Last week the US Securities and Exchange Commission started proceedings against the Park Financial Group, Inc., a registered broker-dealer with a disciplinary history, and its principal Gordon Cantley. The company is alleged of creating and using a fraudulent scheme involving the securities of Spear & Jackson, Inc., and additionally in failing to file Suspicious Activity Reports, in violation of the firm’s record-keeping obligations.
The Commission’s Division of Enforcement has already obtained injunctive relief against Dennis P. Crowley, the former chief executive officer of Spear & Jackson, for violation of several provisions of the federal securities laws when taking part in the pump-and-dump scheme. The SEC Order revealed that between February 2002 and July 2003, Park and Cantley executed numerous trades in Spear & Jackson stock for three companies registered in the British Virgin Islands and secretly controlled by Crowley.
Crowley specifically gave Park and Cantley sell orders for the BVI Companies’ accounts; they filled these orders although any transactions on these accounts required the written approval of at least two authorized individuals, and Crowley was not an authorized signatory. Park and Cantley also executed Crowley’s trades knowing that he was the chief executive officer of Spear & Jackson, and that the accounts of the above-mentioned BVI companies traded exclusively in Spear & Jackson stock, buying and selling shares.
Park and Cantley also knew that the BVI Companies were transferring large amounts of Spear & Jackson stock to a stock promoter, and company’s stock price was increasing. During the relevant time period, Park and Cantley generated approximately $2.5 million by executing more than 200 trades in Spear & Jackson stock for the BVI Companies’ accounts.