A group of 54 investors are suing the New Brunswick Securities Commission for $5.6 million, claiming it failed to protect them from an alleged ponzi scheme.
The investors from across the province filed the lawsuit on Monday at the Court of Queen's Bench in Edmundston.
The lawsuit targets the New Brunswick Securities Commission and four of its employees, including Rick Hancox, the commission's executive director.
Peter Mockler, a Fredericton lawyer who is representing the investors, said his clients are every-day folks who were counting on the commission to protect them.
"They invested a lot of money with CITC in Quebec and they lost it," Mockler said.
"The securities commission were aware for a long time of the potential for this loss and failed to notify them or indeed to even take action against CITC until it became too late to do so."
The lawsuit centres around an alleged ponzi scheme that dates back to 2006 and involves two Quebec companies.
Three New Brunswick men have been accused of selling shares to investors, then using that money to pay other, prior investors. These alleged actions were being done while the company was properly registered with the securities commission.
The lawsuit claims the securities commission investigated, but failed to find any wrongdoing.
Quebec agency found problems in 2007
Even in 2007, when their counterpart in Quebec found the companies had violated the law in that province, the New Brunswick Securities Commission didn't tell the investors in New Brunswick and it didn't freeze the company's funds before it went bankrupt.
Michelle Robichaud, a spokesperson for the New Brunswick Securities Commission, said it's not unusual for investigations to take several years.
And Robichaud said the CITC case was a complex, inter-provincial investigation.
But the commission's spokesperson wouldn't comment on the allegations in the lawsuit.
"I think once again it's important to note that we just received those allegations and we need to ensure we do take the time to review and evaluate and make sure we're able to respond," Robichaud said.
The plaintiffs are seeking $5.6 million, plus interest dating back to 2007, as well as costs associated with the lawsuit.
Meanwhile, the commission's case against the three men allegedly involved in the ponzi scheme still hasn't been dealt with.
There was a hearing Tuesday morning, dealing with some preliminary matters but that's been adjourned. Robichaud said it won't likely be dealt with until later this summer.
The lawsuit alleges the securities commission concluded CTIC was conducting a ponzi scheme in 2008 but took no action to correct it.
"By the time action was taken by the [securities commission] to stop it, the total investments were estimated to be in excess of $14 million of which $6.4 million comprised the investments of the investors," the lawsuit alleges.
The lawsuit also says the securities commission "knew or should have known" about the problems with CITC by July 2007 and they had a duty to warn investors and "they deliberately and negligently refrained from advising them of the danger to their investment and potential for loss."
None of the allegations have been proven in court.Investors vs. N.B. Securities Commission