. It said Mr. Summers used almost $1-million of investors funds to pay his own personal and business expenses in excess of fees he was entitled to receive as manager of Tricoastal Partners. A further $1.2-million was lost in trading, while $1.4-million has been located in brokerage accounts and frozen by regulators to preserve the funds for investors.

The OSC charged Mr. Summers with fraud under the Criminal Code, while also simultaneously levelling allegations of fraud under the Ontario Securities Act. The criminal charges allow the possibility of a jail sentence or fine if Mr. Summers is convicted, while the Securities Act allegations would allow the commission to fine him or ban him from participating in the investment industry.

The investigation was conducted by the OSC's Joint Serious Offences Team, which was set up last year as a partnership between the commission, the RCMP and the Ontario Provincial Police to collaborate on criminal investigations.

The OSC said Mr. Summers co-operated with staff throughout the investigation.

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Editor's note: An earlier version of this story included an incorrect headline and body copy that said the RCMP had laid the fraud charges, when in fact it was the OSC.

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About the Author
Real Estate Reporter

Janet McFarland is the real estate reporter for The Globe and Mail’s Report on Business, with a focus on residential real estate trends. She joined Report on Business in 1995, and has specialized in reporting on corporate governance, executive compensation, pension policy, business law, securities regulation and enforcement of white-collar crime. More


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