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Email this10:26 am
May 19, 2020
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Norman1 said
Elaine said
…
This is sick and this was actually put on employees to do the dirty work.And employees are just like us.Did any of them object?Did any of them disappear somewhere else when an investment case was coming up?…How would the PACE Credit Union employees know those preference shares were crap?
Being able to read the offering memorandum and evaluate the risk of the underlying portfolio of high-yield bonds is a specialized skill. Those skills are not part of the requirements of a teller or loan officer.
It's not quite true that anyone can sell the preference shares. It depends on the investor class of the buyer.
Anyone can sell up to $10,000 to any buyer in a 12-month period for that buyer.
If the buyer is a "qualified investor," then anyone can sell up to $30,000 to the buyer in a 12-month period for that buyer. A "qualified investor" can be sold up to $100,000 in a 12-month period with suitability advice from a registered rep.
If the buyer is a "accredited investor" or is "family, friend, or business associate" of the issuer of the shares, then anyone can sell to the buyer with no limits.
If you were sold private shares above of those limits, by a non-registered person, then that would be an enforcement matter for the Ontario Securities Commission. The contact details are here.
Thanks Norman-will contact
12:02 pm
April 6, 2013
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Investor1 said
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However, PCU went ahead and shut PSC down before the lock in period ended which leaves everyone including many of their own employees out in the cold.This is where the liability begins for PCU as they are breaking the deal as investors were prepared to lock their money in for the long term, but the contract didn’t say anything about the parent company PCU having the right to shut PSC down while at the same time trying to pretend they have no relationship with them.
…
That windup right is implied by ordinary corporate law and the voting and non-voting rights of the different kinds of shares in PACE Financial and First Hamilton Holdings.
For example, in the First Hamilton Holdings documents Sheri mentioned, over 80% of the shares that were entitled to vote for the windup voted in favour. 
None of the First Hamilton Holding preference shares had the right to vote:
41. FHH has issued the following shares:
(a) 2,536,544 series A non-voting redeemable preference shares plus an equal number of warrants, issued as units at $10,00 per unit,
(b) 729,660 series B non-voting redeemable preference shares at $10.00 each,
(c) 17,000 class A non-voting shares at $0.01 each, and
(d) 1,010,000 class B voting shares at $0.01 each.
So, the company can be woundup without the approval of the holders of the preference shares, who are not entitled to a vote.
Essentially, the preference shares were locked in. But, the issuer of the shares was not and could exit by winding up the company with the approval of the class B voting shares. That's the actual deal that was agreed to.
The preferences shares are not like a GIC in which both parties are locked in.
It would be beneficial to see a lawyer with the offering memorandum and other documents to learn what the deal actually was.
12:12 pm
April 6, 2013
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Sheri said
…
My question is, will funds from the liquidation be returned to those that deceived us, mismanaged our investments, didn’t care enough to take care of their clients, and possibly if you read the IIROC investigation charges, took money for themselves on the backs of the unsuspecting investor? I don’t think they should be allowed to recoup any of their shares. Thoughts?
Yes, if each preference share were entitled to $2 after liquidation, then the PACE staff will also get $2 for each preference share they bought and still own.
Some PACE staff may have believed in what they were selling, not knowing better, and bought the preference shares too.
2:01 pm
June 22, 2020
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In the above scenario, the remaining $3 per share is the risk liability for PCU that they need to make up for or get sued for.
3:12 pm
May 19, 2020
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I definitely recall being at the Mississauga PACE Credit Union branch (around December 2017) where they had posters advertising PACE Securities preferred shares, 5% and bonus 2% dividend payout.
Does anyone have a photo of it? Or found it on the internet? If so, I would love to see it again.
3:36 pm
May 15, 2020
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Yes I fondly recall it there by the front entrance reception desk. But if it was out there on the net it’s likely been scrubbed as they say, nothing more to see here. Probably in a closet at head office though.
Speaking of, I find it odd that Mr. Eves uses their address for his foundation too. A worthy cause of course, just oddly coincidental. Wonder how much he has been affected by all of this.
4:32 pm
April 6, 2013
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Investor1 said
In the above scenario, the remaining $3 per share is the risk liability for PCU that they need to make up for or get sued for.
It doesn't work that way with corporate shares.
One would be entitled to "up to $5" on windup. Once the $2 is paid out, the preference shares legally "evaporate."
Interestingly, that and an explicit disclaimer of liability of the parent companies have actually been disclosed to investors on page 14 of the June 27, 2017 PACE Financial Preferance share offering memorandum that the liquidator E&Y included in Appendix B of its first report:
Limited Recourse: Recourse under the terms of the Preference Shares will be limited to the redemption price of the Preference Shares – namely, the subscription price plus all accrued and unpaid dividends to the date of redemption. The Issuer cannot redeem Preference Shares unless the Issuer can, at the time of redemption meet certain “solvency” tests under the OBCA. Pursuant to certain statutory tests in the OBCA, the Issuer must meet the following test – namely that, after payment of the redemption price, the Issuer will be able to meet its liabilities generally as they come due and the realizable value of its assets are not less than the aggregate of its liabilities plus the amount required to redeem all other shares ranking equal or in priority to the Preference Shares. There is no additional recourse by Preference Shareholders for any deficiency in value of the Preference Shares in the event of nonpayment or default by the Issuer of redemption of the Preference Shares – more particularly, the Issuer’s parent corporations (Pace Credit Union, Pace Securities Corp. and Pace General Partner Limited) will not be liable or in any way responsible for payment of any amounts to the Preference Shareholders, whether for dividends, redemption amounts or otherwise.
4:40 pm
May 19, 2020
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Norman1 said
Investor1 said
In the above scenario, the remaining $3 per share is the risk liability for PCU that they need to make up for or get sued for.It doesn't work that way with corporate shares.
One would be entitled to "up to $5" on windup. Once the $2 is paid out, the preference shares legally "evaporate."
Interestingly, that and an explicit disclaimer of liability of the parent companies have actually been disclosed to investors on page 14 of the June 27, 2017 PACE Financial Preferance share offering memorandum that the liquidator E&Y included in Appendix B of its first report:
Limited Recourse: Recourse under the terms of the Preference Shares will be limited to the redemption price of the Preference Shares – namely, the subscription price plus all accrued and unpaid dividends to the date of redemption. The Issuer cannot redeem Preference Shares unless the Issuer can, at the time of redemption meet certain “solvency” tests under the OBCA. Pursuant to certain statutory tests in the OBCA, the Issuer must meet the following test – namely that, after payment of the redemption price, the Issuer will be able to meet its liabilities generally as they come due and the realizable value of its assets are not less than the aggregate of its liabilities plus the amount required to redeem all other shares ranking equal or in priority to the Preference Shares. There is no additional recourse by Preference Shareholders for any deficiency in value of the Preference Shares in the event of nonpayment or default by the Issuer of redemption of the Preference Shares – more particularly, the Issuer’s parent corporations (Pace Credit Union, Pace Securities Corp. and Pace General Partner Limited) will not be liable or in any way responsible for payment of any amounts to the Preference Shareholders, whether for dividends, redemption amounts or otherwise.
In order for us to know about this "disclosure", we would have had to be GIVEN this Offering Memorandum, preferably (legally) before purchasing, but since we know how PSC did business; let's say even after, or even maybe a month later, or ever! Almost everyone I have talked to that's affected, did not get any OM.
5:09 pm
May 15, 2020
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Yeah that kind of fine print isn’t what attracted my confidence in Pace Credit Union actually. So while that may be matter of fact and no, obviously if I was provided something like that and told to read it or certain parts were pointed out as they have been here, I think anyone would have been able to make an informed decision to run. I think they will find a major problem with using that crutch.
But what was and clearly still is projected forth to the client is a little different, we’ll see how much of it rings true of the brand...
6:38 pm
June 22, 2020
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The Limited Recourse clause above does not mention anything about dissolution by the parent company (PCU) which is exactly what happened.
This is what will give rise to the liability risk and class action if it isn’t resolved In favour of affected members and employees.
6:56 pm
May 15, 2020
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And the fact that those decisions were made in Q4 2019 when they saw the writing on the wall. Surely there was an obligation to tell us what was going on. Someone chose to let things ride and kept it between the execs of the two organizations while the lawyers went over what to do. Then things got substantially worse through Q1 2020. It’s going to all come out in the wash soon enough and that rinse cycle can be clean or it can get as skunk as it needs to be. Count on it.
I like the word Ethical in this document the most:
https://www.pacecu.ca/SharedContent/documents/PACESecurities/MediaRelease.pdf
7:05 pm
June 22, 2020
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Yaftica said
And the fact that those decisions were made in Q4 2019 when they saw the writing on the wall. Surely there was an obligation to tell us what was going on. Someone chose to let things ride and kept it between the execs of the two organizations while the lawyers went over what to do. Then things got substantially worse through Q1 2020. It’s going to all come out in the wash soon enough and that rinse cycle can be clean or it can get as skunk as it needs to be. Count on it.
Exactly. Especially when the new CEO decided to shut PSC down after only being on the job for 14 days.
10:32 am
May 19, 2020
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Waiting for Ontario Security Corp to get back to me.
Still waiting for Barbara Dirks to provide me with my contract and seeing they are having a really ,really hard time finding it I have asked for a blank contract.But not even a "we got your email and are looking into it"
.Might be time to go out and picket again.
I mean really-IIROC says that their people were not involved in the sale to me.
So who sold me 100 grand worth of something that they promoted as a GIC and then never gave me a copy of the contract-because I really don't have copies of contracts for my GIC's so why would I need one for this investment?
I guess they want me to lawyer up .I mean take my money and then have to lawyer up.People really ought to know what they get involved in when they deal with Pace Credit Union.
11:12 am
May 15, 2020
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I suppose it is possible Elaine that your funds were moved into or allocated to preferred shares sometime after the GIC deposit was made. In my case my TFSA was transferred into the organization, allocated to Fidelity Mutual funds (100%) then a few months later they mysteriously migrated into Pref Shares without my knowledge until realizing something was seriously wrong when the statements showing market value were substantially less.
I theorize they never closed an account that I had opened two years prior but liquidated in 2019 by request. The advisor was looking for a quick commission from a first time investor who wouldn't notice the difference in equities anyway, moved my deposit from mutual funds into the Pref Shares without any authorization obviously.
Perhaps yours was operating within the same set of ethics... those commissions were likely tough to ignore for these people, I can see where the incentives may have easily formed the intent to deceive wherever possible, seeing it as a short term move anyway until they had to be brought back out into the accounts. Much more to be uncovered here...
11:50 am
April 6, 2013
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Elaine said
Waiting for Ontario Security Corp to get back to me.Still waiting for Barbara Dirks to provide me with my contract and seeing they are having a really ,really hard time finding it I have asked for a blank contract.But not even a "we got your email and are looking into it"
.Might be time to go out and picket again.
I mean really-IIROC says that their people were not involved in the sale to me.
So who sold me 100 grand worth of something that they promoted as a GIC and then never gave me a copy of the contract-because I really don't have copies of contracts for my GIC's so why would I need one for this investment?
…
How did IIROC determine that it wasn't someone registered who sold those PACE Financial preference shares to you? Was IIROC to obtain the name of the person?
That person must have been a PACE Credit Union employee, if it wasn't a PACE Securities representative. We had thought that only a registered person could sell those shares. However, we now know that unregistered people can sell private shares under certain conditions. Maybe the person "misfiled" PACE Credit Union's copy of the purchase agreement to hide their involvement.
PACE Credit Union would need to keep a copy in case the OSC came calling and wanted to verify that the selling limits for unregistered sellers were being respected.
Regardless, the original purchase agreement, documentation to determine your investor class, and the money would have been sent to PACE Financial to complete the purchase. Perhaps, PACE Credit Union could not find their copy of the purchase documents and are now working with the E&Y staff, who are liquidating PACE Financial, to get a copy.
12:00 pm
June 22, 2020
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It’s bad enough if they sold these products to unsuspecting customers, but if they moved your funds into this product without your knowledge then it’s an even bigger problem.
Also, if they find a persons contract, that is also a major compliance issue for lack of proper record keeping.
The new CEO Barbara Dirks really needs to fix this before a class action and/or negative publicity harms the credit union any further.
Hopefully the CEO will get back to you and not hide behind a general email box.
An angry upset employee who has a lot of shares told me that the CEO’s direct email address is bdirks@pacecu.com
It doesn’t look good for PCU to hide behind layers of legalize when they hurt their own employees.
They could regain the trust of the public and their own employees if they take appropriate steps to make everyone whole.
1:01 pm
May 15, 2020
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Yes - something tells me I'd be cringing if I was the legal team now trying to advise the board on this when it also involves employees who have lost their life savings within this scheme of confidence. In fact I'd probably be looking at calling the police shortly for more than the obvious reasons, this is no laughing matter anymore.
The ship is taking on water Captain we're well beyond what we ran into a while ago here... And it appears we're beginning to lean quite substantially. Is there a plan? Captain Schettino ?
7:34 am
May 15, 2020
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Some additional food for thought here? (as in why weren't the investors wrapped up in these preferred shares told they took a dive in valuation to $4 last fall when both the Credit Union and Pace Securities were most certainly having discussions about their future positions)
Forgive my novice explanation & understanding here but this is what I've come to understand. In November 2019, apparently Pace changed the way they price such securities, including PACE Financial Limited.
What is matter of fact is that a third-party firm, RSM Canada was hired to value PACE Financial Ltd. Their valuation was based on what is 'reasonable' using their assumptions on what one would be willing to pay for the shares at a particular point in time, which was back in August actually... After that process apparently... It was decided to obtain third party valuations annually.
The valuation included a calculation that discounted the income stream produced from PFL’s holdings until maturity. The difference between the original offering price and the dropped price was this different discount rate. As the shares were to approach maturity, that gap between the rates was presumably going to decrease & return to par... but I guess other reasons were found as to why that was or became impossible.
Apparently it wasn't to change the fact that they would continue to pay the dividends on the shares at the price issued either...
So yes - sort of information which should have been broadcast / disclosed back then to help clients make an informed decision would be one inclination? Is that a form of negligence? Maybe a report from these people exists but its likely under the carpet at the moment...
10:11 am
April 6, 2013
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Yaftica said
…
So yes - sort of information which should have been broadcast / disclosed back then to help clients make an informed decision would be one inclination? Is that a form of negligence? Maybe a report from these people exists but its likely under the carpet at the moment...
There's no negligence when there is no obligation.
Other than what was specifically agreed to with shareholders, issuers of private shares have no reporting requirements. There's no obligation for a private company to file quarterly reports with the provincial securities regulators or issue press releases when there is a material change, like publicly traded companies do.
As for the valuation, it is a worthless distraction. Besides the crap terms, the preference shares were not freely transferable. No one was going to buy those shares from you for $5/share or even $1/share.
The valuation just a number to put on a quarterly statement instead of $0.00. The valuation is like those worthless $10,000 appraisals on a wedding ring that has no buyers willing to pay $10,000 for the ring.
10:33 am
May 15, 2020
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There's no negligence when there is no obligation.
Other than what was specifically agreed to with shareholders, issuers of private shares have no reporting requirements. There's no obligation for a private company to file quarterly reports with the provincial securities regulators or issue press releases when there is a material change, like publicly traded companies do.
As for the valuation, it is a worthless distraction. Besides the crap terms, the preference shares were not freely transferable. No one was going to buy those shares from you for $5/share or even $1/share.
The valuation just a number to put on a quarterly statement instead of $0.00. The valuation is like those worthless $10,000 appraisals on a wedding ring that has no buyers willing to pay $10,000 for the ring.
Sure wish that was on the marketing material at the front door or clearly explained by the "Advisor" at some point, that perspective would likely have helped many make an informed decision. That appraisal may be worthless for sale however but it does allow you to buy insurance against that amount...
So the "new" marketing strategies with something like this product is within the realm of what you're referring to as an "obligation" to the client presumably ? Looks like lessons learned...
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