Staff of the Nova Scotia Securities Commission has accused a broker of helping a group of corporate insiders prop up their firm’s stock.

The NSSC on Wednesday issued a notice of hearing and statement of allegations against broker Bruce Clarke concerning his part in trading by insiders of Knowledge House Inc. Its allegations have not yet been proven, and there are numerous lawsuits ongoing around this case.

Clarke was formerly with Levesque Securities Inc. which later became National Bank Financial Ltd. He was terminated by NBF in October 2001 and re-registered at Union Securities Ltd. in June 2002. At NBF, he was the broker for a number of K.H.I. insiders, their associates and relatives. He also operated an account in the name of a numbered company, 2317540 Nova Scotia Ltd., a corporation owned and controlled by him.

The commission alleges that in late 1999 certain K.H.I. insiders and others entered into an arrangement to act jointly to maintain the price of K.H.I. shares, and to provide liquidity for the stock. It says that Clarke agreed to assist the insider group in carrying out this arrangement. The arrangement was never disclosed to the public, contrary to the Act, the commission says.

It claims that from March 2000 to July 2001 Clarke made a large number of purchases of K.H.I. shares on margin through 540, on orders from the insider group. The commission says that the purpose of the trades was to maintain the price of K.H.I. within a certain range; to create the effect of a liquid market for the shares and in consequence to collaterally affect the values upon which margin could be based in the accounts of shareholders. These purchases were funded by transfers of freely trading K.H.I. shares and cash from the insider group, but no insider trading reports were filed.

“Clarke violated the exchange’s rules and by-laws of the IDA by entering purchases and bids; or causing to be entered purchases and bids that caused the price and bid of KHI to close on an uptick in furtherance of the arrangement,” it alleges.