OSC gets insider trading hearing started
TORONTO — Until now, the public had only heard the blockbuster allegations that Bay Street lawyer Mitchell Finkelstein was at the heart of what Canada’s largest securities regulator says was a profit- making illegal insider trading ring.
But on the first day of the hearing Monday, Finkelstein’s lawyer provided a first look at how the mergers and acquisitions specialist will explain the actions that led the Ontario Securities Commission to investigate and accuse him and four financial advisers of illegal insider tipping and trading.
In an opening statement, OSC lawyer Donna Campbell provided a detailed road map of six transactions in which Finkelstein is alleged to have given tips on pending deals to former CIBC World Markets investment adviser Paul Azeff, a former university friend.
The regulator alleges the tips were then passed to a chain of others including his business partner, family, clients, and friends who profited from trading on the information.
The OSC alleges Finkelstein’s tips were based on information about deals his law firm, Davies Ward Phillips & Vineberg, was working on, including ones in which he wasn’t a legal adviser.
Mark Connelly, a senior Davies lawyer, was the first witness called by the OSC on Monday.
During cross- examination, Connelly said Finkelstein may have had legitimate reasons for accessing confidential files detailing transactions that hadn’t yet been made public.
“It was certainly not inappropriate to access files to which you were not assigned,” Connelly said.
“The system was designed for that.”
Over the course of the hearing scheduled to run through December, Finkelstein’s lawyer and counsel for the other accused men must explain away a series of emails, telephone and trading records the regulator says demonstrates a “pattern” of passing along profitable tips involving six pending deals.
Former CIBC investment adviser Azeff and his business partner Korin Bobrow are accused of illegal insider trading and tipping, as are former TD Waterhouse advisers Howard Miller and Francis Cheng, who are alleged to have learned about the tips from a client.
Finkelstein, Azeff and Bobrow attended the hearing Monday.
“This is a case of patterns,” Campbell told the three- member panel of commissioners at the opening of the case.
“There are patterns of timely, highly profitable trading.”
In four of the six cases pinpointed by the OSC, Finkelstein is alleged to have met Azeff in person after the tip, and then made large cash deposits into his bank accounts, sometimes over several days.