Frank Speight and International Stock Transfer Charged

Securities Lawyer 101 Blog l Brenda Hamilton Attorney

Securities Lawyer 101 Blog

On July 24, 2014, the Securities and Exchange Commission (the”SEC”) and Department of Justice announced charges against Frank-Speight (Cecil Franklin Speight) and his Florida-based transfer agent with defrauding investors by using aggressive boiler room tactics to peddle worthless securities with promises of high returns or discounted prices. The Information charging Speight detailed an elaborate scheme to defraud investors using the transfer agent business under his control.

Transfer agents are typically used by publicly-traded companies to keep track of the individuals and entities that own their stocks and bonds.

According to the charges, Frank Speight, whose firm International Stock Transfer Inc. (IST) was a registered transfer agent, abused the transfer agent function by creating and issuing fake securities certificates to both U.S. and international investors.

While investors collectively sent in millions of dollars thinking they were purchasing high-yield investments and discounted stock, they ended up receiving counterfeit certificates that Speight and IST fooled them into thinking were legitimate.

The U.S. Attorney’s Office for the Eastern District of New York announced Speight has pleaded guilty to a criminal charge.

Speight and IST also agreed to settle the SEC’s charges. Speight will be barred from serving as an officer or director of a public company and from participating in any penny stock offering. The court will determine monetary sanctions at a later date.

According to the SEC’s complaint filed in U.S. District Court for the Eastern District of New York, Speight’s scheme included multiple securities, including the issuance of fake foreign bond certificates and stock certificates for a publicly-traded microcap company with no connection to IST. To bolster the appearance of the safety of the investments and conceal from investors how their money was really being spent, Speight enlisted two attorneys to receive investment funds into their own bank accounts.

From there, the money was transferred to IST. Instead of making its way to any issuers, however, IST and Speight spent investors’ money almost as quickly as it came in. They used it to pay Speight’s personal expenses, and in Ponzi scheme fashion new investor money was used to fund interest payments to prior foreign bond investors. In all, Speight and IST stole more than $3.3 million from at least 70 investors.

The SEC’s complaint charges Speight and IST with violating the antifraud provisions of the securities laws, including Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Exchange Act Rule 10b-5. The complaint charges IST with violating the transfer agent books and records requirements of Section 17(a)(3) of the Exchange Act, and Speight with aiding and abetting such violations. Speight and IST have consented to the entry of judgments permanently enjoining them from future securities law violations and requiring them to pay disgorgement of all ill-gotten gains plus prejudgment interest and penalties as determined by the court, which must approve the settlement.

This blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship. For more information please contact Hamilton and Associates at (561) 416-8956 or [email protected]. Please note that the prior results discussed herein do not guarantee similar outcomes.

Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
101 Plaza Real South, Suite 201 South
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855