An alleged breach of fiduciary duty will cost a Canadian advisor and his Massachusetts firm almost $9 million in penalties.
Hans Peter Black, a resident of Canada, and Interinvest Corporation, his Boston-based investment advisor practice, were fined in U.S. District Court in the District of Massachusetts on Wednesday after failing to answer a U.S. Securities and Exchange Commission complaint filed in June 2015.
In its complaint, the SEC alleges that Interinvest and Black funneled more than $17 million in client assets into financially troubled Canadian penny stock companies in which Black had “undisclosed business and financial interests.”
Black served on the board of directors of the companies, which paid $1.9 million to an entity he controlled.
Interinvest clients lost as much as $12 million of that $17 million based on trading in the penny stock companies, some of which were purportedly in the business of mineral exploration.
Black and Interinvest continued to funnel client assets into the penny stock companies despite admonitions from the firm’s chief compliance officer, according to the SEC complaint.
The SEC alleges that Black’s involvement with the companies and his receipt of payment constituted a conflict of interest that he and his firm failed to disclose to their clients.
As part of the court’s default judgment, Interinvest and Black will pay $5.4 million in disgorgement and interest. In addition, the court ordered Black to pay $2 million and Interinvest to pay $1.5 million in civil penalties.