The British Columbia Securities Commission said Colin McCabe of Abbotsford engaged in "egregious conduct contrary to the public interest" in writing the reports in his Elite Stock Report on Guinness Exploration Inc. and two others between October 2009 and July 2010.
The BCSC also found that a second man, Erwin Thomas Speckert, facilitated secret payments to the tout sheet publisher in connection with Guinness Exploration, a company with holdings in Yukon.
McCabe "wrote and published grossly misleading reports while acting on retainer from third parties without knowing, or even inquiring, as to the parties' interest in the promotion, or its purpose," the commission said in a statement.
"In our opinion those who ultimately profited through these promotions, or hoped to do so, could have done so only by improper market conduct, which would reasonably call into question the confidence that should be placed on our capital markets if this sort of conduct were tolerated," a commission panel said.
The commission found that Speckert, managing director of a Swiss company called Everest Asset Management, acted as an intermediary for unknown persons and arranged secret payments to McCabe that totalled $2.65 million for promoting Guinness.
In finding that Speckert engaged in conduct contrary to the public interest, the panel said he "had to have known that the purpose of these arrangements was to conceal the relationship between the unknown persons and McCabe."
"Speckert's facilitation of secret payments to McCabe made him an active participant in the process and was an essential part of the promotion."
In two separate transaction, two individuals emailed McCabe about promoting two other companies, Tuffnell Exploration Ltd. and Gunpowder Gold Corp., both OTCBB issuers, for which he was paid US$1.2 million apiece.
McCabe, who began writing his monthly stock report shortly after he graduated from university in his mid-20s in 2005 or 2006, used phrases like "monster gains," "quadruple-digit gains within a matter of weeks" and "585 per cent in the next 60 days" in touting the stocks.
Among other things, Guinness was described as a stock whose profits "could dwarf anything we've seen so far, while Tuffnell "could be our most profitable gold stock ever," wrote McCabe, who took the Canadian Securities Course while in university but had no experience in the securities industry.
Gunpowder was expected "to become one of my crowning discoveries — a pinnacle achievement of my stock-picking career," he wrote.
The panel directed the parties to make submissions on sanctions according to the schedule set out in the findings.