OSC director of enforcement Tom Atkinson, flanked by deputy directors Kathryn Daniels, left, and Karen Manarin.Moe Doiron/The Globe and Mail
A former accountant at insurer Kingsway Financial Services Inc. and her adult son will pay more than $1-million in penalties after admitting they engaged in illegal insider trading in the spring of 2008.
The Ontario Securities Commission approved a settlement agreement Thursday in which Helen Kuszper, who was a senior accountant in Kingsway's investment reporting group, admitted she became aware of the company's poor first-quarter financial results more than a week before they were released in early May of 2008.
Knowing the bad numbers would likely depress Kingsway stock when they were released, she and her son Paul – who was an accountant in Antigua – traded options on Kingsway shares. The bought put options, sold call options short, and made other trades designed to either generate gains or cut their losses when the Kingsway shares fell.
The stock dropped 30 per cent the day after the poor financial results were released and the pair realized a profit of more than $320,000. They also avoided about $29,000 in losses.
In addition, the two admitted that they misled commission staff by denying that Ms. Kuszper had access to Paul's trading account, and that she had executed put option trades on his behalf. They came clean after they were shown Internet and trading records that indicated all the put option trades originated from a computer in Kingsway's head office in Mississauga, even though Paul was living in Antigua at the time.
According to the settlement agreement, the two were in regular contact during the period when they traded the options, and discussed their scheme in code language.
The Kuszpers have agreed to pay back all the money they earned, plus an administrative penalty of $701,690, representing twice the profits that they made, or losses they avoided, on the trades. Together, they will also pay $60,000 to cover the OSC's costs in handling the case.
Ms. Kuszper has also been banned permanently from trading securities, or from acting as a director or officer of a public company. Her son has been given a similar ban, but for 15 years.
The OSC's director of enforcement Tom Atkinson said the commission has made a priority of pursuing insider trading and tipping cases. "In this case, a company employee misappropriated confidential material information and used it for her own gain and that of her son," he said in a statement. "Such conduct is abusive of our capital markets and we will take action accordingly."