Becksley Capital Inc. and Fabrizio Lucchese – s. 28
An addendum to this decision has been issued by the Director. The addendum may be found here
1. Becksley Capital Inc. (Becksley) is registered under the Securities Act, R.S.O. 1990, c. S.5 (the Act) as an exempt market dealer.
2. Fabrizio Lucchese (Lucchese) is registered under the Act as Becksley's ultimate designated person (UDP).
3. On November 5, 2020, staff of the Ontario Securities Commission (Staff) sent a letter to Lucchese (the Letter) informing him that Staff had recommended to the Director that the registration of both Becksley and of Lucchese (collectively, the Registrants) be suspended, pursuant to s. 28 of the Act.
4. The Letter made the following allegations against the Registrants in support of Staff's recommendation that their registration be suspended:
(a) Lucchese is the mind and management of Becksley, and is personally accountable for its acts and omissions.
(b) As of the date of the Letter, Becksley was not in compliance with at least two fundamental requirements of Ontario securities law:
(i) The firm did not meet the minimum working capital requirement in s. 12.1(2) of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103). Moreover, this capital deficiency was discovered by Staff when in fact it should have been self-reported by Becksley, as required by s. 12.1(1) of NI 31-103.
(ii) Becksley terminated its chief compliance officer (CCO) in March 2020 without notifying Staff, as required by s. 3.1(1)(b) of National Instrument 33-109 Registration Information (NI 33-109), and no new CCO had been designated, contrary to s. 11.3(1) of NI 31-103. Staff only learned of this termination from the former CCO directly, in August 2020, approximately five months after the fact. Moreover, Lucchese failed to respond to follow-up inquiries by Staff about the CCO's termination and other compliance matters.
(c) The working capital and CCO issues were the latest in a pattern of non-compliance by Becksley with its obligations under Ontario securities law:
(i) Pursuant to terms and conditions on its registration first imposed in May 2014 and subsequently modified over time, Becksley was required to redeem approximately $2.5 million to investors for investments sold to them that were either unsuitable, or where a prospectus exemption was not available for the distribution in the first place.
(ii) From October 2015 to October 2016, Becksley was on financial reporting terms and conditions resulting from its failure to meet the minimum working capital requirement as at July 31 and August 31, 2015. This working capital deficiency had not been reported by Becksley as required by s. 12.1(1) of NI 31-103, but was instead discovered by Staff.
(iii) In November 2015, Staff discovered that two civil lawsuits commenced against Becksley and a FINTRAC Notice of Violation against the firm had not been disclosed to Staff, as required by s. 3.1(1)(b) of NI 33-109.
(d) As UDP of Becksley, Lucchese had failed to comply with his duties under s. 5.1 of NI 31-103 to (a) supervise the activities of the firm that are directed towards ensuring compliance with securities legislation by the firm and each individual acting on the firm's behalf, and (b) promote compliance by the firm, and individuals acting on its behalf, with securities legislation.
(e) On the basis of the allegations set out in the Letter, Staff was of the view that the Registrants had failed to comply with Ontario securities law, lacked the requisite integrity for registration, and their registration was objectionable.
5. The Letter notified the Registrants of their right under s. 31 of the Act to an opportunity to be heard (an OTBH) by the Director before the Director made a decision regarding Staff's recommendation that their registrations be suspended. The Letter provided the Registrants with a deadline of November 19, 2020 to request an OTBH. Despite Staff following up with Lucchese, the Respondents never responded to the Letter or otherwise requested an OTBH.
6. It appears to me, in my capacity as Director under the Act, that the uncontested allegations in the Letter are substantiated, and accordingly, it appears to me that the Registrants have failed to comply with Ontario securities law, lack the requisite integrity for registration, and their registration is objectionable. Accordingly, the registrations of the Registrants are hereby suspended pursuant to s. 28 of the Act, effective immediately.
November 20, 2020
"Jeffrey Scanlon"
Manager
Compliance and Registrant Regulation