BC’s securities regulator has permanently banned a Vancouver lawyer from the financial markets after he was convicted in a US court for his role in a US$34-million fraud.
In 2018, the US Securities and Exchange Commission accused Faiyaz A. Dean of engaging in a “fraudulent scheme to effect illegal, unregistered sales of and manipulating the market” for shares of a company called Biozoom Inc., according to a sanctioned decision by issued a panel of the BC Securities Commission on Wednesday.
Dean did not participate in the US court proceedings, and a default judgment was entered against him in November 2019, according to the BCSC.
The US court banned him from participating in “penny stock” offerings – defined as those with a price of less than US$5 per share. It also ordered him to pay a civil penalty of US$160,000 to the SEC.
The BCSC decision indicates that the commission’s executive director sought to ban Dean from the markets under the commission’s authority to reciprocate orders from other financial regulators.
The Dean opposed the attempt to sanction him, arguing that the US court’s default judgment against him meant there had been no findings of fact in the case and the panel therefore could not treat the SEC’s allegations as factual.
The panel rejected this argument, writing in its decision:
“It is well-established under the United States and Canadian law that a default judgment conclusively establishes the liability of a defendant and any allegations relating to liability are considered true. As a consequence of default, defendants are deemed to have admitted the allegations of the complaint . It is widely held that a court, when faced with a default judgment, is required to accept all of the factual allegations as true.”
The dean also argued that his conduct “fell short of market manipulation” and was too tangential to the fraud to warrant sanctions against him, according to the decision.
This claim, too, was unpersuasive to the panel.
“Dean’s fraudulent market manipulation involved artificially high stock prices which were sold to unsuspecting investors who, consequently, suffered harm when the prices fell,” the decision reads.
“Dean claims that his role in the fraudulent scheme was ‘relatively minor.’ He was wrong. He had an essential role in the market manipulation and, because of his actions, investors were harmed.”
The panel noted that the Dean received almost US$120,000 from his participation in the scheme, which he argued was “for services performed.”
He told the panel that the allegations against him did not establish whether the amount he received was for “legitimate professional services,” and argued that the panel shouldn’t conclude that he was enriched by the fraud.
“Dean’s claim that the money he received from his part in a market manipulation is somehow legitimate is audacious,” the panel wrote, rejecting his argument.
“We found that he was enriched.”
The BCSC panel banned Dean from trading in or purchasing any securities, derivatives or registered accounts, with limited exceptions for personal accounts purchased through a registered dealer who has been provided with a copy of the decision against him.
It is also prohibited for him from serving as a director or officer of any securities issuer or registrant, serving as a registrant or promoter, advising or consulting in the market, and engaging in promotional activities.
The decision notes that Dean resides in Vancouver and is a non-practicing lawyer in Vancouver. He is currently licensed to practice in Washington state.
The Law Society of BC issued a citation against him in June 2021, alleging various instances of misconduct that have not been proven. A hearing on that matter is still to be scheduled, according to the law society’s website.