The operators of an unregistered, offshore firm that breached securities law in Alberta have been ordered to pay almost $2 million in sanctions by a regulatory hearing panel of the Alberta Securities Commission (ASC).
Last year, an ASC panel ruled that Glenn Hunter and Kyle Watters, along with their firms, HW & Associates Inc. and HW TradeFX LLC, violated securities law when they admitted to engaging in trading on behalf of investors without being registered as dealers.
The panel found that they raised about $20 million from investors in Alberta, British Columbia and Saskatchewan between February 2021 and 2023, and that most of the investors lost most of their money due to their failed foreign exchange trading. Approximately $1.8 million was returned to investors, the panel said.
Now, following a hearing on sanctions, the panel ordered that Watters disgorge over $1 million, pay a penalty of $150,000 and costs of $15,000. He was also banned from the markets for 20 years.
Hunter was banned for 16 years, ordered to disgorge $600,000, to pay a penalty of $125,000, and costs of $15,000.
The two companies were permanently banned.
According to the panel’s decision, ASC staff sought $300,000 penalties against both men, along with disgorgement and 20-year market bans. However, the panel found that they weren’t equal participants in the failed scheme.
“Although Hunter and Watters were equally to blame for engaging in misconduct and for their intentions, we conclude they were equal partners in name only,” the panel said in its decision. “Watters was clearly dominant in the actual trading as well as in the amount of money raised from investors.”
As a result, it ordered somewhat less severe sanctions against Hunter, noting that he was less involved in the scheme, and that he is, “less of a risk in the future because he is less likely to engage in such trading on his own.”
While it noted that the pair likely didn’t set out to breach securities rules, the panel concluded that their misconduct was “very serious due to its nature and extent … and the harm caused to specific investors and the capital market.”
The panel also found that they benefited from their misconduct through Trade FX receiving about $1.77 million in trading commissions, although much of that money was lost to failed trading too.
It also said that, while their conduct would usually attract larger penalties, both are facing financial difficulties — as a result, it imposed lower monetary penalties than ASC staff sought.
“Overall, we conclude that the sanctions for Hunter and Watters (and, through them, for the corporate respondents) must reflect the need for considerable specific and general deterrence, although less deterrence is required for Hunter,” it said in reaching its decision on sanctions.