Complaints, Lawyer Discipline and Public Hearings

Summary of Decision of the Hearing Panel


Yvonne Ye Wah Hsu

Surrey, BC

Called to the bar: May 28, 2004

Discipline hearing: July 26, 2019

Panel: Phil Riddell, QC, chair; Lindsay LeBlanc; Brendan Matthews

Decision issued: August 1, 2019 (2019 LSBC 29)

Counsel: William Smart, QC, and Trevor Bant for the Law Society; William McLeod, QC, for Yvonne Ye Wah Hsu

AGREED FACTS

In 2009 a client retained Yvonne Ye Wah Hsu in connection with raising funds on behalf of CC Corp. Hsu drafted an offering summary, which the client then gave to prospective investors. Hsu did not take any steps to determine whether the client was registered under the Securities Act to sell securities.

Hsu began receiving offering summaries signed by various individuals, and did not notice that someone was making changes from time to time to the document she had drafted. Hsu began receiving investor funds into her trust account and she withdrew funds, which were paid to the client or to a company controlled by the client.

Hsu and the client came up with an investment structure according to which investors would not receive shares in CC Corp., but rather in a new company (NewCo), which would issue shares to investors as “ security.”

The client informed Hsu that CC Corp.’ s CEO had been caught embezzling funds, that CROF Corp. company was going to carry on its business, and that he was now raising funds for CROF Corp. Hsu incorporated a second new company (NewCo2) to issue shares to investors as “ security,” and she revised the Form of Investment Agreement to refer to CROF Corp. and NewCo2.

While Hsu was away from the office on parental leave for approximately a year between 2011 and 2012, her firm continued to receive investor funds into trust and pay them to the client or to the company controlled by the client. During this time all document packages were prepared for investors by legal assistants with no supervision by a lawyer.

In May 2013 CC Corp. filed an assignment into bankruptcy. The client told Hsu he wanted to continue the project by asking investors for a 15 per cent top-up so that he could buy the company’ s assets out of bankruptcy.

Hsu incorporated a new company, EC Corp., to receive the “ top-up” investments and attempt to buy CC Corp.’ s assets out of bankruptcy. These funds were deposited into Hsu’ s firm’ s trust account and were subsequently paid out to the client or to the company controlled by the client.

In total, Hsu received approximately $12.5 million into her trust account from persons who intended to invest in CC Corp. or CROF Corp. and approximately $1.8 million from persons who intended to invest in EC Corp. No investors received any shares of CC Corp., CROF Corp. or EC Corp.  

Hsu paid out from her trust account approximately $12.3 million to the company controlled by her client, $1.4 million to the client personally and $350,000 to CC Corp.

In December 2017 the BC Securities Commission held that the client, the company controlled by him, NewCo and NewCo2 had each committed fraud, and that the client had fraudulently misappropriated approximately $5 million from persons who intended to invest in CC Corp. or CROF Corp.

ADMISSION AND DETERMINATION

Hsu admitted to professional misconduct. In determining the suitable disciplinary action, the panel considered that Hsu has no previous discipline history and accepted that she was not aware of and did not intend to facilitate the fraud. The panel also took into consideration that Hsu admitted her misconduct, was cooperative with the investigation, and agreed that securities is an area of specialty in which she is not competent to practise.

DISCIPLINARY ACTION

The panel ordered that Hsu:

  1. be suspended for three months;
  2. be restricted from practising in the area of securities law; and
  3. pay costs of $1,000 plus taxable disbursements.

2019 LSBC 29 Decision of the Hearing Panel