Pace Securities | Page 15 | General financial discussion | Discussion forum

Douglas Thomson said
Worth noting that there are dozens of angles of potential remedy here, as varied as each of our particular circumstances (you don’t need to convince an anonymous forum poster that you have a legitimate claim). Make complaint(s) to a legitimate body, and retain experienced legal counsel. Satisfy yourself that you did everything you could.  

Thanks Douglas.

Start here if you are new to the forum or just haven't done so already:
FSRA: contactcentre@fsrao.ca,
IIROC: investorinquiries@iiroc.ca
Ontario Securities Commission OSC: inquiries@osc.gov.on.ca
ombudsman@obsi.ca

Send them details of your experience with PCU and PSC. Include the following:

1. Who you are? Give as much info as you feel comfortable sharing.
2. How did you learn about PFL or FHH investment? For example: Advisor called you, TV ad, bank poster, teller, brochure, etc.
3. What did you think you were buying? For example: GICS, bonds, preferred shares, etc.
4. What you asked to buy, but what you were actually sold? Disclose the $ amount (optional).
5. Where did you purchase them? location, branch
6. Who was your salesperson or advisor you dealt with?
7. What documents do you have from these investments? Do you have a New Account Form, Purchase Agreement, Offering Memorandum, etc.?
8. Some of the lies that were told to you that you are discovering now.

Elaine said
I would just like to let everyone know that I received an email version of what I
bought from Pace Credit Union today.
I scanned it briefly and saw the same name at the bottom as other people have had as an advisor.Although IIROC has said that he was not registered with them.So a Pace Employee at the time of sell.I am an accredited investor.The whole thing makes me sick.I was never given a copy although it says clearly that the client needs to be given a copy to make the transaction valid.
This person has a lot to answer for.
H.M.

Glad you are able to finally get a copy of your purchase documentation.

One doesn't have to be registered with IIROC to sell private shares like those PACE Financial preference shares. Anyone can sell an unlimited amount to an investor when the investor is an "accredited investor" or is a "family, friend, or business associate" of the issuer of the shares.

These two schedules are used to determine which of the four classes the investor is in.

They seem to have really been trying to cover themselves on their documents with this clause

"However, in the event that a Liquidity Event occurs on or before December 31, 2020, the Redemption Date will be extended indefinitely and the Issuer will not be obliged to redeem any of the Series A Preference Shares prior to liquidation, dissolution or winding up of the Corporation.
Liquidation or Winding Up: On any liquidation or winding up of the Corporation, the holders of Preference Shares will be entitled to distribution out of the assets and property of the Corporation available to its shareholders, in priority to distributions to the holders of any other class of shares, but concurrently and pro rata with distributions to holders of all other series of Preference Shares, the Redemption Amount (namely, $10.00 per share) plus all accrued and unpaid cumulative dividends thereon."

The only thing is that the liquidators need to determine exactly how much is left and the regulatory and potential criminal investigation will have to determine if money was looted with "management" fees in excess of the agreed upon terms as well as whether or not the manager went rogue and violated their investment mandate which raises a whole other liability in addition to the PCU sales activities.

This all looks very ugly and it's interesting to note that Ernie Eves, the former politician, was a Director and Board member of PSC. I wonder what he has to say?

Perhaps we'll have wait and see what the liquidators find as well as the result of the IIROC disciplinary hearing to see if there will be any criminal investigation and grounds for potential lawsuits.

I'm sure we'll be reading about this in the papers again soon.

Quoted from above”I was never given a copy although it says clearly that the client needs to be given a copy to make the transaction valid.”

I have spoken with several other members who also did not receive anything and did not even see the O.M. until it was sent AFTER they signed up so this is clearly a violation that occurred in the various PCU branches. Now I’m not sure if this technicality is enough to make PCU want to settle and make everyone whole after determining the final share valuation, but if they “actually value” their members, they’ll do something to fix it as it’s a lot cheaper than being sued.

Bill said
Not necessarily cheaper than being sued, as Norman1 has already pointed out a court may well find PCU only partly responsible (the adults who freely entered into contracts they later regretted may also be partly responsible for their fates) and thus may only have to pay that % of any losses suffered. I'm sure PCU and its lawyers are costing out the various options available to them, they'll do what they think will be least injurious to the business's bottom line in the long run.  

Having PCU pay the % of losses suffered would essentially make all affected members (and angry employees) whole. If they did that, it would greatly rebuild their reputation instead of being the Enron of Credit Unions.

Of course we have to see what remaining value remains in the shares and then fund the difference which result in happy members and employees.

Bill said
Investor1, what I meant was if the courts find PCU to be (just to use a hypothetical example) 50% at fault and the investors also to be 50% responsible for their losses, i.e. each was equally negligible, then PCU would have to pay half of the total losses suffered. The range can be anywhere from 0% to 100%, for either party.

PCU needs to take all its stakeholders' interests, including its other customers (who may be faced with extra fees, lower deposit interest rates, etc) into account in deciding who should bear a portion or all of any costs PCU may be liable for in this matter.  

Also on terms of liability, the portfolio managers at PSC and the support bankers at Laurentian Bank Securities (LBS) are certainly responsible to varying degrees yet to be determined.

For example, and before anything else, I am well aware that mortgages and insurance are not regulated the in same way as derivatives, but if for example, someone obtains a mortgage (leverage) to buy a property, the mortgage lender usually requires some form of insurance to cover the payments if buyer cannot pay.

Now, when using leverage to purchase bonds, why didn’t the PSC fund managers, especially the Chief Risk Officer ensure that they had adequate capital reserves in the event of a margin call (Capital adequacy/ Stress tests) or other derivative coverage in the form of put options if they didn’t have adequate capital reserves?

Second, PCS appears to have only dealt with LBS during its operating life. Why didn’t LBS have some form of risk control for its client PCS as they would have seen the entire PCS risk profile. Although LBS is not regulated like the mortgage example above, they should have also ensured that their client, PSC covered their leveraged positions with either adequate capital reserves or put options.

It appears the LBS made the margin call that hurt PSC, but why didn’t PSC have fail safes in place to prevent this and why didn’t LBS have some other fail safe of their own in place since they appear to be the only bank that handled PSC and thus had a full view of PSCs operation.

Obviously a preventative remedy on the part of PSC would have been ideal in the form of adequate capital or covering puts, but LBS clearly saw their clients risk profile and should also had some form of preventative remedy on the form of requiring capital reserves or puts.

Perhaps LBS didn’t fulfill its responsibility to its client PSC by providing adequate risk monitoring before the making the margin call. Also, was the margin call the only option? Could LBS or even PCU given PCS some form of bridge loan to prevent the rapid fire sale of leveraged assets?

One more item of concern. During the life of PSC, several risk reports were written by third parties that indicated that PSC was low to moderate risk even in April this year I believe )according to the Globe article). So did PSC hide something from these third parties who wrote these reports and who exactly paid for them to write these reports?

I’m not trying to make any conclusions here based on the limited information I have, but it is clear that several parties are involved and we have yet to determine their varying degrees of responsibility.

Bill said
Investor1, a court (not "we") will decide responsibility. Aggrieved investors need to decide if they're going to sue everybody in sight or be more focused, guess their lawyers will guide them. There may be other lawsuits among LBS, PCU, etc but investors need to decide who in particular they think wronged them. Or else hope that PCU will make good due to regulatory action or as a pr move.  

Agree it will be the courts that decide proportionality between the entities. The investors' beef is with PSC and perhaps PCU. I am guessing LBS was the carrying broker and PSC the introducing broker. LBS simply provided back office operations and the margin loan. IMO, they really shouldn't be the target of the investors. Both LBS and PSC would be well aware of margin loan terms, and given leverage was 3 to 1, it wasn't going to take much of a market value drop in the underlying securities for LBS to exercise its right to call the loan or for PSC to provide more capial. PSC was simply far too leveraged. One big mess.....

Norman1 said
Laurentian Bank Securities is registered as an investment dealer. PACE Securities was registered as both an investment dealer and an investment fund manager.

The investment fund manager is supposed to understand the risk of leveraged speculation, not the carrying broker who is executing the trades and providing backoffice services.

It is ludicrous to say that Laurentian Bank Securities had suitability responsibilities to PACE Securities. It is like suggesting that the wrench salesperson is somehow responsible for a botched brake job by a licensed mechanic.

As an investment dealer itself, PACE Securities ought to have known how margin loans work and how short the time frame (as little as one trading day) is to meet a margin call.  

++++ Agreed

I finally got a copy of the thing I signed.
An email copy and a hard copy.No original.
First time I have seen it since January 2018.
The top signature is mine but going along there are some and at least one that is NOT mine..(but my name)
Anyone have any idea on how to proceed with this?
Just go to the cops?
Get a lawyer?
Ask Barbara and Terri?
The one handwriting analysis place I contacted wanted 800 bucks for 4 hours work on it.I am sure they do a good job-but I don't know who would accept their report and I am sure courts have their own.And 1 grand is just the start-if they have to go to court it adds up from there.
So since the salesguy was from Pace Credit Union there is a bit of liability involved if in fact it is a forgery,I would imagine.And the stress I am under gets worse and worse the longer this goes on.Adds to the pain of the Atypical Trigeminal neuralgia.
And because I was never expected to get the form I guess it was just get it done by the salesguy.A Pace Credit Union Salesguy.
Still haven't got any bonds-that would have ruined the illusion.