A Halifax investment adviser’s “reckless arrogance” cost clients more than $36 million in investments, says the lawyer who is representing 29 plaintiffs in a lawsuit against the investment company.
“We will have to see what defence the defendants will come up with but I don’t think anyone would deny that our clients lost their shirts here and we say that is the responsibility of the defendants,” said Ian Gray, a partner in the Halifax law firm Walker, Dunlop.
Gray filed a lawsuit Monday in the Nova Scotia Supreme Court seeking more than $40 million in overall damages against investment adviser Fredrick Saturley, the High Tide Wealth Management company that he founded in 2010, and investment dealer National Bank Independent Network, the investment brokerage arm of National Bank of Canada.
Gray said his clients, primarily elderly Nova Scotia couples who were preparing for retirement or had already retired, invested tens of millions of dollars with Saturley and High Tide. The money was predominantly the life savings, retirement funds and planned inheritance of generally middle class and upper middle class individuals, Gray’s summary stated.
He said the greatest single family loss incurred was somewhere in the order of $8 million.
‘Risky investment strategy’
“Mr. Saturley has consistently pursued a very risky investment strategy,” Gray said at a news conference at the Lord Nelson Hotel in downtown Halifax.
In good times, pursuing the “strangle strategy,” can make a reasonable amount of money, Gray said. “but if the market takes a certain downtown, you are going to lose just about everything, as indeed our clients did.”
Gray described it as a strategy that requires a certain sophistication on the part of the investor and a stomach for losses, “a certain ability to bounce back from a catastrophic loss, which is precisely what our clients didn’t have.
“I have clients in their 60s, their 70s and in a couple of cases, their 80s. These are not the sort of people that I think anyone would advise to undertake risky, capital-intensive strategies in an attempt to make a killing. These are people who needed to play things safe and steady for retirement.
“But here is the important thing. That is what they thought they were doing. Mr. Saturley, our clients allege, said he would take care of them with conservative investments.”
All the while, he was independently going out and executing a very risky strategy and one that ultimately catastrophically exploded in his and his clients’ faces, Gray said.
Gray said Saturley and High Tide opened margin accounts in the names of his clients, which allowed it to trade on margin. The investment company purchased uncovered options and leveraged exchange traded funds, depositing them in clients’ accounts while the majority of clients were unaware of the high risks.
When the economy took a significant COVID-driven downturn in March, High Tide clients’ portfolios were quickly decimated. Not only did Gray’s clients lose entire life savings but in many cases they were left owing money, which had been borrowed without their knowledge or consent.
“Our clients were over-extended in a way that it should have been obvious that it was far too risky, the bank in our view acted precipitously and they didn’t have to do that. Mr. Saturley sets our clients up for the fall and the bank knocks them down.”
Ian Gray, lawyer
Eventually, despite some clients trying to satisfy hundreds of thousands of margin debts by deregistering RRSPs and obtaining lines of credit over a March weekend, National Bank Independent Network (NBIN) liquidated their assets.
Gray said no one could have predicted the economic downturn in March.
“But if you put someone in a very risky position where something going wrong will lead to catastrophe, eventually something will go wrong,” he said. “Our clients were over-extended in a way that it should have been obvious that it was far too risky, the bank in our view acted precipitously and they didn’t have to do that.
“Mr. Saturley sets our clients up for the fall and the bank knocks them down.”
NBIN was previously involved in the Knowledge House scandal, Nova Scotia’s last major investment case, and was ordered in 2015 to pay $3 million in punitive damages for its treatment of claimants.
Gray is also seeking punitive damages, court costs and interest, pushing the $36 million in losses to over $40 million in damages sought.
‘A catastrophe’
This is not Saturley’s first trouble with investments and unauthorized trading. He was fined $10,000, plus $5,000 in court costs, in 2004 while working for BMO Nesbitt Burns after a disciplinary hearing for unauthorized trading on multiple clients’ accounts. In 2008, Saturley’s clients with CIBC Wood Gundy lost millions of dollars as a result of a margin error. The investigation showed Saturley had engaged in unauthorized discretionary trading a second time. Still, he unsuccessfully contested his termination from Wood Gundy in the Nova Scotia Supreme Court.
“This was Mr. Saturley’s third bite at the cherry and once again, it was a catastrophe,” Gray said. “It is a problem that this person keeps coming back and running the same play and it keeps blowing up in his face.”
Gray said the industry has to take a harder look at people coming in rather than cleaning up after the fact.
“Should you get your licence back for having lost it for doing this and if you do get your licence back, what level of oversight are we going to impose on you,” Gray said.
He said the chief compliance officer of High Tide is Adrian Saturley, Fredrick’s son, which is “manifestly inappropriate.”
How is a son supposed to provide oversight of his father, who employs him, Gray asked.
Gray said he had considered but decided against including the regulating body, Investment Industry Regulatory Organization of Canada, in the lawsuit.
The lawsuit claims civil fraud against Saturley and his company, negligence against both the bank and Saturley and claims regulatory discrepancies.
Gray said if the defendants choose to sit down and negotiate a resolution, things could move quickly but “the reality is it takes a very long time to get a complicated case through the civil justice system,” and a trial probably would not be heard until 2023 or 2024.
None of the allegations have been proven in court.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
TORONTO – Canada’s main stock index was little changed in late-morning trading as the financial sector fell, but energy and base metal stocks moved higher.
The S&P/TSX composite index was up 0.05 of a point at 24,224.95.
In New York, the Dow Jones industrial average was down 94.31 points at 42,417.69. The S&P 500 index was down 10.91 points at 5,781.13, while the Nasdaq composite was down 29.59 points at 18,262.03.
The Canadian dollar traded for 72.71 cents US compared with 73.05 cents US on Wednesday.
The November crude oil contract was up US$1.69 at US$74.93 per barrel and the November natural gas contract was up a penny at US$2.67 per mmBTU.
The December gold contract was up US$14.70 at US$2,640.70 an ounce and the December copper contract was up two cents at US$4.42 a pound.
This report by The Canadian Press was first published Oct. 10, 2024.
