B.C.’s financial markets regulator has levelled allegations of “wash trading” – trading shares between two accounts controlled by the same person in order to manipulate the market – against a Toronto lawyer.
The B.C. Securities Commission alleges in a notice of hearing issued Wednesday that Shimshon Refoel (Shimmy) Posen directed a wash trade to artificially lower the share price of a B.C. company.
The company is not named in the notice, nor in a news release the BCSC sent announcing the allegations on Thursday.
According to the regulator, Posen is a securities lawyer who worked for a law firm that had the B.C. company as a client.
In January 2024, the company wanted to sell 10 million shares in a private placement for 3 cents a share, the BCSC said.
The Canadian Securities Exchange, on which the company is listed, has rules restricting share sales of this type for values less than 5 cents per share. The exchange prohibits private placements for prices that low if the price is also below the stock’s volume-weighted adjusted price (VWAP) over the preceding 20 trading days, according to the BCSC.
At the time the company was working with Posen’s law firm, its VWAP was 7.8 cents per share.
“To drive down the share price, the BCSC alleges that Posen placed an order to buy 50,000 shares at $0.005 (half a cent) per share in an online investment account in his name,” reads the regulator’s news release.
“Later that day, he directed a matching sell order for 50,000 shares at $0.005 (half a cent) per share, by instructing a registered representative to enter the sell order in an investment account in the name of a holding company owned by Posen’s wife, over which Posen had trading authority.”
This “wash trade,” lowered the company’s VWAP below 3 cents per share, according to the regulator.
A few days after the trade was completed, Posen’s law firm notified the CSE of the decreased VWAP, and the CSE approved the private placement, the BCSC said.
“The BCSC alleges that Posen violated B.C.’s Securities Act because he knew, or reasonably should have known, that the wash trade would result in or contribute to a misleading appearance of trading activity in, and an artificial price for, the company’s shares," the regulator’s release reads.
The allegations against Posen have not been proven. The BCSC said he or his counsel must attend its office at 9 a.m. on May 6 if they wish to be heard before a hearing on the matter is scheduled.
