Man must repay millions after hyping penny stocks

“His failure to understand that his actions constituted serious misconduct shows a fundamental lack of judgment, which… poses a serious risk to investors and our markets. B.C. SECURITIES COMMISSION PANEL RULING

The B.C. Securities Commission has ordered a newsletter publisher to pay $4.3 million in penalties for illegally hyping three penny stocks, and has banned a promoter who funnelled secret payments to the publisher from operating in B.C.’s capital markets for five years.

In a July 14 decision, the commission found that Abbotsford resident Colin Robert McCabe accepted $5 million in anonymous payments between October 2009 and July 2010 to promote three penny stocks listed on the Over The Counter Bulletin Board in his Elite Stock Report tout sheet.

The commission found that in doing so McCabe “wrote and published grossly misleading reports” about the companies, and did so without knowing or inquiring whether there was any connection between the third parties that hired him and the stocks being promoted.

And the panel’s “inescapable conclusion,” the decision said, was the reports were designed to increase trading volumes in the companies and inflate share values rather than the assessments of a registered stock analyst, which McCabe wasn’t.

In the same decision, the commission found that Swiss businessman Erwin Speckert, through his firm Everest Asset Management, acted as an intermediary in the misconduct by directing $2.65 million of the payments to McCabe from sources that he refused to reveal to the commission.

“His failure to understand that his actions constituted serious misconduct shows a fundamental lack of judgment, which, when combined with the nature of his misconduct, poses a serious risk to investors and our markets,” the panel wrote in its decision meting out punishment, released Monday.

McCabe wound up with the steeper penalty. He was fined $1.5 million and ordered to repay $2.8 million he earned as a result of the promotions. McCabe was also permanently banned from acting as an officer or director of a company or trading in securities, except for limited exceptions.

The commission ordered Speckert, whom it determined is also a resident of Minden, Ont., to resign any position he holds with a registered company and banned him from acting for registered companies in any capacity for a period of five years.