The Nova Scotia Securities Commission (NSSC) has found that two geologists did not mislead markets with trading designed to support the stock of a junior miner.
The NSSC ruled that Allen Sheito and Gary Woods did not violate securities laws, and that their conduct was not contrary to the public interest, when they made bids for shares of Mountain Lake Resources Inc. designed to prop up the stock.
NSSC staff had alleged that Sheito and Woods traded the firm’s shares without a bona fide investment intent, but to bolster the stock’s price in the face of selling pressure. This, it charged, amounted to creating a misleading impression of trading activity in the stock, thereby violating securities laws.
However, the commission concluded that this was not the case. In its decision, it says that it accepted expert evidence “that it is not in breach of fair trading practices for directors of junior listed companies to make support bids for their company shares if done within certain bounds and limitations.”
“Those limitations include that such bids are near current market prices, are not cancelled at the first sign that they might be filled, are not designed to mislead investors about the state of the market, do not result in fictitious trading volume and do not establish prices that are inconsistent with market conditions at the time,” the NSSC said.
This doesn’t mean that all support bids are acceptable, the commission notes. Instead, such trading has to be viewed within the context of the market at the time to determine if it is otherwise misleading or deceptive, or if prices become artificial.
In this case however, the NSSC found that the trading was not manipulative, and did not comprise improper intent, as the bids were within a reasonable trading range that reasonably could result in a ‘hit’; their motivation was not improper; and the small amount of trading did not constitute sufficient activity to be misleading. So, it dismissed the allegations.