By The Book: BCSC turfs Liechtenstein-based bank

(May 27, 2008) A British Columbia Securities Commission panel has ordered a European bank that held accounts at 11 B.C. investment dealers to permanently cease trading in any securities or exchange contracts in B.C.

The BCSC believes that from November 2006 through August 2007, Hypo Alpe-Adria-Bank AG, based out of Liechtenstein, traded through its accounts at the 11 B.C. dealers a total volume of about 463 million shares, representing about $165 million in value.

The BCSC says over 90% of the volume was in shares of issuers quoted on the U.S. Over-the-Counter Bulletin Board with almost all of the total volume in sales. The BCSC also notes some of the trades were in securities of issuers that were the subject of unsolicited promotional emails, or spam.

Commission staff were unable to identify the beneficial owners of the shares traded in the Hypo Bank accounts because the bank said Liechtenstein bank secrecy laws prevented it from providing commission staff investigators with that information.

In its decision, the panel referred to an earlier commission decision holding that the banking secrecy laws of foreign jurisdictions cannot serve as a shield against the legitimate exercise by the commission of its powers to enforce securities regulation in B.C.

“We are faced with suspicious trading activity, and commission staff is unable to complete its investigation until it gets the information about the identities of the beneficial owners,” the panel wrote. “We cannot ignore the potential risk to our markets in these circumstances. Although making the order permanent may have limited effect because, as Hypo argues, the wrongdoers (if there are any) may well have moved on, it will at least forestall the use of Hypo as a conduit for any further suspicious trading.”

(05/27/08)

Staff

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