Gravitas, previously Portfolio Strategies Securities, has been an IIROC member since 2007. The violations concerned the Creative Wealth Monthly Pay Trust, an open-ended trust. Gravitas acted as the lead agent of the Creative Wealth offerings.
The investment objective of Creative Wealth was to provide unitholders a fixed rate of return equal to 9% annually. The OM stated that Cangap Merchant Capital, which held the primary assets and issued a series of promissory notes, had been “created to acquire a diversified portfolio of income producing businesses and lending opportunities” and that it “specialized in investing in and actively participating in the management of small- to mid-sized privately held businesses”.
It added that the securities were “only suitable for sophisticated investors with a high tolerance for risk and seeking a targeted fixed yield over the long term. These securities are more suitable to diversify assets in a larger portfolio rather than as a core portfolio holding”.
Many of the clients involved were retired and with net liquid assets below $1 million.
In October 2015, Creative Wealth advised unitholders that Creative Wealth would be implementing temporary changes, including reducing the NAV to $5.00 per unit, from $10.00 per unit, reducing the rate of return to unitholders from 9% per annum to 0% per annum, and suspending all redemptions for a period of no more than 24 months.
