13 December 2016
The Vancouver Sun reports on what looks to be a money grabbing exercise by a broking company that’s got bills to pay…
Here is the report
A cross-country legal dispute is unfolding in B.C. Supreme Court, pitting a suspended Bay Street brokerage against an Okanagan pot grower.
Jacob Securities Inc., a Toronto investment dealer that shut down late last year, is suing THC BioMed Intl. Ltd., a federally licensed and publicly traded cannabis company based in Kelowna, alleging the pot producer breached an agreement by delivering worthless copies of share certificates.
In a notice of civil claim filed in October, Jacob Securities names THC BioMed and its subsidiaries, alleging the companies entered a settlement agreement in September 2015 to resolve a legal action started four months earlier in Ontario. That agreement provided for the delivery of 4,660,000 common shares in THC to Jacob, the lawsuit alleges, but nine months after THC delivered the purported share certificates last year, Jacob realized they were not originals but colour photocopies, which “cannot be traded and have no value.”
None of the allegations have been tested in court.
THC’s response, filed in November, alleges the settlement agreement was entered into as a result of Jacob’s “false pretences, fundamental misrepresentations and omissions.” THC had engaged Jacob to act as an agent for an equity financing and to publish a research report, the response says, adding that if THC had “been aware of the true status of (Jacob) with its regulatory authority, they would not have entered into the settlement agreement.”
That regulatory authority, the Investment Industry Regulatory Organization of Canada, had placed Jacob under scrutiny over the previous two years, unbeknownst to THC, according to court filings.
On Nov. 10, 2015, a month before the Investment Industry Regulatory Organization suspended Jacob Securities, the firm announced the launch of the Jacob Capital Management Cannabis Fund, which would “target both private and public investments across the global cannabis value chain.”
The announcement said the Jacob fund would have a maximum size of $50 million, and that George Smitherman, a former deputy premier of Ontario and also a director of THC, had been “specifically chosen as senior adviser.”
Jacob’s cannabis fund, Smitherman said this week, “never did take off.”
Jacob had announced the fund without requisite registration approvals, the Investment Industry Regulatory Organization alleged.
Within weeks of the fund announcement, the regulator learned about more of Jacob’s troubles: the chief financial officer was resigning and the company had been “locked out of its business premises due to its failure to pay rent of approximately $110,000,” the Investment Industry Regulatory Organization hearing panel wrote in its suspension decision, adding, “apparently, unsupervised trading continued by (Jacob’s) registered representatives through their mobile phones and by meeting with clients in the lobby of the building.”
A month after the fund announcement, the regulator ordered Jacob Securities to stop dealing with the public.
On Dec. 18, 2015, the day after the regulator suspended Jacob Securities indefinitely, the company’s founder, Sasha Jacob, announced the start of a new, non-regulated financial advisory firm called Jacob Capital Management Inc.
Khurram Malik, partner and head of research at Jacob Capital, who also worked with Jacob Securities, said there was no animosity between his firm and THC. He hoped the dispute could be resolved quickly, he said, “but if it isn’t, we’ll obviously take it as far as we have to take it.”
THC BioMed’s CEO and president John Miller said he could not discuss the lawsuit. But THC’s most recent annual financial statement, filed last month, says the company “intends to vigorously defend itself from this lawsuit as it believes it has meritorious defences to this action.