Canada’s National Sport: Insider Trading

Vancouver has long been a hotbed for shady stock operators, but crooks have long eluded the long arm of the Mounties.

But regulators are stepping up their enforcement activities, and are targeting the once untouchables.

Lawyers:

Securities regulators in the United States and Ontario have launched a major insider trading investigation that centres on 11 Canadian takeovers during the past two years and the U.S.-based law firm that advised companies involved in each of the deals.

An affidavit filed by OSC investigator Stephen Carpenter states that the regulator’s review of potential sources of confidential deal information “revealed a connection” between Mr. Grmovsek, 39, and an unidentified lawyer with an unnamed law firm that represented a company in each transaction.

It does not take much detective work to figured out who was involved:

Corporate announcements of each of the deals show that only one law firm, Dorsey & Whitney LLP, acted as an adviser during each transaction. Dorsey & Whitney was founded in Minneapolis in 1912 and currently employs 650 lawyers in the United States, Europe and Canada.

The SEC certainly promised over a year ago that it would begin to step up enforcement activities, and this could be an example of the new posture:

The investigation is believed to mark the first time that lawyers have been publicly targeted in a Canadian insider trading probe. Heavy trading ahead of takeover announcements is common in Canada, but the OSC has only won convictions in a small handful of cases, mostly involving corporate officials.

Is sounds like the wild west days of Canada’s securities markets are coming to a close, a few decades too late for many straight shooters in North America.

P.S. Go Red Wings!
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Insider trading probe focuses on U.S. law firm
Globe & Mail
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Update:

The SEC recently signalled that it was troubled by the growing number of lawyers who have recently been targeted in insider trading cases. Linda Chatman Thomsen, the SEC’s director of enforcement, said in a March speech that she found it “depressing” and “inexplicable” that nine U.S. lawyers have been sued by the regulator in the past year for allegedly trading in stocks ahead of significant news.

“There’s that level of trust and confidence that you have with a lawyer that is much higher than you would have with say an investment adviser or an investment banker. That’s the disturbing part about it,” he said.

Insider trading probe targets classmates
Globe and Mail

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