Securities regulators in British Columbia have settled with two men who admitted to participating in an alleged market manipulation involving a U.S. over-the-counter issuer, handing down 25-year trading bans and $225,000 in monetary penalties.
The British Columbia Securities Commission said today that, in two separate agreements, it has settled with Malkeet Singh Bains and Narvinder Singh Patric Virk, after they admitted to trading that created a misleading appearance, or an artificial price for, shares of Sungro Minerals Inc., a Nevada corporation that was originally based in Surrey, B.C., and quoted on the U.S. OTC bulletin board.
Under the settlements, Bains will pay $125,000, and is prohibited from purchasing or trading securities, acting as a promoter, engaging in investor relations, and becoming an officer or director of an issuer, for 25 years. Virk has agreed to pay $100,000 and also faces the same prohibitions on his market activities.
According to the BCSC, Bains, an insurance broker, admits that in 2007 he set up Sungro as a “shell company” along with a financial planner, Mark McLeary, who had experience starting public companies. In 2009, when it became clear the company could not be sold as a shell, Bains and the planner agreed to sell some of the shares and split the proceeds. It says that Bains also admits that, at the behest of the financial planner, he recruited several of his friends as seed shareholders and instructed them to sell their shares at specified prices on specific dates in June and July 2009.
One of these friends was Virk, the commission says, who admitted that he became a Sungro seed shareholder and recruited several of his family members and friends too. It reports that Virk also admits that he sold his shares, at specified prices on specific dates, at the direction of Bains.
The commission says that they engaged in conduct, that “resulted in or contributed to a misleading appearance of trading activity in, or an artificial price for, Sungro shares” in violation of securities rules.
In July 2009, BCSC staff issued a temporary order cease trading Sungro, and a notice of hearing alleging market manipulation. The executive director of the BCSC previously issued orders against five of the seed shareholders, who admitted in a settlement agreement that they had made false or misleading statements to BCSC investigators about their purchase of Sungro Minerals shares.
Earlier this month, Canadian securities regulators introduced a new rule designed to combat the abuse of the U.S. OTC markets by companies based
in Canada, including the use of shell companies created for stock promotion schemes. The rule, which is to take effect in July, imposes additional disclosure requirements on issuers, restricts the use of certain exemptions, and imposes resale restrictions on private placements.