Commission imposes $25,000 penalty on boiler room operator
Released: 09/14/00 Contact: Dean Pelkey
NR #00/40 (604) 899-6880 or
(BC only) 1-800-373-6393
Vancouver -- The B.C. Securities Commission has imposed a $25,000 administrative penalty on Jack Weatherell for operating a boiler room that urged the public to purchase shares of various junior companies.
The Commission also prohibited Weatherell from trading securities, from being a director or officer of any company and from engaging in investor relations activities for 12 years.
Weatherell set up the Vancouver boiler room -- a sales team that uses high-pressure sales tactics over the phone and by direct mail -- in 1998, under the name Tech Investments Inc.
In the spring of 1998, he approached two men to staff the Tech office. During the hearing, one of the men, Ross Kain, testified that Weatherell told him he would be good at the work because it was basically just a sales job.
“And, you know, I sold health club memberships and vacuums, you know, how hard could stock be?” Kain told the hearing.
Weatherell gave the men binders containing the names of more than 5,800 potential investors from around the world, from which they drew their sales lists. He also gave them sales scripts they used in calling 30 to 40 investors a day. When a call produced an investor who seemed particularly interested, Weatherell would come on the phone as the “closer” the person who finalizes a sale.
Weatherell also called and met with investors. In one such meeting, he promoted the shares of Goanna Resources Inc., a company that was listed on the Over the Counter Bulletin Board, a highly speculative high-risk market featuring junior companies.
He touted the company’s nickel deposits as potentially twice the size of Voisey’s Bay, one of largest mineral discoveries in Canada in the last decade. He told investors that their shares would at least double when the company’s secondary drilling results came out.
The commission found that Weatherell distributed securities without being registered and without a prospectus, and acted as an adviser without being registered.
Emphasizing the seriousness of the violations, the commission said that the sale of securities can have a critical impact on a person’s financial well-being and cannot be compared to the sale of a health club membership or a vacuum.
“A cornerstone of the securities regulatory structure is the requirement that people trading on behalf of others, or advising others, be registered. This is intended to ensure that the investing public receives expert advice from competent and ethical people, whose activities are governed by a comprehensive set of rules and are subject to regulatory scrutiny.’’
The prohibition against giving undertakings relating to the future value or price of a security is also designed to protect the public, the panel said.
“Potential investors should be basing their investment decisions on factual information and reasoned analysis rather than on projections of future value that are frequently, like Weatherell’s representation regarding Goanna, outrageous and utterly unsupported.”
Kain reached an earlier settlement with the Executive Director, agreeing to pay $1,000 in investigative costs and to a two-year ban from the B.C. securities market.
The B.C. Securities Commission is the independent provincial government agency responsible for regulating trading in securities and exchange contracts within the province. Copies of the decision can be found in the documents database on the commission’s website www.bcsc.bc.ca or by contacting Communications Manager Michael Bernard at 899-6524.