The British Columbia Securities Commission in western Canada has issued a so-called “temporary order and notice of hearing” in which it alleges that Bank Gutenberg, a Swiss private bank, traded and advised in securities on behalf of at least two local high-net-worth customers without a licence.

The British Columbia Securities Commission in western Canada has issued a so-called “temporary order and notice of hearing” in which it alleges that Bank Gutenberg, a Swiss private bank, traded and advised in securities on behalf of at least two local high-net-worth customers without a licence. The regulator strongly suspects that there are other residents of the province who trade through Bank Gutenberg. It alleges, however, that the bank has refused to answer direct enquiries, claiming that Swiss secrecy laws do not permit it to provide the information directly. Indeed, it also claims that the Swiss regulator – presumably FINMA although it does not name it – said the same when asked. It also alleges that the bank argued that Swiss criminal laws prohibited it from complying with orders or requests from foreign authorities. The regulator is after the names, account information and account statements of all British Columbia residents who have beneficially held accounts at the bank. 

The oddly-named document is a product of s161(1) of the province’s Securities Act 1996, which gives the commission sweeping powers to end someone’s financial career, stop a firm from trading, force it to disseminate information to the public, force it to make recompense for breaking regulations and issue reprimands, as long as it has held a hearing and has decided that it is in the public interest. 

The “notice of hearing” stems from s161(2) of the Act, which states that if the commission considers that the length of time required to hold such a hearing could be “prejudicial to the public interest” it can issue a temporary order, without giving the miscreant an opportunity to be heard, to take effect for a 15-day period. Every enforcement order must be accompanied by a notice of hearing (s161(5)). 

After that, however, there must be a formal hearing at which the target firm can make its own representations. Section 162 states that the commission can impose a maximum fine of $1 million for each contravention of the Act or of its rules. In relation to the hearing itself, every cost imaginable may be awarded to the recalcitrant firm under s174. 

The allegations, which are not yet proven, go on to say that Bank Gutenberg offered its services through its website without posting a prominent disclaimer that expressly identified the foreign jurisdictions in which it was allowed to deal shares. 

Bank Gutenberg, formerly CAT Brokerage AG, has never been registered in any capacity under the Act. It provides offshore securities brokerage services on its website. The commission believes that it is facilitating “suspicious trading” in British Columbia because it employs two locals with regulatory enforcement histories on its night desk to trade on the TSX Venture Exchange, which has its headquarters in Calgary but which also has an office in Vancouver.