An Abbotsford man has been ordered to pay almost $4.3 million to the B.C. Securities Commission (BCSC) and has been permanently banned from B.C.'s capital markets for making false stock reports.
BCSC announced the decision Monday against Colin Robert Hugh McCabe, 30, who previously published the monthly Elite Stock Report from his home in Abbotsford.
The commission has ordered that McCabe resign from any position he holds as an officer or a director of an issuer or registrant.
He is also permanently banned from those positions, as well as from trading in securities, purchasing securities or exchange contracts, engaging in investor relations activities and acting in a management or consultative capacity in the securities market.
McCabe's fine is broken down into almost $2.8 million he obtained as a result of his misconduct and an administrative penalty of $1.5 million.
McCabe's submission at his BCSC hearing was that he pay an administrative penalty of $65,000 and pay back funds of about $502,000.
McCabe researched stocks, using publicly available information such as websites and news releases, and, if he thought they had a shot at being profitable, he would write about them in his newsletter.
The Elite Stock Report was distributed only by direct unsolicited mail in the U.S.
A BCSC panel found that between October 2009 and July 2010, McCabe published "grossly misleading reports" about three companies.
These reports were designed to "significantly increase trading volumes in the shares of (the three companies) in order to inflate their stock price," the BCSC stated.
The commission said, in exchange, McCabe was paid more than $5 million, which was transferred to offshore and Swiss bank accounts.
Among the companies about which McCabe wrote was Guinness Exploration Inc. He claimed that Guinness had purchased an 8,000-acre property in the Yukon which contained an estimated one million ounces of gold.
McCabe's report said investing in the project would hand his subscribers "monster gains inside the next 60 days … and could go 10-for-1 in the next twelve months."
He described it as "a discovery so massive it makes Fort Knox look trivial."
The commission stated that McCabe was paid a total of $2.65 million by Erwin Speckert, the managing director of a Swiss company called Everest Asset Management.
Speckert was acting as a middleman for a party that he has refused to name, and the arrangements were designed to "conceal the flow of funds" to McCabe from whomever Speckert was representing, according to the BCSC.
As a result of his role, Speckert has also been permanently banned by the BCSC from B.C.'s capital markets.
The other two companies that McCabe wrote about in a misleading manner were Tuffnell Exploration Ltd. and Gunpowder Gold Corp. Each company paid McCabe $1.2 million to produce and distribute 850,000 copies of the Elite Stock Report.
In its decision, the commission stated that McCabe and Speckert pose serious risks to investors and the industry.
"There is no issue regarding the seriousness of McCabe's misconduct. The panel found it to be egregious and contrary to the public interest because it exposed investors to improper practices and eroded confidence in our markets," the BCSC stated in its written decision.
McCabe had argued that his misconduct was not deliberate and he thought what he was doing was legal.
McCabe's actions are also the subject of a complaint filed by the U.S. Securities and Exchange Commission (SEC), which alleges McCabe was paid $16 million between January 2008 and February 2011 for false write-ups in his Elite Stock Report, The Stock Profiteer and Resource Stock Advisor.
The SEC is seeking to have McCabe repay the funds and ban him from participating in such activity in the future.