Criminal Charges Also Filed
Although being an investment broker usually requires a strong sales technique, various regulatory agencies and stringent laws are in place to ensure fairness within the market. When an advisor goes awry and begins engaging in boiler room practices that are illegal or otherwise contrary to the client’s best interests, he or she stands to face significant legal and financial ramifications once the illicit behavior is exposed. There maybe a few shills out there who are getting away with questionable methods that they employee to solicit investors, but sooner or later, most of these disreputable perpetrators will be found out. One such example is a Florida-based transfer agent and its owner. The Securities and Exchange Commission (SEC) has charged Cecil Franklin Speight and International Stock Transfer, Inc. (IST) with using boiler room tactics in an attempt to sell worthless securities that they touted as having a high rate of return or reduced pricing.
A transfer agent is a financial institution that is used by a company to maintain the records of investors, as well as account balances and transactions. Additionally, transfer agents can issue and cancel certificates and handle other types of problems related to these actions. These transfer agents are usually third-party financial institutions; however, some companies act as their own transfer agent. This was the case with Speight who was the registered transfer agent for IST. An investigation conducted by the SEC found that Speight was abusing this position by making and issuing fake securities certificates to U.S. investors as well as investors abroad. Speight solicited and obtained millions of dollars from hopeful investors who believed they were buying high-yield investments and discounted stock. What the investors actually received from Speight and International Stock were counterfeit certificates that the investors believed to be authentic.
The SEC’s complaint states that Speight’s scheme of falsification included the issuance of fake foreign bond and stock certificates for a publicly-traded microcap company with no connection to IST. In an attempt to make the investments look sound and to hide how he was really spending investors’ funds, Speight used the bank accounts of two attorneys into which he deposited these funds. The money was then transferred to IST and ultimately spent by IST and Speight. The funds were used to pay personal expenses for Speight who then solicited new investors so that he could make interest payouts to existing foreign bond clients. The SEC believes that there were roughly 70 victims of Speight and IST from whom they stole more than $3.3 million.
“Speight brazenly misused his transfer agent authority to commit fraud by creating fake certificates and acting as if he was authorized by issuers to do so,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office. “His promise of high-yield investment returns and his use of attorneys to receive investor money were simply lures to take advantage of unsuspecting investors.”
The SEC’s complaint also charged Speight and IST with violating several sections of the anti-fraud provisions of securities law. The complaint charged IST with violating the transfer agent books and records requirements of the Exchange Act, and Speight with aiding and abetting such violations. Both Speight and IST have agreed to the entry of judgments that permanently prohibit them from committing any further securities law violations. They are also required to relinquish all illicitly obtained profits, pay pre-judgment interest, and also pay any other penalties as determined by the court, which must approve the settlement. Additionally, Speight will be barred from serving as an officer or director of a public company and from participating in any penny stock offerings. The court will determine monetary sanctions at a later date.
Due to the criminality of these actions, the U.S. Attorney’s Office for the Eastern District of New York subsequently announced that they were filing criminal charges against Speight.
The Blum Law Group specializes in helping people who have been victimized by brokers or investment firms. If you believe you have suffered financial losses as a result of the actions of Mr. Speight or International Stock Transfer, Inc., please give us a call at 1-877-STOCK-LAW for a free consultation.