Accused stock-tipper Mitchell Finkelstein has lost his bid to have his case dismissed by the Ontario Securities Commission on grounds he didn’t have proper advance notice of the allegations.
Mr. Finkelstein is a former lawyer at prominent Bay Street firm Davies Ward Phillips & Vineberg LLP who was accused in 2010 of tipping a former fraternity buddy about merger deals being worked on by his firm. The OSC alleged he pocketed stacks of $100 bills in return.
Mr. Finkelstein asked the OSC last year to throw out his case, arguing his 2010 interview with OSC investigators was “inappropriate and unlawful” and he was not given enough details about the allegations nor enough time to respond to them before they were made public.
His lawyer told a hearing last November that Mr. Finkelstein’s interview with OSC staff – conducted in October, 2010, before the allegations were announced the following month – served to “incriminate” his client.
An OSC panel ruled Thursday there was no “abuse of process” in the case, and said a hearing can proceed against Mr. Finkelstein.
“The threshold for finding an abuse of process as established by the relevant case law is extremely high and the conduct of staff at issue here does not meet this threshold,” the ruling concluded.
“It was not oppressive or vexatious and this is not one of the ‘extremely rare’ situations in which an abuse of process should be found.”
The panel decision said the damage suffered by Mr. Finkelstein by the allegations is not “irremedial” if staff ultimately cannot prove its case at a hearing.
Mr. Finkelstein’s lawyer, Jeffrey Larry, said Thursday he would review the “lengthy” decision and had no comment on the ruling.
Mr. Finkelstein is accused of tipping Paul Azeff, a former investment adviser with CIBC World Markets Inc. in Montreal, about six pending takeover deals between 2004 and 2007, including the huge takeover deal of Placer Dome Inc. by Barrick Gold Corp. in 2005.
He denies the allegations and they have not been proven.
His request to have the case dismissed was based on the OSC’s common practice of giving advance notice to investigation targets that a case is pending, allowing them to provide information to respond to the allegations.
OSC staff argued there is no formal obligation to provide an “enforcement notice” and that Mr. Finkelstein was given ample time to respond. He received an enforcement notice Nov. 3, 2010, and the case against him was unveiled publicly a week later on Nov. 11.
OSC lawyer Donna Campbell told the hearing in November that Mr. Finkelstein could not have had a “scintilla of doubt” about the details of the allegations being levelled against him after a five-hour interview on Oct. 25, and was given ample opportunity to explain his conduct.
The hearing panel rejected suggestions from Mr. Finkelstein’s lawyers that the OSC abide by similar notice requirements that are in place in the United States under its “Wells Process.”
The hearing panel said the U.S. procedures are not in place in Canada and people should not have a “legitimate expectation” they will be followed in Ontario.
The panel said the enforcement notice Mr. Finkelstein received in November was detailed enough to provide him with sufficient notice of the case, and gave him enough time to respond.