Tracing a mutual fund dealer’s trail of deceit
The British Columbia Securities Commission’s discovery of one of the biggest frauds in modern B.C. history can be traced to the day that a family showed up at the BCSC’s offices to share their concerns about a longtime friend of theirs – a mutual fund dealer in Victoria named Ian Thow.
Thow had talked the family into investing in what he described as shares of a Jamaican bank, and to make the investment through him personally – not through the mutual fund dealership where he worked. But after the family tried to cash out a portion of the purported investment, Thow became evasive. When they tried and failed to get all of their money back, they told their story to the BCSC.
A troubling pattern
A BCSC investigator quickly uncovered troubling signs at the firm where he worked: Thow’s earnings had been declining for years, and clients of his were redeeming their shares at an unusually high rate. So the investigator tracked down many of Thow’s former clients. It turned out that many of them were still Thow’s clients, but had redeemed their mutual fund holdings, sold through the firm, and invested directly through him. In many cases, they had followed Thow’s advice to take out loans on their homes to fund the investments.
Ultimately, through interviews with about two dozen people, the BCSC pieced together the elements of a massive fraud, in which Thow charmed clients into investing in securities that did not exist – either the Jamaican bank, or construction loans, or an initial public offering in the firm where he worked. He used their money to finance a lavish lifestyle that included a waterfront mansion, luxury cars, boats and aircraft.
Penalties and prison
He left behind “a trail of financial devastation and heartbreak,” in the words of a BCSC panel that imposed $6 million in penalties on him and banned him for life from the investment market. The penalty was later reduced by a judge to $250,000.
Thow never showed up for his BCSC hearing – he fled to the U.S. just before he was supposed to be interviewed by BCSC investigators and lawyers. But based on the BCSC’s prosecution and information it could share with law enforcement, the RCMP launched a criminal investigation that resulted in Thow’s extradition from Oregon, a guilty plea to 20 counts of fraud over $5,000, and a 9-year prison sentence.
Thow was released from prison in 2012. The BCSC is continuing its legal fight to collect on the financial sanction imposed on him.