Several advisors are now in hot water for acting on a tip from a securities lawyer -- a move that runs afoul of the OSC.
Several advisors are now in hot water for acting on a tip from a securities lawyer -- a move that runs afoul of the OSC.
The Ontario Securities Commission pinned the accusations against Mitchell Finkelstein, who lost his gig with Davies Ward Phillips & Vineburg after the OSC launched an official investigation in 2010, alleging the lawyer fed tips to Paul Azeff, a CIBC investment advisor in Montreal who was an old fraternity friend.
"They assert that they had good reason, based on due diligence, to purchase the target shares and no motivation to engage in illegal activity that they understood, as professionals and registrants, would prejudice their successful careers," the OSC report alleges.
The decision represents a rare victory for the OSC as it’s one of the few times they’ve successfully prosecuted lawyers, bankers, brokers, or financial advisors for crossing inside trading boundaries. The decision is also a rare for the regulator in a tipping case. These types of cases can be extremely difficult to prove since the evidence is almost always circumstantial.
Several others, Korin Bobrow, also from Montreal, and Howard Miller and Francis Cheng, both from Toronto, were proven to have connection with three transactions. All were accused of participating in illegal insider trading in six instances involving inside information about pending M&A deals from November 2004 to August 2007.
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According to the decision, the panel found that Finkelstein tipped Azeff while in a special relationship with Masonite International Corp., and that Azeff, Bobrow, Miller and Cheng each purchased Masonite securities with knowledge of these facts, contrary to the public interest; and, that they acted contrary to the public interest by recommending the stock to clients.
A hearing on sanctions is expected to take place on May 21 and penalties could top $1-million for each of the six violations.
Despite their assertions, the panel concluded that Finkelstein was aware that material facts surrounding the deals with undisclosed and in three cases, the OSC found that he had direct knowledge, because he was a lawyer involved in the transaction. The panel also found that he that the deal would acquire a target.
In the three other transactions, it also found that Finkelstein had knowledge of the decision to acquire the target, although he was not working on the transactions, because he accessed deal documents between the time of the decision to acquire and the public announcement.
"On a balance of probabilities, we find that the purchase of MHM shares by Azeff and Bobrow, Miller and Cheng, was timely trading motivated by the [inside information] each of them received,” the report notes.
The Ontario Securities Commission pinned the accusations against Mitchell Finkelstein, who lost his gig with Davies Ward Phillips & Vineburg after the OSC launched an official investigation in 2010, alleging the lawyer fed tips to Paul Azeff, a CIBC investment advisor in Montreal who was an old fraternity friend.
"They assert that they had good reason, based on due diligence, to purchase the target shares and no motivation to engage in illegal activity that they understood, as professionals and registrants, would prejudice their successful careers," the OSC report alleges.
The decision represents a rare victory for the OSC as it’s one of the few times they’ve successfully prosecuted lawyers, bankers, brokers, or financial advisors for crossing inside trading boundaries. The decision is also a rare for the regulator in a tipping case. These types of cases can be extremely difficult to prove since the evidence is almost always circumstantial.
Several others, Korin Bobrow, also from Montreal, and Howard Miller and Francis Cheng, both from Toronto, were proven to have connection with three transactions. All were accused of participating in illegal insider trading in six instances involving inside information about pending M&A deals from November 2004 to August 2007.
#pb#
According to the decision, the panel found that Finkelstein tipped Azeff while in a special relationship with Masonite International Corp., and that Azeff, Bobrow, Miller and Cheng each purchased Masonite securities with knowledge of these facts, contrary to the public interest; and, that they acted contrary to the public interest by recommending the stock to clients.
A hearing on sanctions is expected to take place on May 21 and penalties could top $1-million for each of the six violations.
Despite their assertions, the panel concluded that Finkelstein was aware that material facts surrounding the deals with undisclosed and in three cases, the OSC found that he had direct knowledge, because he was a lawyer involved in the transaction. The panel also found that he that the deal would acquire a target.
In the three other transactions, it also found that Finkelstein had knowledge of the decision to acquire the target, although he was not working on the transactions, because he accessed deal documents between the time of the decision to acquire and the public announcement.
"On a balance of probabilities, we find that the purchase of MHM shares by Azeff and Bobrow, Miller and Cheng, was timely trading motivated by the [inside information] each of them received,” the report notes.
