SAINT JOHN (GNB) – A former lawyer from New York state has defaulted on more than $1.7 million of promissory notes issued to a small group of New Brunswick investors.

James A. MacCallum of Jamestown, N.Y., (formerly of the Moncton area) and Andrew Mitchell Holdings, LLC., a company controlled by MacCallum, have been banned from trading in securities directly with the public and were ordered repay the losses to investors as well as pay $50,000 in penalties and $10,000 in costs. The order was released today as part of a settlement agreement approved by a hearing panel of the New Brunswick Securities Commission.

“These types of loans made for investment purposes are the most common source of investor losses seen in our enforcement team's case load,” said Rick Hancox, executive director of the commission. “Investors considering these types of loans should ask themselves: "Why is this investment offering such high interest?”

On the surface, these investments are simple arrangements – lending money to be invested in exchange for interest payments. However, like any investment, the investor must still do research and fully understand all the risks involved. The commission reminds investors that if there were no risk to these loans, a bank could loan the money at conventional rates of interest. At a minimum, investors should review, understand and confirm the financial statements of the borrower before making a loan.

“Understanding the risks involved in lending large amounts of money is a difficult and sophisticated task,” said Hancox. “Only those who have the professional skills to be able to evaluate the borrower's creditworthiness should consider this type of investment.”

MacCallum and AMH defaulted on five promissory notes issued in 2009. The $1.7 million raised  was purportedly used to fund various investments, including investments in real estate, a life insurance policy, and a promissory note issued by a third party. Neither MacCallum nor AMH was registered to trade in securities in New Brunswick.

The settlement agreement indicates that MacCallum has been suspended from the practice of law in New York and that he is presently insolvent.

For more information about these matters, please refer to the motion materials available on the New Brunswick Securities Commission's website under Enforcement then click on Recent Decisions.

The public may also contact the commission's investor services co-ordinator at 506-658-3060 or 1-866-933-2222 (toll-free) to get further information, to make a complaint or to express other investment-related concerns. Being an informed investor is your best defence against investment fraud. Learn how to protect yourself by taking advantage of the materials available on the commission's website.

The New Brunswick Securities Commission is an independent provincial Crown corporation responsible for regulating trading in securities within the province.