A B.C. company called FS Financial Strategies Inc. that markets itself as a financial planning adviser for millennials appears to be in dire need of some financial planning advice itself.
Despite raising roughly $36 million from more than 300 investors, FS Financial Strategies' expenses have exceeded its revenue every year since 2011, according to the BCSC, which has temporarily halted its investment raising activities. Bank accounts have also been frozen.
“Generally speaking, our concern is that there’s some activity going on – we want it to stop,” Doug Muir, the BCSC’s director of enforcement, told Business in Vancouver.
“So we’ve issued these orders to protect the public so we can continue and finish our investigation to determine exactly what has been happening.”
The temporary order against the company prohibits it from trading in securities or conducting any investor relations activities.
Muir admits it's unusual to order such a freeze before an investigation is complete.
“We haven’t done it a lot recently, but we think in this case it’s warranted because of the amount of money raised and the number of investors involved,” Muir said.
The BCSC names Aik Guan “Frankie” Lim and Scott Tomas Low of B.C. as the founding directors of FS Financial Strategies.
The company’s net losses have increased annually, from $800,000 in 2011 to more than $7 million in 2015. The company failed to disclose its poor financial state to potential investors, the BCSC said.
“By 2013, the company’s revenue was insufficient to cover interest payments, but the respondents continued to pay interest by using money from new investors to pay other investors,” the BCSC states.
From 2010 to 2014, FS Financial Strategies raised $18 million through loan agreements. In 2014, the company agreed to a voluntary undertaking to stop trading and distributing securities until it had filed proper documentation required to show that its investors met exemptions under the Securities Act –accredited investor exemptions, for example.
It not only failed to provide the proper documentation, it also set up affiliates in Alberta just a few months after the undertaking and continued to raise another $16 million from Alberta and B.C. investors.
FS Financial Strategies has never filed a prospectus, offering memorandum or exempt distribution report, and the BCSC believes some of the investors did not qualify under exemptions in the Securities Act.
FS Financial Strategies markets itself as a financial services company that caters to “a younger generation.” It is the umbrella group for several other companies:
• FS Financial Services Inc;
• FS Financial Strategies Services Inc.;
• WL Strategic Capital Partners Inc.;
• FS Stellar Insurance Services Inc.;
• Verico FS Capital Inc.;
• FS Financials Services (Alberta) Inc.
• Flexifi Inc. (formerly CC Cornerstone Credit Ltd.); and
• FS Financial Systems Inc.
Other individuals named in the BCSC’s temporary order are: Darrell Wiebe, Chun Ying “Jim” Pan, Chung-Sheng “Johnson” Kao, Afshin Ardalan, George Lay, Hunter Wei-Shun Wang (AKA Hunter Wei Shun Wang), Nyit Foon “Lydia” Chin, Aike Joo Lim, Gagan Deep Bachra, Chi Kay “Dixon” Wong, and Meng Cher “Philip” Tsai.
The BCSC asks that anyone who invested in FS Financial Services or its affiliates and has concerns about their investment to contact them.
