ALBERTA SECURITIES COMMISSION

DECISION

Citation: Re Platinum Equities Inc., 2014 ABASC 71 Date: 20140225

Platinum Equities Inc.,

Deerfoot Court Real Estate Investment Fund Limited Partnership,

Glenmore & Centre Retail Limited Partnership,

Platinum 5 Acres and a Mule Limited Partnership,

PMIC II Investments Ltd.,

Qualia Real Estate Investment Fund VI Limited Partnership,

Shariff Chandran and Chitra Chandran

Panel: Stephen Murison

Daniel McKinley, FCA

Fred Snell, FCA

Representation: Tom McCartney

Natasha Bazant

Peter Verschoote

for Commission Staff

Jakub Ksiazek

Daniel Johnson

for the Respondents

Submissions Concluded: 19 December 2013

Decision: 25 February 2014

4757455.1

i

TABLE OF CONTENTS

I. INTRODUCTION .................................................................................................................. 1 II. THE RESPONDENTS............................................................................................................ 1

A. Platinum and Linked Entities .............................................................................................. 1 B. The Individual Respondents ............................................................................................... 3

1. Shariff Chandran........................................................................................................... 3 2. Chitra Chandran ............................................................................................................ 3 3. Benefits to the Individual Respondents; Family Invested ............................................ 4

C. RM Group ........................................................................................................................... 4 III. THE ALLEGATIONS ........................................................................................................ 5 IV. THE LAW ........................................................................................................................... 6

A. Trades and Distributions ..................................................................................................... 6

1. The Registration Requirement ...................................................................................... 6 2. The Prospectus Requirement ........................................................................................ 7

3. Registration and Prospectus Exemptions ..................................................................... 7 B. Misrepresentation ................................................................................................................ 8

C. Fraud ................................................................................................................................... 8 D. Conduct Contrary to the Public Interest .............................................................................. 9

V. THE RESPONDENTS' CONDUCT: FACTS AND ANALYSIS ...................................... 10

A. Illegal Trades and Distributions ........................................................................................ 10 1. "Securities", "Trades" and "Distributions" ................................................................. 10

2. No Registration, No Prospectus; Exemptions Unavailable ........................................ 11 3. Authorizing, Permitting or Acquiescing ..................................................................... 12

B. The Deerfoot LP Syndication ........................................................................................... 12

1. The Deerfoot Court Purchase ..................................................................................... 12

2. The Deerfoot LP Syndication ..................................................................................... 14 3. Misrepresentation? ...................................................................................................... 15

C. The Glenmore LP Syndication .......................................................................................... 16

1. The Property and the Glenmore OM .......................................................................... 16 2. Misrepresentation? ...................................................................................................... 17

(a) Allegations ................................................................................................................. 17 (b) Were the Impugned Statements Made? ..................................................................... 17

(c) Relevant Respondents' Roles ..................................................................................... 18 (d) Were the Impugned Statements Materially Misleading or Untrue? .......................... 18

(i) Key Issue – "Secure" and "Secured" ................................................................... 18

Chitra's Perspective ............................................................................................ 19

Shariff's Perspective ............................................................................................ 20

(ii) Conclusion on the Key Issue............................................................................... 20

(iii) Materiality ........................................................................................................... 21

(e) Knowledge ................................................................................................................. 21

D. The P5 LP Syndication ..................................................................................................... 22 1. Greenwich Land Purchases ........................................................................................ 22 2. The TCC LoC ............................................................................................................. 23 3. The P5 OMs ................................................................................................................ 25 4. Misrepresentation? ...................................................................................................... 26

ii

5. Fraud ........................................................................................................................... 28

(a) The Allegations .......................................................................................................... 28 (b) Pertinent Facts Summarized....................................................................................... 28 (c) Shariff's Perspective ................................................................................................... 28

(d) Elements of Fraud: Analysis ..................................................................................... 29

Prohibited Act and Deprivation ................................................................................. 29

Subjective Knowledge ................................................................................................ 30

Claimed Justifications or Defences ............................................................................ 30

(e) Conclusion on Fraud .................................................................................................. 32 (f) Authorizing, Permitting or Acquiescing in the Fraud ................................................ 32

E. Conduct Contrary to the Public Interest ............................................................................ 33 1. Training and Oversight of Salespeople ...................................................................... 33

(a) The Platinum Selling Process Generally .................................................................... 33

(b) Evidence as to Training.............................................................................................. 33

(c) Evidence as to Oversight............................................................................................ 34 (d) Analysis and Findings ................................................................................................ 34

Training ...................................................................................................................... 34

Oversight .................................................................................................................... 35

2. Other Conduct Contrary to the Public Interest ........................................................... 36 (a) Illegal Trades and Distributions ................................................................................. 36

(b) Misrepresentation ....................................................................................................... 36 (c) Fraud .......................................................................................................................... 36 (d) Authorizing, Permitting or Acquiescing .................................................................... 37

VI. CONCLUSION AND NEXT STEPS ............................................................................... 37

1

I. INTRODUCTION

[1] Staff (Staff) of the Alberta Securities Commission (the ASC) allege that eight

respondents (the Respondents) contravened Alberta securities laws and acted contrary to the

public interest in connection with several distributions of securities.

[2] The allegations are against two individuals (Shariff Chandran (Shariff) and his sister

Chitra Chandran (Chitra)), Platinum Equities Inc. (Platinum), and five entities (the Platinum

Issuers) linked to Platinum – Deerfoot Court Real Estate Investment Fund Limited Partnership

(Deerfoot LP), Glenmore & Centre Retail Limited Partnership (Glenmore LP), Platinum 5

Acres and a Mule Limited Partnership (P5 LP), PMIC II Investments Ltd. (PMIC), and Qualia

Real Estate Investment Fund VI Limited Partnership (Qualia LP). (We refer to Platinum and

the Platinum Issuers together as the Platinum Respondents.) The specific allegations include

illegal trades and distributions, misleading statements in offering memoranda (OMs) and

marketing material, fraud, and failures in training and oversight of salespeople.

[3] At the hearing into the merits of Staff's allegations in November and December 2013 we

received documentary evidence and heard the testimony of four witnesses and of Shariff and

Chitra. The evidence included a "Statement of Agreed Facts and Admissions" executed by each

Respondent and by Staff (the Admissions Statement), the content of which – apart from a few

minor inconsistencies with other documentary evidence – we accept as true.

[4] As explained below, most – but not all – of the allegations against the Respondents have

been proved by Staff on a balance of probabilities. This proceeding therefore now enters a

second phase, for the determination of what, if any, orders ought to be made against the

Respondents.

II. THE RESPONDENTS

A. Platinum and Linked Entities

[5] Platinum, founded in 2003, was connected to several corporations and limited

partnerships – not all of them Respondents – linked by varying combinations of direct or indirect

ownership, direction and management; we refer to these and Platinum together as Platinum

Group. Platinum was involved in what Shariff termed "syndication", which mainly involved

selling to investors (in Alberta and elsewhere) interests in Platinum Group entities that had

bought, or would buy, identified real estate. Platinum did the selling for the entities, through a

salesforce that peaked (in 2006 or 2007) at 60, in three provinces.

[6] Platinum syndications – Shariff testified to 16 – focused on commercial real estate,

typically involving the acquisition (through limited partnerships) of existing office buildings,

generally in Calgary. The idea was that rents paid by property tenants would fund returns to the

relevant Platinum Group investors, who would also share in the proceeds if the property were

resold. There were variations on the model: some property was outside Alberta; Glenmore LP

syndicated a retail building; P5 LP involved land acquisition for residential development; and

PMIC (which was not a limited partnership) was to invest in a "portfolio" of mortgages.

[7] Shariff was one of Platinum's founders, he and his spouse were its voting shareholders,

and he was a director (apparently since incorporation) and a senior officer (for at least some of

2

the relevant time; he resigned, nominally at least, as president and chief executive officer in

2008).

[8] We briefly describe some Platinum Group entities here:

Deerfoot LP – Deerfoot LP was the vehicle for the syndication of a suburban

Calgary office building (Deerfoot Court). Its general partner was Deerfoot Court

Investments Ltd. (Deerfoot Ltd.). Deerfoot Ltd.'s sole shareholder was Platinum;

Shariff was its sole director.

Deerfoot LP investors received some distributions but those ceased late in 2009 or

early in 2010, and most have had none of their invested principal returned. In

December 2011 Deerfoot LP went into bankruptcy and a court approved the sale

of Deerfoot Court.

Glenmore LP – Glenmore LP was the vehicle for the syndication of a Calgary

retail strip mall (Glenmore). Its general partner at the material times was

Glenmore & Centre Retail GP Ltd. (Glenmore Ltd.), owned by Shariff and

Chitra, who admitted being directors at all material times.

No distributions have been made to Glenmore LP investors since March 2011;

some have received nothing since December 2009, and most have had none of

their invested principal returned. Glenmore Ltd. was replaced as general partner

of Glenmore Ltd. by a nominee of the investors on 10 September 2013, and

Glenmore continues to be operated as a going concern.

P5 LP – P5 LP was the vehicle for the syndication of a Calgary residential land

development (Greenwich). Its general partner was Platinum 5 Acres and a Mule

Inc. (P5 Inc.). At all material times Platinum was P5 Inc.'s sole shareholder,

Shariff was a director and Chitra was an officer.

P5 LP made no distributions to its investors, and most have not had their invested

principal returned. Ultimately, property associated with P5 LP was foreclosed on.

PMIC – PMIC (as mentioned) was to invest in a portfolio of mortgages. Shariff

was the sole voting shareholder and a director of PMIC on 1 September 2005, the

date of its OM.

PMIC has made no distributions to its investors since December 2009, and most

have not had their invested principal returned. PMIC is now in receivership.

Qualia LP – Qualia LP was the vehicle for the syndication of two office

buildings, one in Calgary and one in British Columbia. Its general partner was

Venti Investment Corporation (Venti). Shariff was a director of Venti; its

shareholders were Platinum and another corporation of which Shariff was a

director and officer.

3

Property associated with Qualia LP has since been sold, with some Qualia LP

investors receiving a partial return of their invested principal.

137 – 1376261 Alberta Ltd. (137) held some Platinum Group property and was

party to numerous transactions essentially as a Platinum Group nominee. Shariff

acknowledged that 137 was "controlled by" him.

B. The Individual Respondents

1. Shariff Chandran

[9] Shariff described himself as having "had several years of real estate experience" before

launching Platinum in May 2003. He obtained a formal educational qualification (an MBA) in

2007.

[10] The Admissions Statement characterizes Shariff as "the guiding mind and variously, a

director, officer or shareholder of Platinum and the other" Platinum Group entities. The

evidence as a whole corroborates this, and we so find. Indeed, based on the evidence we find

that what Shariff did, knew or reasonably ought to have known in respect of any one of these

entities can also be ascribed to that entity. These findings are unaffected by the fact that, for a

time, he resigned some formal positions he held with some entities, a move he told us was

prompted by unwelcome publicity relating to criminal charges that were unrelated to the

allegations here and which eventually went away. Those resignations appear to have been rather

haphazard (Shariff thought, for example, that he had "[p]robably not" resigned from 137) and

merely cosmetic, not diminishing his practical direction of the entities.

[11] Whatever titles he did or did not hold at a given time, and whether or not other

individuals also held titles, it is clear (not least, from his own testimony) that Shariff was in

charge of all Platinum Group entities (including each of the Platinum Respondents), making the

most important business decisions and bearing ultimate responsibility for all that went on within

Platinum Group.

2. Chitra Chandran

[12] Before moving to Platinum, Chitra worked for several years in the financial sector

dealing with retail mortgage loan approvals for a financial institution, and independently as a

mortgage broker.

[13] Chitra joined Platinum in late 2005 and held various positions, becoming a director in

April 2007. As Shariff testified (specifically in respect of Platinum, although the evidence

indicates that the comment applied equally to other Platinum Group entities): "She was director

and officer whenever I needed her to be a director and officer."

[14] Chitra's day-to-day work at Platinum seems to have begun largely with administrative

tasks, but she was given a series of titles (including "vice president credit and finance") and

became "chief marketing officer". She dealt with some of the processes particular to investments

made through registered retirement savings plans.

[15] According to the Admissions Statement (essentially corroborated by her and Shariff's

testimony), Chitra "was responsible for recruiting, training and managing Platinum's sales

4

consultants for the [Platinum] Respondents from late 2007 until 2009", sharing those

responsibilities with another person in 2008 and 2009. She also held senior positions with other

Platinum Group entities, including the general partners of Glenmore LP and P5 LP. In practical

terms Chitra had a more limited role than Shariff – never, for example, selecting real estate or

establishing the terms of a syndication. However, she held – and used – her official titles when

signing important documents for various Platinum Group entities. She was also identified in

some Platinum Group OMs as a director and member of management (with what was presented

as a solid financial-sector background).

3. Benefits to the Individual Respondents; Family Invested

[16] Shariff testified that he and members of his family invested "in Platinum". Asked to

elaborate, he named several Platinum syndications but only one (Qualia LP) to which the

allegations here relate. Chitra testified that she and her "significant other" invested "in Platinum"

– "in projects" – but did not specify which projects.

[17] Acknowledging that investors suffered losses from the impugned syndications' failures,

Shariff claimed not to have profited from the alleged misconduct, or at least from the alleged

misleading statements or fraud. Chitra claimed negative consequences for herself and family

members.

[18] Chitra testified that she "received a salary on an ongoing basis, regardless of what project

was going on", and that she "was paid well". Shariff testified that he personally netted about

$2 million – about $200,000 per year – over the ten years he ran Platinum, and we do not doubt

that he (as a Platinum shareholder) would have expected to profit from Platinum's earnings.

Shariff also acknowledged arrangements under which he (or Platinum) was to receive $1 million

for each syndication involving a property sourced through what we refer to as "RM Group"

(defined below). In this way, Shariff testified, he or Platinum received $2.7 million from

RM Group in connection with certain early Platinum syndications. $700,000 of this amount

derived from one of the impugned syndications discussed below, Deerfoot LP. Shariff claimed

that he "[e]nded up injecting [this $700,000] back into [Deerfoot LP] to cover the distributions to

. . . investors". He also testified to personally funding some Platinum Group outlays, including

having "paid out of our pockets" some distributions to Glenmore LP investors.

[19] The evidence, however, does not suffice for any quantification of the overall benefits

sought, expected or received by either Shariff or Chitra.

C. RM Group

[20] The evidence is replete with references to RM Group, the term we use for a Calgary

businessman (RM) active in commercial real estate, and various entities apparently under his

control. References below to RM Group are to RM or to one or more of RM and those entities.

[21] Platinum Group and RM Group had extensive mutual dealings, some of them relevant to

the allegations here. Shariff and Chitra blamed RM Group (and RM specifically) for problems

that arose with Platinum Group. We deal with some of these matters below.

[22] Staff made no allegations against RM or any RM Group members, and we make no

findings against any of them.

5

III. THE ALLEGATIONS

[23] All allegations against a former respondent (Victor Alejandro Gavilan Jara (Gavilan))

were resolved before the hearing by settlement with Staff (the Gavilan Settlement). Staff

withdrew certain allegations against other Respondents in the course of the hearing. The

remaining allegations are that:

Illegal Trades and Distributions

each of the Platinum Respondents illegally traded in and distributed securities, in

contravention of sections 75 and 110 of the Securities Act (Alberta) (the Act);

Shariff, as a director or officer (or both), authorized, permitted or acquiesced in

the Platinum Respondents' contraventions of sections 75 and 110;

Chitra, as a director or officer (or both), authorized, permitted or acquiesced in the

contraventions of sections 75 and 110 by Platinum, Glenmore LP and P5 LP;

Misrepresentation

Deerfoot LP made statements to investors that misled, in material respects, by

omitting facts relating to a property transaction involving a price increase, in

contravention of subsection 92(4.1) (the same allegation against Platinum was not

pursued in closing submissions);

Glenmore LP and Platinum made statements to investors, using the words

"secure" and "secured", that were, in material respects, misleading or untrue or

did not state facts that were required to be stated or were necessary to make the

statements not misleading, in contravention of subsection 92(4.1);

P5 LP made statements to investors that were, in material respects, misleading or

untrue or did not state facts that were required to be stated or were necessary to

make the statements not misleading, in respect of the price and timing of property

acquisitions and certain contracts related thereto, in contravention of subsection

92(4.1) (the same allegation against Platinum was not pursued in closing

submissions);

Shariff, as a director or officer (or both), authorized, permitted or acquiesced in

the contraventions of subsection 92(4.1) by Deerfoot LP, Glenmore LP and

P5 LP;

Chitra, as a director or officer (or both), authorized, permitted or acquiesced in the

contraventions of subsection 92(4.1) by Glenmore LP and P5 LP;

Fraud

P5 LP and Platinum engaged in a course of conduct that perpetrated a fraud on

P5 LP investors, in contravention of clause 93(b);

6

Shariff, as a director or officer (or both), authorized, permitted or acquiesced in

P5 LP's contravention of clause 93(b) (the same allegation against Shariff in

respect of Platinum was not pursued in closing submissions);

Conduct Contrary to the Public Interest

Shariff and Chitra, as directors or officers (or both) of Platinum, engaged in

conduct contrary to the public interest by refusing or otherwise failing to institute

and maintain appropriate training and oversight programs for salespeople; and

all other of the Respondents' impugned conduct was also contrary to the public

interest.

IV. THE LAW

A. Trades and Distributions

1. The Registration Requirement

[24] Before 28 September 2009, clause 75(1)(a) of the Act prohibited a person or company

from trading in a security if not registered to do so, unless an exemption applied. Since that date,

the revised provision has prohibited a person or company from acting as a dealer without being

registered to do so, unless an exemption applies. "Dealer" is defined in clause 1(m) to include "a

person or company engaging in or holding itself out as engaging in the business of . . . trading in

securities . . . as principal or agent".

[25] The term "security" is broadly defined in clause 1(ggg) of the Act to include:

(ii) any document constituting evidence of title to or interest in the capital, assets, property,

profits, earnings or royalties of any person or company;

. . .

(v) any bond, debenture, note or other evidence of indebtedness, share, stock, unit, unit

certificate, participation certificate, certificate of share or interest, preorganization

certificate or subscription . . .

[26] Clause 1(jjj) of the Act defines "trade" to include a "sale or disposition of a security for

valuable consideration" and "any act, advertisement, solicitation, conduct or negotiation made

directly or indirectly in furtherance" of a trade.

[27] Concerning the "engaging in the business" trigger under the current registration

requirement, section 1.3 of Companion Policy 31-103CP Registration Requirements and

Exemptions (as it was named at material times) cites such indicia as directly or indirectly

soliciting securities transactions or otherwise engaging in activities similar to those of a

registrant for (or with the expectation of) compensation or with repetition, regularity or

continuity.

[28] Therefore, to find a contravention of clause 75(1)(a) of the Act we must conclude from

the evidence that:

there was a security as defined in the Act;

7

there was a trade as defined in the Act in relation to that security;

in respect of activity on or after 28 September 2009, the person or company

engaged in or held itself out as engaging in the business of trading in securities;

the person or company was not registered; and

any claimed registration exemption was unavailable.

2. The Prospectus Requirement

[29] Subsection 110(1) of the Act prohibits the distribution of a security in the absence of a

receipted prospectus, unless an exemption applies. "Distribution" is defined in clause 1(p) to

include "a trade in securities of an issuer that have not been previously issued".

[30] Therefore, to find a contravention of subsection 110(1) we must conclude from the

evidence that:

there was a security as defined in the Act;

there was a trade as defined in the Act in relation to that security;

there was a distribution as defined in the Act of that security;

a prospectus was not filed and receipted for that distribution of securities; and

any claimed prospectus exemption was unavailable.

3. Registration and Prospectus Exemptions

[31] Alberta securities laws provide several prospectus exemptions (and, for a portion of the

material period, provided comparable registration exemptions), including for sales:

to an "accredited investor" (under section 2.3 of National Instrument 45-106

Prospectus and Registration Exemptions (NI 45-106)); and

pursuant to an OM (under section 2.9 of NI 45-106).

[32] There is another registration exemption (under section 8.5 of National Instrument 31-103

Registration Requirements and Exemptions (as it was named at material times), and previously

under section 3.1 of NI 45-106) for trades of securities made through or to a registered dealer.

[33] Those who seek to rely on an exemption from the registration or prospectus requirement

"must have made a reasonable, serious effort – or taken whatever steps were reasonably

necessary – to satisfy themselves that the exemption was available" at the time of the trade or

distribution of the security (Re Robinson, 2013 ABASC 203 at para. 151). A respondent bears

the onus of demonstrating the availability, and adherence to the terms, of a claimed registration

8

or prospectus exemption (Re TransCap Corporation, 2013 ABASC 201 at para. 90). It does not

suffice that some, but not others, of the trades within a distribution qualified for an exemption.

B. Misrepresentation

[34] Subsection 92(4.1) of the Act in essence prohibits the making of "misrepresentations" (as

defined in section 1, and which term we sometimes use below):

(4.1) No person or company shall make a statement that the person or company knows or

reasonably ought to know

(a) in any material respect and at the time and in the light of the circumstances in

which it is made,

(i) is misleading or untrue, or

(ii) does not state a fact that is required to be stated or that is necessary to

make the statement not misleading,

and

(b) would reasonably be expected to have a significant effect on the market price or

value of a security or an exchange contract.

[35] "Common-sense inferences about materiality may suffice" (Re Arbour Energy Inc., 2012

ABASC 131 at para. 764). The materiality standard is objective, based on reasonable

expectation. As stated in Arbour (at para. 765), this involves:

. . . a determination as to whether untrue or omitted facts would reasonably be expected to have a

significant effect on the market price or value placed on securities by reasonable investors – a

proxy for this is, essentially, determining whether there is a substantial likelihood that such facts

would have been important or useful to a reasonable prospective investor in deciding whether to

invest in the securities on offer at the price asked[.]

[36] The ASC confirmed in Re Marcotte, 2011 ABASC 77 (at para. 83) that subsection

92(4.1) of the Act bars misrepresentations to both existing and prospective investors. The

provision does not require proof that an investor relied on a misrepresentation (Arbour at

para. 768).

[37] Alberta securities laws mandate the inclusion in an OM of key terms of all material

agreements to which the issuer or a related party is a signatory. However, that content

requirement is distinct from subsection 92(4.1) of the Act, and compliance or non-compliance

with the content requirement is in itself not determinative of the issue of misrepresentation.

[38] It is not a sufficient answer to an allegation of misrepresentation in an OM that the

document contained none when issued. If circumstances evolve such that a once-reliable OM

becomes materially misleading while selling thereunder continues, the document must be

amended and reissued (Re Capital Alternatives Inc., 2007 ABASC 79 (affirmed sub nom.

Alberta Securities Commission v. Brost, 2008 ABCA 326) at para. 226).

C. Fraud

[39] Clause 93(b) of the Act prohibits any person or company, directly or indirectly, from

engaging or participating in any act, practice or course of conduct relating to a security that the

person or company knows or reasonably ought to know will perpetrate a fraud on any person or

company.

9

[40] The applicable law was set out in Capital Alternatives at para. 309 and has been followed

in several subsequent ASC decisions:

The term "fraud" is not defined in the Act. The gist of the meaning is not, however, difficult to

discern. Johnston and Rockwell [in Canadian Securities Regulation, 4th ed. (Markham:

LexisNexis, 2006) at 421] point to the elements of fraud as enunciated at common law by the

Supreme Court of Canada in R. v. Théroux, [1993] 2 S.C.R. 5 at 27, which has been adopted in the

context of securities regulation (for example, in Anderson v. British Columbia (Securities

Commission), 2004 BCCA 7 [leave to appeal refused [2004] S.C.C.A. No. 81] at para. 27):

. . . the actus reus of the offence of fraud will be established by proof of:

1. the prohibited act, be it an act of deceit, a falsehood or some other

fraudulent means; and

2. deprivation caused by the prohibited act, which may consist in actual

loss or the placing of the victim's pecuniary interests at risk.

Correspondingly, the mens rea of fraud is established by proof of:

1. subjective knowledge of the prohibited act; and

2. subjective knowledge that the prohibited act could have as a

consequence the deprivation of another (which deprivation may consist

in knowledge that the victim's pecuniary interests are put at risk).

[41] It is no defence to a fraud allegation that the alleged perpetrator did not profit from the

alleged fraud (Théroux at 17).

[42] The mens rea element may reasonably be inferred from the totality of the evidence (Brost

at para. 48). A respondent's subjective belief that no one will ultimately be hurt is no defence to

a fraud allegation; it is sufficient to have knowingly engaged in a prohibited act and to have

known that the prohibited act could place investors' pecuniary interests at risk (Re DeLaet, 2013

ABASC 42 at para. 90). As noted in Théroux (at 24): "Many frauds are perpetrated by people

who think there is nothing wrong in what they are doing or who sincerely believe that their act of

placing other people's property at risk will not ultimately result in actual loss to those persons."

D. Conduct Contrary to the Public Interest

[43] In exercising its public interest jurisdiction, the ASC has the power to intervene even

when no contravention of Alberta securities laws has been found. As was stated in Re Fletcher,

2012 ABASC 222 (at paras. 96, 98):

The [ASC] has the power, via its public interest jurisdiction, to intervene even when no breach of

Alberta securities laws has been found (Re Arc Equity Management (Fund 4) Ltd., 2009 ABASC

390). In considering the public interest jurisdiction of the Ontario Securities Commission (the

"OSC"), the Supreme Court of Canada noted that the OSC has "a broad discretion to intervene in

Ontario capital markets if it is in the public interest to do so" but that, in exercising its public

interest discretion, the OSC "should consider the protection of investors and the efficiency of, and

public confidence in, capital markets generally" (Committee for the Equal Treatment of Asbestos

Minority Shareholders v. Ontario (Securities Commission), 2001 SCC 37 at para. 45). In Re

Canadian Tire Corp. (1987), 10 OSCB 857 (affirmed (1987), 59 O.R. (2d) 79 (Div. Ct.), leave to

10

appeal to Ont. C.A. refused (1987), 35 B.L.R. xx), the OSC had earlier determined that its public

interest jurisdiction would be appropriately exercised "to deal with situations that are inconsistent

with the best interests of investors or where a transaction constitutes a flagrant abuse of the

marketplace".

. . .

Clearly, in determining whether to exercise our public interest jurisdiction, we must . . . consider

all relevant circumstances, mindful that such jurisdiction is to be exercised with restraint and

caution. We adopt the following statement of the OSC in Re Sterling Centrecorp Inc. (2007), 30

OSCB 6683 (at para. 212):

The [OSC's] "public interest" jurisdiction is broad and powerful, and must be

exercised with caution, as recognized in the Re Canadian Tire decision. When

considering the exercise of this jurisdiction, the [OSC] needs to have regard to

all of the facts, all of the policy consideration[s] at play, all of the underlying

circumstances of the case, and all of the interests affected by the matter and the

remedy sought. . . .

V. THE RESPONDENTS' CONDUCT: FACTS AND ANALYSIS

A. Illegal Trades and Distributions

1. "Securities", "Trades" and "Distributions"

[44] We find, consistent with the Admissions Statement, that the Platinum Respondents raised

money from investors (most of them Alberta residents) as follows:

between 17 November 2006 and 16 November 2007, $10.3 million was raised

from investors ($9.4 million of that from Alberta residents) through the sale of

units of Deerfoot LP (Deerfoot Units);

between 25 September 2008 and 19 July 2010, $3.925 million was raised from

investors ($3.5 million of that from Alberta residents) through the sale of units of

Glenmore LP (Glenmore Units);

between 1 February 2008 and 29 April 2009, $21 million was raised from

investors ($18.725 million of that from Alberta residents) through the sale of units

of P5 LP (P5 Units);

between 1 September 2005 and 16 November 2007, almost $7.176 million was

raised from investors ($5.971 million of that from Alberta residents) through the

sale of shares of PMIC (PMIC Shares); and

between 8 May 2006 and 16 May 2007, some $16 million was raised from

investors ($14.125 million of that from Alberta residents) through the sale of units

of Qualia LP (Qualia Units).

[45] Deerfoot Units, Glenmore Units, P5 Units, PMIC Shares and Qualia Units were clearly

all "securities" within the meaning of the Act, and newly issued; we so find. Consistent with the

Admissions Statement, it is also clear – and we therefore find – that, within the meaning of the

Act:

11

Platinum traded in and distributed these various securities;

each of the Platinum Issuers traded in and distributed its respective securities; and

from 28 September 2009, Platinum and Glenmore LP acted as dealers in respect

of Glenmore Units.

2. No Registration, No Prospectus; Exemptions Unavailable

[46] The Respondents acknowledge in the Admissions Statement that:

No prospectus was filed with the Executive Director of the [ASC] in respect of the securities of

[the Platinum Issuers].

Each of [the Platinum Issuers] filed an [OM] with the [ASC].

. . .

None of the Respondents were registered to deal or trade in securities . . . .

None of [the Platinum Issuers] filed a preliminary prospectus or prospectus with the [ASC], or

received a receipt for same, in relation to the distributions of their securities.

With respect to approximately half of the purchasers of the securities issued by [the Platinum

Issuers], the Respondents and their employees and agents failed to take all reasonable steps to

ensure that the purchasers were qualified for any exemptions to the registration and prospectus

requirements under Alberta securities laws.

Approximately half of the purchasers of securities of [the Platinum Issuers] did not receive timely

access to [OMs] upon which these issuers purported to rely in order to distribute and trade under

exemptions provided in Alberta securities laws.

Some of the investors in [Glenmore LP] who did not receive an [OM] on a timely basis met the

accredited investor criteria set out in [NI 45-106].

[47] In the Admissions Statement the Platinum Respondents admit that they contravened

sections 75 and 110 of the Act, specifically "by trading in securities while not registered with the

Executive Director of the [ASC] and without an exemption from this requirement" and "by

engaging in distributions of securities without having filed a preliminary prospectus or

prospectus with the Executive Director of the [ASC] and receiving a receipt for the same, and

without an exemption from this requirement".

[48] On the evidence as a whole, including the Admissions Statement, we are satisfied – and

we find – that all of the impugned trades and distributions made by the Platinum Respondents

were made without registration or a prospectus, and that certain of the impugned trades and

distributions made by each of the Platinum Respondents were made without an available

registration or prospectus exemption.

[49] For these reasons, we find that:

each of the Platinum Respondents, before 28 September 2009, illegally traded in

securities, in contravention of clause 75(1)(a) of the Act;

12

Platinum and Glenmore LP, from 28 September 2009, illegally acted as dealers,

in contravention of clause 75(1)(a); and

each of the Platinum Respondents illegally distributed securities, in contravention

of subsection 110(1).

3. Authorizing, Permitting or Acquiescing

[50] The Admissions Statement declares that Shariff and Chitra, in their respective capacities

as a director or officer (or both) of the numerous "issuers and entities described" in the notice of

hearing, each "permitted or acquiesced" in the Platinum Respondents' contraventions of sections

75 and 110 of the Act. Shariff also admitted that he "authorized" these contraventions. Whether

the omission of "authorized" in respect of Chitra was intentional is unclear, but the evidence as a

whole does not support such a distinction: both Shariff and Chitra held – and held themselves

out as exercising – senior positions of authority with various Platinum Group entities, Chitra

specifically in respect of Platinum, Glenmore Ltd. and P5 Inc.

[51] We are satisfied on the whole of the evidence, and we therefore find, that as a director or

officer (or both) of various Platinum Group entities:

Shariff authorized, permitted or acquiesced in the Platinum Respondents'

contraventions of clause 75(1)(a) and subsection 110(1) of the Act; and

Chitra authorized, permitted or acquiesced in the contraventions of

clause 75(1)(a) and subsection 110(1) by Platinum, Glenmore LP and P5 LP.

B. The Deerfoot LP Syndication

1. The Deerfoot Court Purchase

[52] RM Group negotiated the purchase of Deerfoot Court from arm's-length vendors (the

Deerfoot Vendors) in 2006. The price was first set at $20.5 million but reduced by agreement

in October 2006 to $17 million.

[53] RM proposed to Shariff that Platinum syndicate Deerfoot Court. Shariff agreed,

considering it a "pretty marketable deal". Deerfoot LP would be the syndication vehicle.

[54] Consistent with the evidence as a whole (including Shariff's and Chitra's testimony) we

find that, as between them, it was Shariff (not Chitra) who made all Platinum Group decisions

about the purchase of Deerfoot Court. Shariff was not privy to negotiations that RM Group had

with the Deerfoot Vendors, but he knew in October 2006 that RM Group "had a contract in

place".

[55] By agreement dated as of 2 November 2006, RM Group agreed to sell Deerfoot Court to

Platinum Group for $22.6 million in January 2007 (or a mutually acceptable alternative date).

Under this agreement RM Group would, until 31 December 2009, "ensure that the net rent

projected to be received by [Platinum Group] will be no less than $1,509,283.20 annually" (the

Rent Subsidy). There was no evidence of any similar provision in the arrangement between

RM Group and the Deerfoot Vendors. Shariff acknowledged that Platinum Group received no

13

appraisals or engineering reports from RM Group, and did no due diligence before agreeing to

buy Deerfoot Court.

[56] A conveyance document transferred Deerfoot Court directly from the Deerfoot Vendors

to Deerfoot Ltd., recording the $17 million purchase price that RM Group agreed to pay but also

including Shariff's affidavit attesting to a value (apparently as at 12 January 2007) of

$22.6 million. Title was registered to Deerfoot Ltd. in March 2007.

[57] As will be seen, disclosure of purchase prices was an issue in the hearing, and there was

considerable discussion about the $5.6 million (approximately 33%) difference between the two

purchase prices negotiated mere weeks apart, with no intervening improvements having been

made to Deerfoot Court.

[58] An email sent to Shariff on 17 October 2006 would have informed him of the $17 million

price agreed between RM Group and the Deerfoot Vendors. He acknowledged that this put him

in a position to know that price then – before agreeing to a $22.6 million price for Platinum

Group – but he only admitted to actual knowledge of the lower price "at the latest" by mid-

January 2007 (perhaps in reference to the timing of his value affidavit).

[59] Evidence in the form of municipal property tax notices for Deerfoot Court demonstrates

only that the value of the property was capable of considerable variation from one year to the

next. There is no evidence that the $17 million negotiated at arm's length between RM Group

and the Deerfoot Vendors was other than a genuine reflection of what they considered fair value

at the time, given the terms of their deal.

[60] It is unclear how the $22.6 million price was arrived at, or what (if any) negotiations were

involved. Shariff testified to discussing the matter with RM and coming away satisfied that "the

cash flow that we were supposed to receive" justified the difference in prices. He described a

computation in which a $1.5 million cash flow (presumably reflecting either expected annual

rent or the maximum annual Rent Subsidy), when applied to "a value of $22.6 million", resulted

in what he termed a "cap rate" of about 6.5 (6.5%, presumably), which he characterized as "not

unreasonable in November of '06". The computation (as Shariff acknowledged) did not adjust

for the riskiness of cash-flow assumptions, even though (as he testified) Platinum Group "didn't

have the information that was provided to [RM Group] on what . . . rents were being paid".

[61] As to the $5.6 million difference between the two purchase prices, the Respondents

submitted that the deals were "simply . . . different", Shariff pointing specifically to the Rent

Subsidy's promise of roughly $4.5 million in cash flow over three years.

[62] While not determinative of the disclosure issue, we observe that the $5.6 million price

difference remains unexplained. Shariff's cap rate computation does not account for it, while the

Rent Subsidy does so (if at all) to only a limited extent. First, the numbers obviously do not

match. Second, Shariff's approach (as he admitted) took into account no element of risk, even

though the Rent Subsidy was unsecured and therefore might not deliver (indeed, it did not

deliver) what Shariff anticipated. Third – and in our view most significant – it would be

inappropriate to treat $4.5 million as the measure of the Rent Subsidy's value. The Rent Subsidy

was meant only to top up any rent shortfalls to the agreed $1.5 million per year. Deerfoot Court

14

already had rent-paying tenants, something presumably factored into the Rent Subsidy figure.

However its terms were determined, there is no basis for inferring that buyer and seller expected

the Rent Subsidy to be used to its maximum extent. Akin to an insurance policy, the Rent

Subsidy may have had value when it was negotiated, but perhaps only a fraction of the

$4.5 million maximum coverage it promised could reasonably have been considered an addition

to the property's value without it.

2. The Deerfoot LP Syndication

[63] Deerfoot LP offered Deerfoot Units under an OM dated 21 November 2006 (the

Deerfoot OM). Shariff, as an officer and director of Deerfoot Ltd., signed the document and

certified it to be free of misrepresentation. The Deerfoot OM was never amended.

[64] According to the Deerfoot OM, all of the net proceeds of the offering would be applied to

the acquisition of Deerfoot Court, which Deerfoot LP would hold for at least three years.

Investors were promised quarterly distributions from "Distributable Cash", defined (essentially)

as the surplus of rental receipts from Deerfoot Court over operating expenses, capital outlays and

debt-servicing.

[65] The Admissions Statement declares that the Deerfoot OM "did not include information

regarding the purchase of the issuer's key asset, a real estate property, from" RM Group, and

specifically that:

(a) [RM Group] had entered into an agreement to purchase the property in question from the

prior owner . . ., an entity at arm's length from [RM Group], on or about October __ (sic),

2006 for $17,000,000; and

(b) On November 2, 2006, [RM Group] entered into an agreement to sell the property to

[Deerfoot Ltd.] for $22,600,000.

[66] A review of the Deerfoot OM confirms the accuracy of these admissions. The Deerfoot

OM made no mention – as "material agreements" or otherwise – of either the agreement under

which RM Group would acquire Deerfoot Court from the Deerfoot Vendors, or the agreement

under which Deerfoot Ltd. would buy it.

[67] That said, the Deerfoot LP limited partnership agreement and a marketing brochure both

disclosed a $23 million purchase price. While it is unclear whether the limited partnership

agreement was shown to Deerfoot LP investors, we are prepared to accept that some saw the

marketing brochure, perhaps attached to the Deerfoot OM (even though, according to the

Admissions Statement, approximately "half of the purchasers of securities of [the Platinum

Issuers] did not receive timely access to" the relevant OMs). We conclude that the price to

Deerfoot Ltd. was disclosed to at least some investors, in part perhaps through the Deerfoot OM.

[68] There was, however, no disclosure of RM Group's earlier agreement to buy Deerfoot

Court, or of the $17 million price for that purchase. (Shariff noted that investors could have

found that price from a search of Land Titles records. This would be true only after the

mentioned conveyance document was registered. In any event, we do not consider this the sort

of disclosure contemplated by the rules governing use of OMs.) Shariff justified this

nondisclosure on the ground that it involved "a separate deal" that "has nothing to do with

15

[Platinum]". Even so, he testified that the question of whether to disclose the price difference

was discussed at an internal Platinum meeting, the decision being made not to make disclosure.

[69] Things began to go awry with Deerfoot Court soon after the property purchase closed.

Apparently the Rent Subsidy was triggered "[s]hortly after the first quarter" (in 2007, we infer),

but RM Group paid less than Shariff anticipated, claiming "various adjustments" that led to

months of "back and forth" argument. This was surely aggravated by Shariff's admitted lack of

information about the rent being paid for Deerfoot Court, a key determinant of how much Rent

Subsidy was owed.

[70] This state of affairs apparently continued until, in 2008, Deerfoot Court lost a significant

tenant "and the cash flow ended up dropping significantly", declining to the point that by 2009 it

"was barely sufficient to cover the debt servicing". At some point, RM Group stopped paying

any Rent Subsidy. Asked whether he asserted Platinum Group's rights in that regard, Shariff

indicated that he initially thought the differences could be resolved but, when he later

contemplated litigation, he did not pursue it because he believed RM (given his resources) would

have outlasted Platinum Group in any litigation.

3. Misrepresentation?

[71] The alleged misrepresentation in the Deerfoot Court syndication was the omission from

the Deerfoot OM of information related to the purchase history of the property, particularly

Deerfoot Ltd.'s acquisition of title to Deerfoot Court directly from the Deerfoot Vendors

(through the concurrent operation of RM Group's agreement to buy Deerfoot Court for

$17 million and Platinum Group's agreement to buy it for $22.6 million).

[72] We concluded above that the latter price was disclosed, albeit imperfectly. The other

elements cited were not disclosed, and the omission was deliberate. The issue to be determined

is: was this omission misleading in a material respect?

[73] We consider whether the omission of disclosure about the essentially concurrent purchase

agreements (and their different prices) would reasonably be expected to have had a significant

effect on the value ascribed to Deerfoot Units by a reasonable investor. Our analysis is premised

on the fundamental purposes of the Act – protecting investors and fostering capital-market

fairness – and the supporting objective of furnishing investors with reliable information on which

to base informed investment decisions.

[74] Although a prospective investor might have a natural curiosity about prior transactions

involving a property targeted by an issuer, we doubt that such information would always be

helpful in assessing a current investment offering. Was there something that would have made

such information uniquely helpful here?

[75] The Respondents argued that the purchase agreement between RM Group and the

Deerfoot Vendors was "not material" to the Deerfoot LP offering, and that investors "had all the

information they needed".

[76] Staff argued that investors needed to know that Deerfoot Ltd. would be paying a

markedly higher purchase price than RM Group had negotiated shortly before (with no

16

intervening property improvements), explaining that this might have prompted investors to

consider, and question, the business "competency" of Deerfoot LP and Deerfoot Ltd. The

Respondents countered that this is not a hearing into anyone's business competency and, by

implication, that Staff's argument must therefore fail. It is true that Alberta securities laws do not

mandate any particular level of business ability, but the rules relating to disclosure (including

OM disclosure) do require some disclosure about senior management that can help prospective

investors assess management's track record. That said, we remain doubtful that disclosure

merely of an agreement between third parties would necessarily serve the suggested purpose.

[77] Implicit in Staff's position may have been concern that the two purchase deals were

largely concurrent and effectively closed as one, with title "skipping" from the Deerfoot Vendors

past RM Group straight to Deerfoot Ltd. Here again, while some investors might be curious

about such an arrangement, it is not obvious that it affected the substantive outcome – the

property landed where intended, at the (imperfectly) disclosed price. We discern here neither

any invariable principle that would mandate disclosure of such transaction mechanics nor, in all

the circumstances, compelling evidence that this aspect of the Deerfoot Court acquisition was

material.

[78] In the circumstances, we are not persuaded that the omission of the particularized

information about Deerfoot Court's purchase history was, in itself, misleading in a material

respect. For these reasons, we find the Deerfoot LP misrepresentation allegations not proved.

C. The Glenmore LP Syndication

1. The Property and the Glenmore OM

[79] RM Group bought Glenmore in an arm's-length transaction in 2007. RM presented

Shariff with a "package deal" syndication plan for it.

[80] Shariff was reluctant. He testified that he was "not overly excited about a retail centre.

There's some risk. There's some . . . exposure". He testified to having "felt some pressure [from

RM Group] into syndicating this project".

[81] At first Shariff tried to syndicate Glenmore outside Platinum, but that failed. Despite his

reservations, Platinum took on the syndication in or around September 2008, using Glenmore LP

as the vehicle. Glenmore LP issued an OM dated 25 September 2008 (the Glenmore OM),

signed and certified by Chitra as an officer and director of Glenmore Ltd. (and by another

individual) as free of misrepresentation. The Glenmore OM was apparently never amended.

[82] The Glenmore OM described a September 2008 agreement under which Glenmore LP

would buy (from an RM Group vendor not identified as such in the Glenmore OM) "the

beneficial interest in" Glenmore for $21.8 million. Closing was to occur on 31 October 2008 "or

such other date as may be agreed" between Glenmore Ltd. and the vendor.

[83] The Glenmore OM also described a "Head Lease" under which the RM Group vendor

was to become "Head Tenant" of the building from closing of the property sale through

April 2017, agreeing (among other things) to be responsible for operating costs and capital

outlays, and to pay annual "base" rent of $1,462,463.

17

[84] There is inconsistent and confusing evidence as to whether these two agreements were

actually signed or, if signed, when and by whom. Regardless, Platinum Group and RM Group

appear to have operated as though bound by at least the property purchase agreement.

RM Group managed the property while Platinum and Glenmore LP continued selling Glenmore

Units – using printed and online marketing material, print and radio advertisements, and in-

person presentations and solicitations. However, the syndication proved difficult and protracted.

Platinum and Glenmore LP had trouble selling sufficient Glenmore Units, and the property

purchase was postponed repeatedly under a series of amending agreements. By 2011 Platinum

Group and RM Group apparently agreed that they had done what they could, and closed the

property sale. Although land titles records for Glenmore continued to record RM Group

ownership and disclosed no Platinum Group interest, a set of agreements in evidence purported

to (and apparently did) convey beneficial ownership to Glenmore LP effective 1 March 2011.

2. Misrepresentation?

(a) Allegations

[85] Staff allege – directly against Glenmore LP and Platinum, indirectly against Shariff and

Chitra – that misrepresentations were made to prospective Glenmore LP investors, specifically

that the offered investment:

was "secured" by commercial real estate;

"leverages [investors'] cash into a secure steady stream of income that's protected

by a head lease"; and

would provide "secure distributions", "secured quarterly returns", "secured

quarterly distributions" and "secured cash flow".

(b) Were the Impugned Statements Made?

[86] The marketing of Glenmore Units included express references to an investment in

Glenmore Units being "secure" or "secured". This was said in print and radio advertisements

and in brochures either printed or posted to Platinum's website, examples of which are in

evidence. Indeed, according to the Admissions Statement:

Platinum's sales consultants made statements to investors during their promotion of the [Glenmore

LP] offering to the effect that:

(a) their investment in the [Glenmore LP] offering was "secured" by commercial real estate;

(b) the [Glenmore LP] offering provided "secure distributions";

(c) their investment in the [Glenmore LP] offering "leverages [investors'] cash into a secure

steady stream of income that's protected by a head lease"; and

(d) the [Glenmore LP] offering provided "secured quarterly returns", "secured quarterly

distributions", and "secured cash flow."

These statements, or words to similar effect, were repeated in the promotional materials circulated

on behalf of [Glenmore LP]. Specifically:

18

(a) website and print advertising which contained the statement that investors could "secure

your investment with commercial real estate";

(b) a print advertisement which stated there were "secure distributions"; and

(c) radio ads stating that investors could leverage their cash into a "secure, steady stream of

income that's protected by a head lease".

[87] Accordingly, we find that the impugned statements were made.

(c) Relevant Respondents' Roles

[88] Glenmore LP, as noted, was Platinum's vehicle for this syndication. Simultaneously,

Platinum was essentially Glenmore LP's agent for purposes of selling Glenmore Units.

Accordingly, we are satisfied – and we find – that the impugned statements were made by

Platinum, and certain of them were also made by Glenmore LP.

[89] As discussed, Shariff and Chitra both held formal positions at various times with

Platinum and Glenmore Ltd. Irrespective of titles, both entities were under the guiding mind of

Shariff. He acknowledged that he had ultimate authority concerning marketing material, even

though he did not review or sign off on all of it. Chitra was clearly involved in the preparation of

marketing material for Glenmore. When asked whether Chitra "was in charge of the marketing

packages and promotional materials for the companies that Platinum was marketing after about

2007", Shariff agreed but also made clear that she reported to him. Chitra acknowledged that she

reviewed and could have input into advertisements – print, radio or on Platinum's website – and

had an opportunity to edit them. She also acknowledged that she instructed Platinum salespeople

to use terms such as "secured distributions" and "secured returns".

(d) Were the Impugned Statements Materially Misleading or Untrue?

(i) Key Issue – "Secure" and "Secured"

[90] The impugned statements were misleading or untrue if they would reasonably have

conveyed an unjustified sense of a "secure" or "secured" investment. Staff and the relevant

Respondents differed on the meaning to be given to the quoted words, as used.

[91] Staff submitted that all of the particularized uses of "secure" and "secured" bear the "legal

meaning".

[92] The Respondents countered that the words have a different use "in common parlance",

and that it was this other usage that was conveyed in at least some of the impugned statements

(apparently excluding the statement that the investment was secured by commercial real estate).

They submitted that the words "secure" and "secured" probably "impart on the lay reader a sense

of stability or safety", but do not "immediately bring to mind the type of legal security suggested

by" Staff.

[93] The parties agreed that, as the Admissions Statement puts it, "at all material times none of

the investors' funds in [Glenmore LP] were secured by any legal instruments charging property

or other assets". This is consistent with the other evidence, and we so find.

19

[94] However, the status and implications of the Glenmore head lease were disputed. Staff

argued that the head lease was "no more than a promise to pay", a promise left unsecured and

therefore not a justification for the impugned statements. The Respondents took the position that

the head lease justified the impugned statements. The Respondents submitted that there was "a

head lease in place as early as 2008" (not just as part of the March 2011 closing), and

characterized discrepancies and confusion surrounding its documentation as "[s]loppy perhaps,

but not deceptive". We are not convinced that the inconsistencies were as inconsequential as

contended by the Respondents. Notably, we conclude that no head lease in favour of

Glenmore LP was in effect before closing of the property sale in March 2011. This meant that

no head lease was in operation when Glenmore Units were being sold to investors in a marketing

campaign that included the "secure" representations.

Chitra's Perspective

[95] Chitra agreed that an important consideration to investors is having a secure investment.

However, her claimed understanding of the impugned statements is in issue.

[96] The Admissions Statement – to which Staff as well as the Respondents were parties –

says the following about the disputed words:

In preparing marketing materials for [Glenmore LP], [Chitra] understood the phrase "leverages

your cash", as it appeared in marketing materials, to mean that investors' funds would allow them

to participate in a real estate investment. She understood the phrase "secure steady stream of

income that's protected by a head lease", used in relation to distributions to investors and as that

phrase appeared in marketing materials, to mean that distributions would flow from payments

from [RM Group] under the Head Lease. [Chitra] also understood the phrase "secured quarterly

returns" to refer to the Head Lease.

In preparing marketing materials, [Chitra] did not appreciate distinctions between the legal or

contractual meaning of 'secure', 'secured', and 'security', and their meaning in common parlance.

[97] Regarding the former paragraph, Chitra agreed that her admission "isn't directed at" the

statement that the investment in Glenmore LP was secured by commercial real estate. In

response to questioning from the panel as to what was intended by the latter paragraph, Chitra

explained:

. . . when we said the security of your returns or the security of your investment distributions were

with the head lease, I think that's what that is referring to. I mean, in terms of security in a

mortgage situation, I mean, that would mean the asset, so -- but that's not the way that I was using

it.

[98] Elsewhere in her testimony, Chitra confirmed that the statement "secured by a head

lease" in the marketing material was intended to communicate that "[t]he return is secured by the

monies that were supposed to come in from the head lease". Similarly, she testified that

"everything refers to the head lease when we are using 'secured'", and that she "wasn't looking at

it as there was security in terms of a property or an asset. I was looking at it in terms of that he's

guaranteeing us a head lease in order to provide distributions, and that's what was secured. Your

distributions are secured by the head lease". She testified that she had not reviewed any of the

documents related to the purchase or financing of Glenmore before placing advertisements that

20

said "secured" by commercial real estate, but thought she would have read the head lease before

approving advertisements.

[99] Chitra understood that the head lease obliged RM Group to make rent payments even if

there were no tenants in the building or tenants did not pay. However, she agreed that the head

lease provided only a covenant or promise to pay rent, a promise backed by no pledge of assets.

She understood that "the property [was] the investment and the security, once we . . . closed on

it, not before". Flowing from this, Chitra agreed with Staff's statements that "there was no

security in place up until March 2011 for those investors' funds that were advanced to the

vendor", that "until March 2011, [Glenmore LP] had no security whatsoever for those investors'

funds", and that Glenmore LP "never had an interest in the property up until March 2011".

Shariff's Perspective

[100] Shariff also testified that he understood the word "secured" (in context, relating to the

head lease) to mean "[s]ecured by the head lease cash flow". Thus, although the head lease was

"not a security of a mortgage or other type of security", he was unconcerned by use of the term

"secured" in advertisements because the head lease secured the cash flow.

[101] He explained that "to make sure that we . . . were secure in the cash flows, [RM] created

a formal head lease which allowed a fixed amount of -- of cash flow to come across from [RM

Group] to the partnership". Shariff said that a lease provides the security in a commercial

building because "at the end of the day, it's -- it's the promise from a tenant that's paying that rent

that is actually generating your income". Elsewhere in his testimony, though, Shariff agreed

with Staff that Glenmore LP had no interest registered against title to Glenmore, and that "there's

nothing secure about this arrangement".

(ii) Conclusion on the Key Issue

[102] We accept – as did Staff in the Admissions Statement – that the impugned words can bear

different meanings in different contexts.

[103] That, surely, is good reason to take care with word usage when marketing securities. In

the context of the Glenmore LP syndication, it would certainly have been helpful to refrain from

using the impugned words, or to add cautionary words making clear that no formal security was

in place.

[104] However, in the circumstances here we are prepared to accept that the Glenmore LP

marketing material reflected a genuine understanding among the relevant Respondents that there

would be a head lease which would deliver a benefit (as compared to a commercial retail project

without a head lease) in terms of heightening the prospects for stable revenue and consequent

returns to investors. We therefore accept also that certain of the impugned statements were

reasonably intended, and understood, by the makers to communicate this sort of enhanced

stability, rather than to suggest any formal securing of anything.

[105] In some contexts, even such a generalized representation could be found to be a

misrepresentation – on the ground, for example, that the sense of stability conveyed was

exaggerated, or that what was conveyed omitted facts necessary to make what was stated not

21

misleading. However, Staff did not advance such arguments here, and we make no finding on

such grounds.

[106] That said, we take a different view of the statement that an investment in the

Glenmore LP offering was secured by commercial real estate. In the context in which the words

were used, we consider that the statement would reasonably have communicated to prospective

investors not merely a generalized impression of stability, but rather a distinct understanding that

there was true "security" in place, in a "legal" sense (to use the parties' term). As admitted – and

found – there was no such security in place. At best, the parties operated as though bound by a

purchase agreement but (even accepting the effectiveness of the March 2011 set of agreements,

which postdated the impugned statement) there was no completed transfer of beneficial

ownership and no head lease in effect until then. Throughout, nothing appeared on title in favour

of Glenmore LP. The statement was therefore misleading and untrue, and we so find.

(iii) Materiality

[107] We also find that this statement was misleading and untrue in a material respect: it would

reasonably have been expected to have a significant effect on the value of Glenmore Units. A

"legal" form of "security" is significant because it enhances a mere promise to pay. It becomes

not merely a promise to deliver an outcome, but couples that promise with something extra –

something important – to ensure that the outcome is delivered even if the promiser defaults. We

are in no doubt that a reasonable investor would generally – and certainly in these circumstances

– ascribe significantly more value to an investment secured by commercial real estate than to a

similar investment not so secured.

(e) Knowledge

[108] Glenmore LP and Platinum knew or reasonably ought to have known that the investment

was not secured by commercial real estate. Glenmore LP and Platinum both acted through their

guiding mind, Shariff, who was involved in all of the relevant business negotiations and their

documentation – none of which created security as represented. Glenmore LP and Platinum also

knew or reasonably ought to have known – through Shariff – that the statement that an

investment in the Glenmore LP offering was secured by commercial real estate was misleading

or untrue in a material respect. Accordingly, we find that Glenmore LP and Platinum

contravened subsection 92(4.1) of the Act.

[109] Shariff admitted being a director of Glenmore Ltd. at all material times. Given this role,

we find that he authorized, permitted or acquiesced in Glenmore LP's contravention of

subsection 92(4.1).

[110] Chitra also admitted being a director of Glenmore Ltd. at all material times. She

acknowledged being involved in the preparation of the Glenmore LP marketing material and

having a role in the print, radio and website advertisements. Although she states in the

Admissions Statement – and Staff accepted – that she did not understand the distinction between

the "legal" and "common parlance" meanings of the words "secure" and "secured", she did not

claim ignorance of such a distinction in connection with the misrepresentation we found (that an

investment in Glenmore LP was secured by commercial real estate). In any event, her

knowledge – or lack thereof – of the meaning of a certain word or phrase is not relevant in

determining her indirect responsibility in these circumstances. Her role as a director of

22

Glenmore Ltd. is determinative. Finally, Chitra claimed to have relied on legal or accounting

advice, but gave no details and offered no evidence corroborating that claim. For these reasons,

we find that she authorized, permitted or acquiesced in Glenmore LP's contravention of

subsection 92(4.1).

D. The P5 LP Syndication

1. Greenwich Land Purchases

[111] Platinum syndicated Greenwich using P5 LP as the vehicle and selling P5 Units to pay

for land acquisition and development.

[112] The targeted land consisted of several adjacent parcels on the western outskirts of

Calgary. The plan was to acquire, rezone and develop it for resale as residential building lots.

Five of the targeted parcels were eventually acquired; we will refer to these together as the

Greenwich Parcels and individually using their legal lot or block identifiers 27, 28, 30, 32 and

33.

[113] A "friend of a friend" of Shariff (we will refer to him as SO) was, for an unspecified

time, a Platinum employee; Shariff testified that SO "came on board . . . the end of '07, beginning

of '08".

[114] SO had bought Parcels 28 and 32 in 2006, for $1.25 million and $1 million, respectively.

[115] In September 2007, acting for Platinum Group, SO signed an offer to buy Parcel 30 for

$2.4 million from an arm's-length owner.

[116] In October 2007 SO (through a numbered company) agreed to buy Parcel 27 from

apparently arm's-length vendors for $2 million, and later that month signed an agreement

reselling it to P5 Inc. for $2.5 million.

[117] In December 2007 SO agreed to sell Parcels 28 and 32 to Platinum Group for

$2.75 million each, and SO's father agreed to sell Parcel 33 to Platinum Group for $2.5 million,

all three transactions to close in February 2008.

[118] The various purchases moved forward, but not all in the same way.

[119] Title to Parcels 30 and 27 passed to P5 Inc. in December 2007 and January 2008,

respectively. Arm's-length financing was obtained and secured by a $3,350,670 mortgage

(Mortgage 1) registered against these two parcels.

[120] Platinum Group interests in the other three Greenwich Parcels (the purchases of which

had not yet closed) were assigned to 137 (part of Platinum Group) in January 2008.

[121] Staff seemed to suggest that the insertion of 137 into the acquisition of the Greenwich

Parcels was designed or served to conceal, mislead or deceive, but the evidence is insufficient to

support any such conclusion. Whatever the reason for 137's involvement, we ascribe it no

importance. 137 seems to have operated essentially as a nominee, agent or trustee for other

23

Platinum Group entities – in this case, P5 Inc. and P5 LP – and there is no evidence that 137's

involvement impaired the interests of investors.

[122] In sum, by 1 February 2008 (the date of P5 LP's first OM, discussed below) P5 Inc. had

acquired title to two of the five Greenwich Parcels (27 and 30) for a total of $4.9 million, and

had mortgaged these two parcels to the extent of some $3.35 million. By the same date 137 had

agreements to acquire the three other Greenwich Parcels (28, 32 and 33) later that month for

$8 million.

[123] According to Shariff, it was around this time that lenders withdrew support from

Platinum Group in the face of publicity concerning the mentioned criminal charges against

Shariff, and Shariff turned to RM for help (although Shariff elsewhere said that the support was

withdrawn later, in May 2008). Whatever prompted its involvement with Greenwich, RM Group

lent $2.75 million to 137 at the end of February 2008, taking as security guarantees from P5 LP

and P5 Inc., an assignment of proceeds of the sale of P5 Units, and mortgages (the RM Group

Mortgages).

[124] 137 took title to Parcel 28 (for $2.75 million) in March 2008, and the RM Group

Mortgages were registered against Parcels 27, 28 and 30.

[125] Parcels 32 and 33 took a different route. They were transferred (in April and March

2008, respectively) from SO and his father (respectively) to RM Group, which granted Platinum

Group the option to buy the parcels for $3,025,000 each. That option was exercised some

months later, and June 2008 transfers to 137 (priced then at $3,050,000 each) were eventually

registered in September 2008. While Platinum Group thus acquired the two parcels as originally

intended, they took a detour lasting several months and costing Platinum Group an extra

$850,000 (described by Shariff as a sort of "financing" fee to RM Group).

[126] P5 Inc. transferred Parcels 27 and 30 to 137 in May and June 2008, respectively.

[127] In the result, by September 2008 P5 LP (through 137) held title to all five Greenwich

Parcels at a total cost of somewhat less (by our reckoning) or somewhat more (by Shariff's and

Staff's reckoning) than $14 million. The evidence as a whole persuades us that acquisition of the

Greenwich Parcels cost P5 LP approximately $14 million.

[128] Shariff testified that he alone (not Chitra) was involved in negotiating the Greenwich land

acquisitions for Platinum Group. Chitra's signature on a number of Greenwich documents is

consistent with her testimony to the effect that she signed what was put in front of her in respect

of the P5 LP syndication without seeking or expecting much explanation, relying instead on the

professionals involved.

2. The TCC LoC

[129] The mentioned withdrawal of lender support in 2008 had affected a Platinum Group

condominium development project in British Columbia (Lucaya).

[130] RM Group, through a company we will refer to as TCC, stepped in with a $10 million

revolving line of credit to 137 (the TCC LoC). The initial 17 June 2008 term sheet described

24

the TCC LoC's purpose as to "repay existing financing, pay amounts due in respect of [Lucaya]

and provide funds for the general corporate purposes". Shariff testified that the plan was to use

the TCC LoC for both Lucaya and Greenwich – "we could fund Lucaya" and "draw down on it if

we needed to for more lots, and continue to do what we had to do on [Greenwich]".

[131] We accept (consistent with the Admissions Statement) that Shariff, not Chitra, was

responsible on the Platinum Group side for the negotiation and operation of the TCC LoC.

[132] The TCC LoC was secured by guarantees from P5 Inc. and P5 LP, an assignment of

proceeds from the sale of P5 Units, and a mortgage registered against the Greenwich Parcels in

September 2008. Filed reports of exempt distribution indicate that P5 LP raised $3.875 million

from the sale of P5 Units after the date of the initial TCC LoC term sheet.

[133] The TCC LoC and the associated mortgage of the Greenwich Parcels were amended and

extended several times, ultimately until 28 February 2011.

[134] In evidence are spreadsheets (the TCC Spreadsheets) recording, and sometimes

labelling, various advances, loan fees, interest charges and repayments on the TCC LoC. Shariff

attributed the TCC Spreadsheets to RM Group and suggested on that ground that we not rely on

them. However, specific items recorded in the TCC Spreadsheets are consistent with – and

sometimes clearly corroborated by – other evidence, including (in some instances) Shariff's

testimony. Despite inconsistencies (mostly modest) among versions of the TCC Spreadsheets in

evidence for different periods, we are satisfied that the TCC Spreadsheets reasonably illustrate

how the TCC LoC operated from 17 June 2008 through 31 December 2010.

[135] Platinum Group drew heavily on the TCC LoC from the outset. 137 incurred a

$1 million "initial loan fee" upon signing. The same day, some $4.6 million was advanced for

use on Lucaya.

[136] Other TCC LoC advances appear to have been used for Greenwich. We accept Shariff's

explanation (as we understand it) that some or all of two first-day advances totalling over

$3.1 million (one explicitly labelled in the TCC Spreadsheets as pertaining to "Block 32") were

applied to 137's acquisition of Parcel 32 (under the mentioned option from RM Group). The

TCC Spreadsheets recorded another TCC LoC advance that can reasonably be ascribed to

Greenwich (a May 2010 item with a notation naming the engineers retained to work on that

project).

[137] The TCC LoC was also used for other Platinum syndications. According to the

Admissions Statement, this included payment of "liabilities incurred by [Deerfoot LP], Lucaya

LP, and other projects". Shariff testified to similar effect – "some advances . . . were made to

Deerfoot Court, but not -- not by my instruction". Indirect confirmation appears in a January

2011 email from Shariff to RM: "There should not be any further draws on [TCC LoC] for

Deerfoot Court".

[138] In all, the TCC Spreadsheets show charges under the TCC LoC through 2010 totalling

over $20.6 million, and over $10.4 million in servicing payments. Some of this servicing was

funded by P5 LP investor subscriptions (consistent with the assignment of proceeds from P5 Unit

25

sales). Shariff acknowledged in testimony that this was done with his authorization. As to the

amount so applied, the Admissions Statement states "at least $360,000". Shariff in testimony

conceded that the amount was higher. According to Staff, all servicing of the TCC LoC came

from P5 LP investors' money. The evidence as a whole persuades us that considerably more than

$360,000 of P5 LP investors' money was used in this way.

[139] Platinum Group defaulted on the TCC LoC and TCC enforced its security. The

Admissions Statement describes the result:

The accumulation of interest and fees accrued on the amounts drawn against the [TCC LoC], the

use of the [TCC LoC] to pay liabilities incurred by [Deerfoot LP], Lucaya LP and other projects,

and payments on the [TCC LoC] with funds from [P5 LP] culminated in the eventual loss of the

[Greenwich Parcels] and the investors' funds, when the creditor [TCC] ultimately foreclosed on

the [Greenwich Parcels].

[140] The Admissions Statement also includes the following declarations directly relevant to

one or more of the allegations (these appear in different sequence in the original):

. . . [P5 LP] and [Shariff] knew that this pledging of the [Greenwich Parcels] as collateral by [137]

was contrary to the business purpose and use for the [Greenwich Parcels] as described in the OM

issued on February 1, 2008. . . .

Under financial pressure from [RM Group], [Shariff] authorized, permitted or acquiesced in the

[Greenwich Parcels] being transferred to [137], and in the use of funds from the [TCC LoC] to

pay, among other things, liabilities associated with Lucaya LP and [Deerfoot LP]. . . .

The [TCC LoC] was used to pay liabilities incurred by [Deerfoot LP], Lucaya LP, and other

projects while securities of [P5 LP] were being sold to investors. The existence and use of the

[TCC LoC] for this purpose was not disclosed to investors in [the mentioned OM], promotional

materials, or otherwise.

At least $5,438,173 of the amount drawn by [137] against the [TCC LoC] between 2008 and 2010

was used to fund, (a) liabilities incurred for loan origination fees, extension fees, and interest

charged by [TCC]; and (b) liabilities incurred by other non-arm's length Platinum projects and

affiliates including Lucaya LP and [Deerfoot LP].

By using the [TCC LoC] to pay liabilities incurred by [Deerfoot LP], the Lucaya LP, and other

projects, and by using investors' funds to make payments on the [TCC LoC], [P5 LP] and [Shariff]

admit that they deprived [P5 LP] of any ability to use investors' funds to accomplish the business

purposes of [P5 LP].

[141] The first disclosure concerning the TCC LoC arrangements appears to have been made

only in 2012, when a note to P5 LP's 2011 financial statements mentioned a line of credit and

mortgages but not their use for non-Greenwich purposes.

3. The P5 OMs

[142] P5 LP offered P5 Units under an OM dated 1 February 2008 (the P5 OM1). Chitra, as

"Secretary" of P5 Inc., and Shariff, as a director of P5 Inc., signed the document and certified it

to be free of misrepresentation.

26

[143] The P5 OM1 stated that the net proceeds – up to $32,150,000 – would be used for

"Acquisition and Development" of the Greenwich Parcels. More specifically, approximately

$20 million was forecast to be spent in approximately three months to accomplish the

syndication and property acquisition. A marketing brochure appended to P5 OM1 ascribed

$17.5 million to "Land Costs".

[144] The only material agreement disclosed in P5 OM1 was the P5 LP limited partnership

agreement, under which P5 Inc. was given extensive authority as general partner, including the

power to borrow money on behalf of P5 LP and to grant security interests against P5 LP's assets

"for expenditures necessary for the efficient operation of the business of" P5 LP. P5 OM1 also

stated that P5 Inc. "may not take any action with respect to the property of [P5 LP] which is not

for [P5 LP's] benefit".

[145] P5 OM1 was amended on 22 May 2008; we refer to the document thus amended as the

P5 OM2. Chitra and Shariff, as "Secretary" and a director of P5 Inc. respectively, signed the

amendment and certified it to be free of misrepresentation. P5 LP did not further amend

P5 OM2 or issue any new OM, despite continuing developments (including the TCC LoC

arrangements). Selling of P5 Units continued until April 2009.

[146] The main changes from P5 OM1 to P5 OM2 were disclosure of anticipated selling costs

of up to $2.45 million, P5 Unit sales to 15 May 2008, new financial statements and a description

of the target property expanded to include another parcel (ultimately not acquired).

[147] Neither P5 OM1 nor P5 OM2 disclosed – as material agreements or otherwise – any of

the purchase contracts, mortgages or related agreements in place by the respective OM dates,

including the completed transfers of Parcels 27 and 30 and Mortgage 1 (in place when P5 OM1

was issued) and the completed transfer of Parcel 28 and the RM Group Mortgages (in place by

the time of P5 OM2). There was, in P5 OM1 and P5 OM2, no disclosure of the actual prices

paid or negotiated for the Greenwich Parcels (ultimately totalling some $14 million, as we

concluded above), of the expected cost of the additional parcel or of a deposit paid for it.

[148] Shariff testified that he was "pretty sure we told investors at the time that we had closed

on one or two of [the Greenwich Parcels] because it was part of the sales process", which would

have "let [investors] know that you've already committed, you're going through the process of

acquiring and assembling the other lots". Chitra testified to similar effect.

[149] Be that as it may, neither P5 OM1 nor P5 OM2 alerted readers that P5 LP or its investors

would be investing in, funding or otherwise financially supporting any project other than

Greenwich.

4. Misrepresentation?

[150] Staff allege misrepresentation in P5 OM1, specifically (i) misleading information

concerning the price to be paid for the Greenwich Parcels and the fact that two of them had

already been acquired, and (ii) failure to disclose material contracts, including purchase

agreements and mortgages.

27

[151] First we consider the absence of disclosure of SO's involvement in the acquisition of

Greenwich Parcels (partly as Platinum Group's agent but also, in some cases, as vendor). The

evidence as a whole does not persuade us that his involvement was significant, or would have

been thought so by prospective investors. We discern no misrepresentation in this.

[152] We next consider the absence from P5 OM1 of disclosure of the then-current state of the

land acquisitions. As discussed, by the 1 February 2008 date of P5 OM1, two Greenwich Parcels

had already been acquired (and mortgaged), while agreements were in place for the acquisition

(to close later that month) of the remaining three. We conclude that this non-disclosure was not

misleading. First, Shariff testified that the completed acquisitions were disclosed as part of the

marketing effort, which we think plausible. Second, the acquisition of two of the Greenwich

Parcels, and the signed agreements to buy the others, were consistent with the disclosed business

plan to buy and develop that land. The use of some mortgage financing (Mortgage 1 and the

RM Group Mortgages) was unsurprising and not inconsistent with the disclosed business plan.

We are not convinced that investors would have considered themselves misled merely by not

having been told that some of what was planned had already been lined up or implemented. The

evidence certainly does not persuade us that these facts alone would have affected significantly

the value ascribed by an investor to P5 LP Units. (The converse situation – a crystallized failure

of the disclosed plan – might have been viewed very differently.) In short, we do not discern

here a misrepresentation.

[153] We turn now to the absence of disclosure of the purchase prices paid or agreed for

Greenwich Parcels. When P5 OM1 was issued, $4.9 million had already been paid to buy two

Greenwich Parcels and there were agreements to pay $8 million for the other three later that

month. The total – $12.9 million – was far short of the $17.5 million land cost shown in the

marketing brochure appended to P5 OM1. Shariff suggested rightly that other costs would also

be incurred under the business plan, but some items to which he alluded would have fallen into

separate cost categories identified in the disclosure. A difference of millions of dollars between

the actual cost and the disclosed cost was unexplained. This, we think, would have been

important to investors, whether they viewed it positively (impressed by the below-budget land

acquisition) or negatively (wondering why so much more money was being raised to buy land

than would be needed for that purpose). Either way, we conclude that investors were misled on

this point, and materially so in that the omitted information would reasonably have been

expected to affect significantly the value they might ascribe to a P5 Unit.

[154] We next consider the evolution of both the facts and the disclosure.

[155] Although reflecting other amendments, P5 OM2 did not address the misrepresentation

just found. Worse, new information also went undisclosed. For reasons discussed above

concerning the status of land acquisitions, we are not persuaded that investors were materially

misled by the absence of disclosure of the completed acquisition of Parcel 28 or of the

RM Group Mortgages (relating to financing for Parcel 28) registered against Parcels 27, 28 and

30. These were not inconsistent with the disclosed business plan.

[156] We conclude differently in respect of Parcels 32 and 33. As noted, Platinum Group,

having lined up their purchase, instead – by the time of P5 OM2 – saw them bought by

RM Group and optioned to Platinum Group for $800,000 more than it had originally agreed. We

28

consider that this information might reasonably have concerned a prospective investor to the

extent of affecting significantly the value they might ascribe to a P5 Unit, and conceivably

altering their decision to invest at all. We find here also a misrepresentation.

[157] In making these findings we took into account the Respondents' argument that "investors

were able to look up the public title documents for these lands and see the transactions and the

figures for themselves". As we commented above in respect of Deerfoot Court, this would be

true only after the relevant conveyance documents were registered, and in any event is not in our

view the sort of disclosure contemplated by the rules governing use of OMs.

[158] P5 OM1 (like P5 OM2) was P5 LP's document, and we found above that it materially

misled by omission (although not in every particular alleged). We further find that P5 LP

(through its guiding mind Shariff) knew or reasonably ought to have known that the omissions

were misleading in a way that would reasonably have been expected to have a significant effect

on the value of P5 Units. It follows, and we find, that P5 LP contravened subsection 92(4.1) of

the Act. We make no similar finding against Platinum because the allegation against it seems

not to have been pursued.

[159] Given Shariff's and Chitra's respective director and officer roles with P5 Inc. – and as

signatories to P5 OM1 (and P5 OM2) – we find that Shariff and Chitra each authorized,

permitted or acquiesced in the contravention by P5 LP of subsection 92(4.1).

5. Fraud

(a) The Allegations

[160] Staff allege that P5 LP and Platinum engaged in a course of conduct that perpetrated a

fraud on P5 LP investors, and that Shariff authorized, permitted or acquiesced in respect of

P5 LP. The allegations relate specifically to the TCC LoC.

(b) Pertinent Facts Summarized

[161] The TCC LoC was entered into and used for purposes not limited to Greenwich. It was,

however, secured by a mortgage against the Greenwich Parcels, and serviced in part using P5 LP

investors' money. Even while money was being raised from the sale of P5 Units, none of this

was disclosed to the investors. Following default, the creditor realized on its security and P5 LP

– and its investors – lost the Greenwich Parcels.

(c) Shariff's Perspective

[162] Shariff described the TCC LoC as having come into existence soon after independent

financing was withdrawn from both Lucaya and Greenwich, and he confirmed that the TCC LoC

was intended to be applied to both. He said that he himself took no money from the TCC LoC.

He described the circumstances as follows:

I was in a jam. I needed to get the funding. We were under pressure. I went to [RM] for help.

He said, This is how we're going to structure it. And . . . I didn't want to lose Lucaya, . . . at the

time, I just wanted to save the deal.

. . .

29

I looked at it as a lifeline, that it kept us alive for the financing. We'd be able to get the

development started, . . . acquire any additional parcels, get Lucaya completed, and pay out the

investors.

[163] Shariff testified that Lucaya "would have gone sideways" without the TCC LoC, and his

intent was to protect "a group of investors". He expressed regret at entering into the TCC LoC,

as doing so "put the [P5 LP] investors at risk" and "[w]e could have continued on with Platinum

5 Acres on its own". Had he walked away from Lucaya, "it would have just limited the exposure

to Lucaya". However, Shariff testified that, at the time, he "was looking at the big picture",

particularly the fact that "[t]here's investors in Lucaya who are invested in other projects, as well,

so it's not like you could just carve everybody out".

[164] Shariff viewed the TCC LoC as "not a bad deal", and expected to be "able to pay it off

and continue on". Unfortunately, he said, in the fall of 2008 the "market crashed in Calgary" and

the "Kelowna market was destroyed".

[165] Shariff acknowledged that he and P5 Inc. were obliged as fiduciaries to act with utmost

fairness and to exercise good faith and integrity in managing the business of P5 LP in the best

interests of the limited partners (and that he knew this in 2007). He admitted in testimony that

the TCC LoC was not "necessary for the efficient operation" of P5 LP or urgently needed to

finance development of Greenwich, and that RM owed no fiduciary duty to P5 LP investors,

most of whom would not have been aware of his involvement in Greenwich or of the TCC LoC.

[166] Extracts from the Admissions Statement quoted above (confirmed by other evidence)

recite that: mortgaging the Greenwich Parcels to secure the TCC LoC "was contrary to the

business purpose" described in P5 OM1; using P5 LP investors' money to service the TCC LoC

"deprived [P5 LP] of any ability" to use the money "to accomplish the business purposes of

[P5 LP]"; the use of the TCC LoC for non-Greenwich purposes was not disclosed to investors;

and the resulting accumulation of obligations culminated in the eventual loss of the Greenwich

Parcels.

(d) Elements of Fraud: Analysis

Prohibited Act and Deprivation

[167] The TCC LoC was intended, and used, for Lucaya and other Platinum ventures, including

Greenwich. P5 LP investors' money was used to service the TCC LoC and the Greenwich

Parcels were mortgaged as security for it. This was contrary to the disclosed business purposes

of P5 LP, and P5 LP investors' approval was neither sought nor obtained.

[168] The Respondents pointed to P5 Inc.'s powers under the P5 LP limited partnership

agreement to borrow money and pledge assets, which were disclosed in P5 OM1. The disclosed

powers, albeit broad, were granted only for P5 LP's business purposes (for Greenwich). In this

regard, the Admissions Statement acknowledges P5 LP and Shariff having known that "pledging

[the Greenwich Parcels] as collateral by [137] was contrary to the business purpose . . . described

in" P5 OM1.

[169] Binding P5 LP to the TCC LoC, using the TCC LoC for non-Greenwich purposes,

granting the related security (notably the mortgage of the Greenwich Parcels), and using P5 LP

30

investors' money to service the TCC LoC – none of which was disclosed – were all beyond the

scope of authority of those who ran P5 LP. The result was deception, of both existing P5 LP

investors and those from whom money was being raised.

[170] This was a prohibited act – both P5 LP's and Platinum's – effected by their guiding mind

Shariff.

[171] The prohibited act put P5 LP investors' pecuniary interests at risk – a deprivation in

Théroux terms. The risk, moreover, crystallized into actual pecuniary loss: P5 LP investors'

money used to service the TCC LoC was lost to Greenwich, the Greenwich Parcels themselves

were lost by foreclosure, and P5 LP investors received no distributions and most have had no

return of their invested principal.

[172] Both elements of the actus reus of fraud are established.

Subjective Knowledge

[173] In all matters pertaining to the TCC LoC, P5 LP and Platinum (and other Platinum Group

entities, notably 137) acted by and through Shariff. In this regard, as noted, his knowledge can

also be ascribed to them.

[174] The purposes and use of the TCC LoC, its servicing with P5 LP investors' money, the

pledge of P5 LP assets as security, the lack of authority for effecting this beyond what was

necessary for P5 LP business purposes, and the absence of disclosure were all clearly known to

P5 LP and Platinum, through Shariff. They similarly knew the associated risk to P5 LP

investors' pecuniary interests.

[175] We therefore find that P5 LP and Platinum had subjective knowledge of the prohibited

act and resulting deprivation. Both elements of the mens rea of fraud are established.

Claimed Justifications or Defences

[176] The Respondents advanced numerous arguments possibly (it was not always clear) in

justification of or defence to the fraud allegation, which we now discuss.

No Intention to Harm

[177] Shariff submitted that he did not intend any harm to P5 LP investors.

[178] We accept that he did not set out to harm P5 LP investors. This, however, is irrelevant to

the allegation of fraud.

No Personal Profit

[179] Shariff claimed not to have benefited personally from the TCC LoC. True or not, this is

unhelpful to our analysis because the existence of fraud does not depend on whether someone

personally profits from the prohibited act.

Conflicting Obligations

[180] Shariff told us of intending to serve both Lucaya investors and P5 LP investors. We

accept that he sought both to salvage Lucaya and to make a success of Greenwich. He may well

31

have had obligations to the former that were similar to those owed to the latter – to act in good

faith and in their best interests. One who has such obligations to an investor group must manage

conflicts in a manner consistent with its best interests.

[181] Shariff was in an awkward position. He saw the TCC LoC as necessary to save Lucaya.

P5 LP did not need it urgently to finance development of Greenwich or otherwise for P5 LP's

efficient operation, but P5 LP was in a position to provide useful, perhaps crucial, security for

the TCC LoC. That, however, did not entitle Shariff to sacrifice P5 LP and its investors for the

benefit of Lucaya.

[182] Shariff said that some investors had invested in multiple syndications. In submissions he

indicated that he treated investors "as part of a larger group: his Platinum investors". This,

though, was inconsistent with the entire Platinum business model, and with the structure and the

OM disclosure of individual syndications. Each was distinct, targeting separate property or

projects; they operated through separate vehicles; and they were marketed separately. Investors

in one syndication could expect no benefit from another, and owed nothing to another.

[183] Far from a justification or a defence, Shariff's failure to recognize and respect the distinct

interests of P5 LP investors (even if some were also Lucaya investors) contributed to the

prohibited act and corresponding deprivation.

Reliance on Others

[184] Shariff claimed to have relied, in entering into the TCC LoC arrangement, on advice from

RM, and on the lawyers involved with the documentation: "They would have read the limited

partnership agreement. If I was breaking the law, I think [the lawyers] have a duty . . . to caution

me".

[185] The reliance claim is unsupported by evidence. We do not know what (if any) advice

Shariff actually sought from, or was given by, RM or the lawyers. It is unclear in any event why

Shariff should have required outside advice to discern the inconsistency between, on one hand,

the disclosed P5 LP business plan and the associated interests of P5 LP investors and, on the

other hand, the purpose and use of the TCC LoC and its associated security.

[186] No defence lies here.

Compulsion or Duress

[187] Shariff claimed to have acted in connection with the TCC LoC under compulsion, duress

or "moral involuntariness" – specifically, while "in financial difficulty and under financial

pressure" from RM (or from RM Group, as the Admissions Statement declares) – and that in

consequence either fraud cannot be established or, if established, that it cannot in fairness lead to

punishment. Although Shariff's testimony and the submissions on this point focused on the fraud

allegation in relation to him, the fraud allegation is also levelled directly at P5 LP and Platinum;

we therefore consider the matter accordingly.

[188] We were pointed to the Supreme Court of Canada decision R. v. Ruzic, 2001 SCC 24. It

does not assist Shariff, P5 LP or Platinum.

32

[189] First, the discussion in Ruzic turned on circumstances of dire physical constraint or

extremity. Nothing similar was involved here. (We were pointed to Glenmore-related emails in

which RM used the word "taser"; we are not persuaded that these conveyed or were perceived by

Shariff as conveying a real physical threat.)

[190] Second, the court in Ruzic said the following (at para. 62):

The common law of duress, as restated by this Court in [R. v. Hibbert, [1995] 2 S.C.R. 973],

recognizes that an accused in a situation of duress does not only enjoy rights, but also has

obligations towards others and society. As a fellow human being, the accused remains subject to a

basic duty to adjust his or her conduct to the importance and nature of the threat. The law includes

a requirement of proportionality between the threat and the criminal act to be executed, measured

on the objective-subjective standard of the reasonable person similarly situated. The accused

should be expected to demonstrate some fortitude and to put up a normal resistance to the threat.

The threat must be to the personal integrity of the person. In addition, it must deprive the accused

of any safe avenue of escape in the eyes of a reasonable person, similarly situated.

[191] Shariff clearly feared the financial consequences (particularly for Lucaya, perhaps also

for Platinum and himself) of the mentioned withdrawal of support by lenders. The TCC LoC

offered a way out. That said, Shariff acknowledged that RM did not pressure him into it, and

that other financing options could have been explored for Greenwich.

[192] Thus, even had Shariff faced a threat in Ruzic terms with no "safe avenue of escape" –

which was not the case – he would still have had "obligations towards others and society" (P5 LP

investors, notably). He would have had to act with "proportionality" and "to demonstrate some

fortitude". This he failed to do, instead he (and P5 LP and Platinum) sacrificed the interests of

P5 LP investors.

[193] Moreover, Shariff, P5 LP and Platinum followed this wrong course for years without

correction (or disclosure) – thereby perpetuating and magnifying the risk, and the actual harm, to

P5 LP investors' pecuniary interests.

[194] In summary, we find here neither the sort of compulsion contemplated in Ruzic nor the

sort of proportionate response it mandates, and no excuse or defence on grounds of compulsion,

duress or lack of volition.

(e) Conclusion on Fraud

[195] To conclude our analysis, all the elements of fraud are proved, and no excuse or defence

is established. It follows, and we find, that P5 LP and Platinum engaged in a course of conduct

that they knew or reasonably ought to have known perpetrated a fraud on P5 LP investors, in

contravention of clause 93(b) of the Act.

(f) Authorizing, Permitting or Acquiescing in the Fraud

[196] Given Shariff's director and officer roles with P5 Inc., we find that he authorized,

permitted or acquiesced in P5 LP's contravention of clause 93(b) of the Act.

33

E. Conduct Contrary to the Public Interest

1. Training and Oversight of Salespeople

(a) The Platinum Selling Process Generally

[197] Platinum, through individuals on its salesforce, conducted the selling efforts for its

syndications. The syndicating entities – including the other Platinum Respondents – were also

participants in the selling efforts concerning their respective securities, notably by issuing OMs.

[198] Testimony – from Shariff, Chitra and two former Platinum salespeople (one of whom we

identify as AC) – gave us some information about how the selling efforts were conducted. The

Admissions Statement provides general information, as did the Gavilan Settlement concerning

the conduct of Gavilan while a Platinum salesperson.

(b) Evidence as to Training

[199] We received some seemingly inconsistent evidence concerning a training manual. The

evidence as a whole satisfies us that at some point Platinum did compile one (the Training

Manual) and kept a few copies at its office, accessible to its salespeople. However, the Training

Manual was not entered in evidence, so we do not know precisely what it contained. Chitra

testified that it included "[subscription] agreements, how to fill them out, what you're asking the

clients in terms of if they [are] accredited investors or eligible investors, what they would be able

to sign off on; and marketing and advertising, what they were allowed to do or what they had out

there". Chitra also testified about "FAQ" sheets, employed "so that everyone was answering

[frequently asked questions] the same way" – "important because you don't want salespeople

going out there saying whatever they want to say or making up things".

[200] We are satisfied that information was also communicated, in meetings, to Platinum

salespeople essentially as Shariff and Chitra testified. Shariff described regular "Monday-

morning meetings" designed to facilitate Platinum salespeople's understanding of "what we were

selling". At these meetings "we'd do a page flip"; "we'd have a PowerPoint presentation, we'd

have the partnership agreement and the OM . . . up in the boardroom, and we'd go page by page

and, you know, have our salespeople review it." Chitra described project-launch meetings at

which salespeople received project-specific marketing material including (if available) "basically

all the documentation that goes along with selling".

[201] It appears from testimony that the meetings with Platinum salespeople were fairly well

attended, and involved some give-and-take – including questions to Chitra or other principals

present, which would be answered. It also appears from testimony that external lawyers attended

two meetings with salespeople to discuss legal aspects of the selling efforts, and otherwise there

was input, although not necessarily attendance, by in-house counsel.

[202] We are satisfied from the evidence as a whole that, in conjunction with the Training

Manual or otherwise, Platinum salespeople were told about, and taken through, various offering

documentation, including OMs, limited partnership agreements and subscription agreements.

Copies of subscription agreements in evidence presented definitions of "eligible investor" and

"accredited investor", as those terms are used in Alberta securities laws.

34

[203] Shariff testified to stressing to Platinum salespeople that they were never to use the word

"guarantee" when discussing Platinum Group investments. We accept that this specific

prohibition was conveyed.

(c) Evidence as to Oversight

[204] As to oversight of Platinum salespeople and their practices while selling securities, there

was very little evidence. AC testified to doing her own advertising for approximately one year

before being asked to remove some online content by a Platinum lawyer (whereupon she ceased

all online advertising). Shariff testified that, "whenever we did find out [about] some sales

individual that had said something wrong, we either cautioned them or, if not, we got rid of

them". However, it was far from clear how such information would readily have become known

to Platinum principals. Indeed, we heard of only one Platinum salesperson – AC – being

terminated, and that was predicated essentially on her having breached faith with Platinum by

selling competing securities. There was, notably, no evidence of any systematic oversight of the

actual interchanges between Platinum salespeople and prospective investors, or any other process

in place to identify and address any flaws in those dealings.

[205] To the contrary, there was evidence of rogue sales activity involving multiple

syndications. The breadth of the selling problems is apparent from what (as mentioned) the

Respondents themselves acknowledge in the Admissions Statement:

With respect to approximately half of the purchasers of the securities issued by [the Platinum

Issuers], the Respondents and their employees and agents failed to take all reasonable steps to

ensure that the purchasers were qualified for any exemptions to the registration and prospectus

requirements under Alberta securities laws.

Approximately half of the purchasers of [such] securities . . . did not receive timely access to

[OMs] . . . .

Some of the investors in [Glenmore LP] who did not receive an [OM] on a timely basis met the

accredited investor criteria . . . .

[206] Evidence consistent with the selling problems is found in the Gavilan Settlement (the

content of which was not challenged by the Respondents). Gavilan admitted having contravened

subsection 92(4.1) and clause 92(3)(d) of the Act while employed as a Platinum salesperson. His

admissions also convey some of the flavour of what happened: misrepresentations to Deerfoot

LP and Qualia LP investors (that they could expect to double their money, and that the

investments were "safe"), and unfair practices (taking advantage of a PMIC investor unable to

protect herself, knowingly recommending that she invest a significant portion of her life savings,

telling her that there was little risk associated with her investment and that she could have her

money back at any time, knowing she was likely not an "eligible investor", and not giving her an

OM before she invested).

(d) Analysis and Findings

Training

[207] It seems to us probable that Platinum, under the guidance initially of Shariff and later of

Chitra, took steps towards educating Platinum salespeople as to what was being sold in whatever

syndications were being pursued at a particular time. We accept that, to that end, they walked

their salespeople through various offering documentation, including the relevant OMs, limited

35

partnership agreements and subscription agreements. In short, we are satisfied that efforts were

made to ensure that Platinum salespeople knew something of the products on offer, with a view

to generating sales.

[208] It also seems to us probable that, as part of this and through the Training Manual, the

FAQ sheets and the meetings earlier described, efforts were made towards alerting Platinum

salespeople to certain factual matters relevant to determining whether prospective investors were

"eligible investors" or "accredited investors". More particularly, we accept that Platinum

salespeople were walked through the relevant documentation – including the portions of the

subscription agreements detailing various investor-qualification criteria – and that it was

probably explained to the Platinum salespeople that they should each time identify which, if any,

applied. We also accept that the relevant OMs were made available to Platinum salespeople, to

be handed to prospective investors. It is conceivable that a great deal of illegal selling might

have been averted had Platinum salespeople been diligent in delivering OMs, and in questioning

prospective investors – even if using nothing more than extracts from the subscription

agreements – and then rejecting any prospective investor whose responses did not indicate

qualification.

[209] We note that Staff did not elaborate on what, in their view, would have constituted what

the notice of hearing referred to as an "appropriate training . . . program", and they pointed us to

no objective source to determine what was contemplated.

[210] In the circumstances, having concluded that some of what was done by way of training at

Platinum probably would have averted much illegal selling if diligently applied, we are unable to

conclude that there was a failure to provide appropriate training as alleged.

Oversight

[211] Staff's allegation has a second component: the failure to provide appropriate oversight.

[212] We need look no further than to the Admissions Statement, in which the Respondents –

Shariff and Chitra included – acknowledge widespread failures to comply with the terms of

securities-law exemptions.

[213] As mentioned, there was no evidence of any systematic oversight of the actual

interchanges between Platinum salespeople and prospective investors, or any other process in

place to identify and address any flaws in those dealings.

[214] In short, the broad – so broad as clearly to have been systemic – failure to satisfy basic

conditions of the relevant registration and prospectus exemptions persuades us that there was

nothing approaching adequate oversight of Platinum salespeople. We so find.

[215] Indirectly or directly, Shariff bore responsibility for this. So, too, did Chitra, in the

period "from late 2007 until 2009" during which, as she admits in the Admissions Statement, she

was "responsible for . . . managing Platinum's sales consultants" (even though that admission

goes on to say that for part of that period she "shared responsibility" with another individual).

36

[216] The registration and prospectus requirements are fundamental elements of our system of

securities regulation, directed at protecting investors and fostering fairness in our capital market.

The systemic failure to ensure basic adherence to conditions of exemptions from those

requirements is wholly inconsistent with the regulatory objectives. Despite the absence of a

breach of a particular provision of the Act in this regard, and mindful of the caution urged by

Sterling Centrecorp in such cases, it nonetheless seems obvious to us – and, in our view, it would

have been obvious to any reasonable participant in the capital market who gave the matter any

thought – that Shariff's and Chitra's failure to provide appropriate oversight of Platinum

salespeople was contrary to the public interest. We so find.

2. Other Conduct Contrary to the Public Interest

[217] Staff allege that all other of the Respondents' conduct found to have been contraventions

of the Act, and the corresponding authorization, permitting or acquiescence, were also contrary

to the public interest. We agree.

(a) Illegal Trades and Distributions

[218] The registration requirement is designed in part to protect investors by involving persons

knowledgeable about our capital market, about particular offered securities, and about particular

investors and their objectives and risk tolerances. The prospectus requirement is designed to

provide investors with reliable information on which to base informed investment decisions. The

conditions attached to exemptions from these fundamental requirements address the same

regulatory purposes. The illegal trades and distributions found here involved conduct wholly

incompatible with these key requirements and conditions. We therefore find that it was also

contrary to the public interest.

(b) Misrepresentation

[219] Misrepresentations to investors are similarly incompatible with the basic objectives of

securities regulation. As stated by the ASC in DeLaet (at para. 77):

Our system of capital market regulation, which aims to protect investors and foster market

fairness, efficiency and confidence, rests in large measure on the cornerstone of disclosure – the

provision, to the market and investors by those seeking investment money, of reliable information

that can assist investors in making informed investment decisions. Untrue or misleading (by

inclusion or omission) representations that would reasonably be expected to have a significant

effect on investment decisions (the price paid for a security, or the decision to invest anything) are

contrary to these fundamental regulatory goals, and to the interests of Alberta investors and the

capital market.

[220] We adopt these comments, and therefore find that the conduct found above to have

contravened subsection 92(4.1) of the Act was also contrary to the public interest.

(c) Fraud

[221] A course of conduct that perpetrates a fraud on investors is self-evidently inconsistent

with investor protection and capital-market fairness and efficiency. It harms those directly

affected, and jeopardizes the confidence of others in the capital market, with adverse

implications for legitimate capital-raising. We therefore find that the conduct found above to

have contravened clause 93(b) of the Act was also contrary to the public interest.

37

(d) Authorizing, Permitting or Acquiescing

[222] Directors and officers play crucial roles in the capital market. They are expected to

exercise their authority appropriately, with integrity and diligence. Acting thus, they can ensure,

when their enterprises raise money in the capital market, that it is done in accordance with

securities laws, and that investors are fairly treated. If instead directors and officers facilitate or

allow capital-market misconduct, they thereby expose the capital market and investors to harm.

[223] It follows, and we find, that in variously authorizing, permitting or acquiescing in

contraventions by the Platinum Respondents, as found above, Shariff and Chitra also acted

contrary to the public interest.

VI. CONCLUSION AND NEXT STEPS

[224] To summarize, we made the following findings of misconduct:

Illegal Trades and Distributions

each of the Platinum Respondents contravened clause 75(1)(a) and

subsection 110(1) of the Act by illegally trading in and distributing securities;

Shariff authorized, permitted or acquiesced in such contraventions by the

Platinum Respondents;

Chitra authorized, permitted or acquiesced in such contraventions by Platinum,

Glenmore LP and P5 LP;

Misrepresentation

Glenmore LP and Platinum contravened subsection 92(4.1) by making what

amounted to misrepresentations, and Shariff and Chitra each authorized,

permitted or acquiesced in such contravention by Glenmore LP;

P5 LP contravened subsection 92(4.1) by making what amounted to

misrepresentations, and Shariff and Chitra each authorized, permitted or

acquiesced in such contravention by P5 LP;

Fraud

P5 LP and Platinum contravened clause 93(b) by engaging in a course of conduct

that perpetrated a fraud on P5 LP investors, and Shariff authorized, permitted or

acquiesced in such contravention by P5 LP;

Conduct Contrary to the Public Interest

the respective Respondents' conduct found to have been contraventions of the

Act, and the corresponding authorization, permitting or acquiescence, were also

contrary to the public interest; and

Shariff and Chitra also acted contrary to the public interest by failing to provide

appropriate oversight of Platinum salespeople.

38

[225] This proceeding now moves into a second phase, for the determination of whether – and

if so, what – orders for sanctions and costs ought to be made against the Respondents.

[226] Once the parties have familiarized themselves with our findings above, the hearing will

reconvene briefly for the purpose of scheduling a timetable for the delivery and hearing of

evidence (if any) and submissions on the issue of appropriate orders.

[227] To that end, the parties are directed to communicate to one another and to the ASC

Registrar by 16:00 on Thursday 6 March 2014 either their respective availability for such a

session at 13:00 on Wednesday 12 March 2014 or their suggestions (with reasons) for an

alternative time or date for this session.

25 February 2014

For the Commission:

"original signed by"

Stephen Murison

"original signed by"

Daniel McKinley, FCA

"original signed by"

Fred Snell, FCA