A West Vancouver stock promoter has been accused of turning a profit through illegal insider trading by the B.C. Securities Commission.
The executive director of the securities commission has ordered a hearing into the activities of Jerome John Rak, who is alleged to have flouted securities laws when he bought shares in an Alberta company with knowledge that was not yet available to the general public.
According to the notice of hearing, on Aug. 4, 2009, Rak met with Arthur Millholland, former president and chief executive officer (CEO) of Oilexco Inc., in West Vancouver, to discuss the possibility of Millholland merging with another company, Velo, and becoming its president and CEO.
The next day, Millholland began drafting a news release that would announce he had become the new president of Velo and sent that draft to Rak.
Between Aug. 5 and 7, before that news had become public, Rak is alleged to have bought 172,000 shares of Velo through a B.C. company called Belmont.
At the end of the day on Friday, Aug. 7, 2009, the companys share price closed at 20 cents. Velo then issued the news release. On Aug. 10, the next trading day, the share price rose to a high of 49.5 cents.
Rak is accused of using insider knowledge of what was about to transpire at the company to make money, known as insider trading.
A date for the hearing will be set Sept. 19.
It isnt the first time Rak has been in trouble with the securities commission.
In 1988 he was banned from trading for eight years for what the commission described as serious breaches of the act and other actions contrary to the public interest.
In handing down its decision at that time, the commission said Raks activities reflected a blatant disregard of securities law and exemplify the practices which can bring securities markets into disrepute.
Meanwhile, two North Vancouver brothers are also among seven men being accused of market manipulation by the securities commission.
Mark Aaron McLeary and Timothy John McLeary are alleged to have been part of an orchestrated campaign to manipulate the share price of Sungro Minerals Inc., a Nevada corporation that originally had its head office in Surrey, B.C.
According to the notice of hearing, the two men were part of a scheme in June 2009 to promote the shares of the company on a discussion board and artificially inflate the price while at the same time directing sales of the shares, with net proceeds going back to Mark McLeary and his close friend Malkeet Singh Bains, who was also the sole director of Sungro.
The men are accused by the securities commission of taking part in conduct that they knew contributed to the misleading appearance of trading activity and an artificial price for Sungro shares.
They are also accused of making false or misleading statements when interviewed by the commission by denying their involvement in the scheme.
A date for the hearing will be set Sept. 26