The executive director of the British Columbia Securities Commission has issued a notice of hearing to extend a temporary order issued against a European-based bank that holds an account at a B.C. investment dealer where suspicious trading activity took place during a spam campaign.

The notice of hearing states that Liechtenstein-based Hypo Alpe-Adria Bank AG trades through accounts at various investment dealers in B.C.

Amongst other things, the notice alleges, Hypo Bank traded a large volume of shares of an Over-the-Counter Bulletin Board issuer through an account during a period when the issuer’s stock was part of a promotional e-mail (spam) campaign that commission staff was tracking.

The notice also alleges that between April 18 and May 31 of this year, 86% of the same account’s total market transactions of spammed securities were sales. The notice states this activity is a potential indicator of selling into a market manipulation.

Hypo Bank claims Liechtenstein banking laws do not allow it to provide the names of the beneficial owners of securities traded through any of its B.C. accounts to any party, and commission staff have been unable to identify the beneficial owners.

Without knowing who the beneficial owners are commission staff cannot effectively investigate whether they have engaged in illegal activity. In addition, the B.C. investment dealers holding these accounts are unable to fulfill their know your client obligations under the Securities Rules. Due to these circumstances, the executive director has temporarily ordered that Hypo Bank cease trading in and be prohibited from purchasing any securities or exchange contracts in B.C.

These allegations have not been proven. A hearing will be held in Vancouver, on September 11. At the hearing, counsel representing the executive director will ask the BCSC to extend the temporary order.