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by Mike Caswell

The Investment Industry Regulatory Organization of Canada has begun proceedings against former Canaccord Genuity Corp. broker Douglas Steer, claiming that he facilitated $15-million worth of trading in Spongetech Delivery Systems Inc., a controversial OTC Bulletin Board company. Mr. Steer executed orders to sell 194 million shares of the company and within days of each sale wired the proceeds to European banks, IIROC claims. The regulator cites him for failing to act as a gatekeeper and for failing to reasonably ensure himself that the transactions were legitimate.

The case against Mr. Steer, which is contained in a notice of hearing IIROC announced Thursday, Jan. 15, is connected to the 2009 pump-and-dump of Spongetech, a company that purportedly made preloaded soap sponges. In 2010, five New York residents were charged with fraud after the company overstated its sales figures and improperly issued tens of millions unregistered shares. None of Mr. Steer's clients were defendants, but court filings identified two of them in an example of some of those share issuances. The defendants all pleaded guilty, with sentences in the case including 24 months in jail for one and $12.7-million (U.S.) in restitution for another.

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