SEC Freezes Assets of Transfer Agent

CHICAGO (CN) - The SEC on Wednesday froze the assets of a Wheaton, Ill. transfer agent and his company, whom it accuses of swiping more than $1.3 million from clients.

The SEC sued Robert G. Pearson and his company, Illinois Stock Transfer Company dba IST Shareholders services, in Federal Court.

Pearson, of Winfield, Ill., is CEO and sole owner of IST.

"Pearson misappropriated more than $1.3 million during the past two years from an IST bank account holding the funds of clients who use IST as a paying agent to make cash disbursements to shareholders," the SEC said in a statement accompanying its lawsuit.

"When reviewing account records, SEC examiners discovered several unusual transactions that appeared to be related to IST's own payroll rather than transfer agent activities," according to the SEC statement. "When asked why it appeared that payroll payments were being made out of an account holding customer funds, Pearson initially said that the local suburban bank holding IST's general operating account could not handle making direct deposits for payroll, so he utilized that account for the direct deposit function. When asked whether IST generated enough of its own revenue in the customer account to cover those payroll expenses without siphoning customer funds, he responded by saying 'probably not.' In later interviews, it became clear that Pearson used funds from the account to meet payroll and payroll tax expenses because IST simply had not earned enough income to cover its business expenses."

The SEC seeks preservation of records, disgorgement and penalties.

Pearson inherited the company from his father. It has existed since 1925.

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