Harry Stinson staffer resigns after breaking the Ontario securities law in a $19M hotel-condo project

The Ontario Securities Commission (OSC) has forced a Hamilton developer’s employee to resign after misleading investors who gave the developer $19 million for the Buffalo Grand Hotel in New York — but documents from the proceedings state the employee didn’t know he broke the rules and was relying on the developer, Harry Stinson.

Stinson, who moved to Hamilton in 2008 and is behind numerous local projects and developments, is still waiting to hear his fate.

He said he disagreed with the allegations before the tribunal and continued to work on a settlement with OSC.

“There is indeed a more fulsome story to be recounted, but it is best done once we’ve completed the project and proves the point this was a valid project, a valid investment,” he told CBC Hamilton, adding he couldn’t say much more about the case.

The OSC documents say Stinson made a plan in 2016 to convert the Buffalo hotel into a condo. He hired Stephen Kelley as the project’s investment co-ordinator and client services manager.

In addition to being forced to resign, an OSC order from March 23 says Kelley is banned for two-years from participating in Ontario’s capital markets. He also had to pay a $15,000 administrative penalty.

“The misconduct here was serious,” reads a statement of facts, stemming from a settlement agreement between OSC and Kelley. “Kelley is remorseful.”

CBC contacted Kelley for comment.

Kelley relied on Stinson, documents say

The document says Kelley was unregistered and “has no education, training, or experience in the securities industry.”

It says he “made misleading statements to investors” by suggesting all investments in the hotel were qualified for registered retirement savings plans and tax-free savings accounts.

He also didn’t obey the terms of the tribunal’s temporary cease trade orders prohibiting trading in specific securities.

A building.
The Buffalo Grand Hotel is described as a 2.8-hectare site with 500 hotel rooms, 72,000 square feet of event space, a 4,000-seat concert hall, multiple food outlets and a 600-car indoor parking garage. (Stinson Hospitality Real Estate)

“Kelley exposed investors to unacceptable risk and undermined confidence in the capital markets,” the settlement agreement says.

“Over $10 million in securities were sold to more than 100 investors, mostly based in Ontario.”

But the documents list mitigating factors, including how Kelley thought he wasn’t breaking the rules.

“Kelley was Stinson’s subordinate and he relied on Stinson in arriving at the conclusion that his activities were legitimate and did not violate securities laws,” read the documents.

“Kelley and his wife personally invested in the hotel with registered funds and cash and have not recovered their principal investment.”

The statement of facts also says he will cooperate with OSC in its proceedings against Stinson, which includes testing as a witness.

Stinson said he and Kelley remained on good terms.

It’s unclear when the matter will return before OSC.

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