‘Grave danger’: Kelowna investor slapped with $1.2M penalty, 20-year ban

A Kelowna investor who lost millions in client funds has been ordered to pay more than a million dollars in fees to an Alberta regulator.

The Alberta Securities Commission said Kyle William Watters was a “grave danger to investors and the capital market” while he was collecting investments for two years. With his partner, Glenn Donald Hunter, the pair lost nearly $20 million of client funds on risky trades.

On July 6, the commission ordered Watters to pay $1.18 million in various fees after staff in both Alberta and BC investigated the pair, according to a recent decision.

Hunter, of Alberta, and Watters met during a course on foreign currency trading. Watters was trading so successfully that people began asking him to invest on their behalf, the securities commission heard.

The investors initially included friends of their pair, but Watters at some point began soliciting Hutterite communities in Alberta and Saskatchewan. Those investments accounted for $14 million of the total $20 million they collected between 2021 and 2023 from around 200 clients.

By January 2022, they were being contacted by Alberta Securities Commission investigators and, later that year, investigators from BC warned Watters he should consult with a lawyer.

While Hunter testified he had told Watters to stop over that period, Watters continued asking investors for more money. Watters appeared to be aware their unregistered trading was illegal and had no intention to quit, according to the decision.

Watters was asked in a hearing why he continued after Hunter told him to stop, but the answer was “not helpful,” according to the securities commission.

“I don’t have an answer for that. I’m sorry. I can’t remember that conversation. I remember it vaguely,” Watters is quoted as saying.

Hunter was found to be less involved and at times “reluctantly” continued. Unlike Watters, Hunters expressed “genuine regret and remorse.” He also made very little profit from the scheme and arranged repayments to 48 investors.

Of the $1.8 million that did go back to investors, $600,000 of it came in the form of repayments Hunter made, largely directed to friends.

Watters, who is in his early 40s, told the commission he has entered bankruptcy proceedings, has no savings and has a limited ability to earn money because of an injury. A fall in November 2022 led him to seek disability benefits and other government supports and he now earns around $4,000 per month.

The severity of his injury, or how long he’ll be unable to work, is unclear, but the commission did note he had continued to contact clients and invest after the injury.

Because of Watters’ lack of remorse, his “dominant” role in the scheme and apparent knowledge that they were not legally registered, the commission gave him a heavier penalty with fees combining to more than $1 million in total. Hunter was handed $740,055 in fees.

The decision didn’t suggest any of those fees would go toward investors’ losses.

Watters did withdraw around $523,000 from his own trading account, while Hunter withdrew around $1,000 from his. There’s no evidence that was money from investors, and the commission noted that the pair were not being accused of fraud.

Hunter and Watters are banned from trading for 16 and 20 years, respectively, with some exceptions. It will apply for almost every jurisdiction in Canada including BC.