Rules and Regulators

by Scott Messenger

In early April, limited partners bombarded the Alberta Securities Commission (ASC) with complaints about Concrete Equities, believing the regulator had “the power to stop this transaction from happening.” But instead of assurance that it would prevent the sale of the LPs’ properties to Calgary’s Strategic Group, ASC’s executive director, David C. Linder, responded with a letter saying many of the LPs’ concerns were matters that would require legal attention the ASC can’t provide. “The ASC’s primary responsibility is for the compliance with Alberta securities laws,” Linder wrote. “The ASC is currently reviewing the announced re-organization from this perspective.”

“We are restricted to the buying, selling and trading of securities,” says ASC spokesperson Mark Dickey. “A lot of the investors’ questions that came in to the ASC largely involved contractual rights, which are covered under contract law, therefore it’s a private, civil matter.”

The ASC has already acted on that basis. In December, 2008, it settled with Concrete Equities Executive Club after the company raised more than $1.6 million by selling class B shares without filing a prospectus. The company then used those funds to invest in one of Concrete Equities’ limited partnerships, promising its Executive Club investors a return of 20% in one year. The investigation closed with the levying of an $80,000 fine and an agreement to refund shareholders.

Unless a similarly clear breach of Alberta securities law is identified in the sale to Strategic, the LPs are on their own. “Coming to us is something that we encourage investors to do – usually before they invest,” says Dickie, “so we can help them do background checks and educate themselves on investing.” But in the end the onus is always on the individual. “Before they sign, they should see an adviser and perhaps a lawyer.”

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