Settlement includes $200K fine for conduct 'abusive to the capital markets': B.C. regulator

Canadian cash is shown. (Shutterstock.com)

A North Vancouver man and his company have agreed to pay a provincial regulator $200,000 after admitting to insider trading and conduct that was "abusive to the capital markets."

The B.C. Securities Commission announced its settlement agreement with Cameron Robert Paddock and Rockshore Advisors Ltd. in a news release Tuesday.

Paddock and his company are also banned from a variety of trading activities for 10 years.

The settlement stems from a pattern of conduct Paddock and Rockshore engaged in, which involved working as "both a placee and a consultant" for seven "private placements" from six different issuers of securities. 

In each instance, Rockshore obtained shares from the issuer and "sold all of those shares in the market immediately or shortly after receipt," often for a lower price than it paid to acquire them.

Rockshore also received consultant fees from the issuers, which offset the losses from selling the shares at a lower price.

"Rockshore’s pattern of acquiring and selling shares in this manner was abusive to the capital markets," the settlement agreement reads.

Further, the agreement notes that in each of the private placements, the issuer retained only a portion of the proceeds, with most of the money raised paid out to consultants.

In two of the cases, Rockshore and Paddock knew that this was the case, but the information "had not been generally disclosed."

That's insider trading, contrary to the provincial Securities Act, though the agreement notes that – at the time – Rockshore "did not appreciate" that the information it had met the act's definition of a "material fact or change" that could give rise to insider trading.

The settlement includes numbers for the two insider trading incidents, which shed some light on how the company's pattern of conduct worked.

Rockshore purchased shares of two companies, referred to in the settlement as issuers D and E, for $2 million and $1,225,000, respectively. It sold the shares of issuer D for $1,518,343 and sold the shares of issuer E for $1,006,743, according to the agreement.

However, Rockshore also received $500,000 in consulting fees from issuer D and $472,500 from issuer E, meaning the company turned a net profit on each relationship – $18,343 from working with issuer D and $254,243 from working with issuer E, based on the numbers in the settlement.

As a result of their misconduct, Rockshore and Paddock agreed to pay the BCSC $200,000, and the commission's news release indicates the fine has already been received.

According to the BCSC, each entity has also been banned from the following activities for 10 years:

• Trading in or purchasing any securities or derivatives
• Advising or otherwise acting in a management or consultative capacity in connection with activities in the securities or derivatives markets
• Engaging in promotional activities by or on behalf of an issuer, security holder or party to a derivative or another person that would be expected to benefit from the promotional activity, and
• Relying on an exemption in the Securities Act, the regulations or a decision.

Paddock has further been banned for 10 years from "becoming or acting as a director or officer of any issuer or registrant, and from engaging in promotional activities on his own behalf in circumstances that would be expected to benefit him," the BCSC said.