The Sinopec logo is seen at one of its gas stations in Hong Kong.BOBBY YIP/Reuters
The chief executive officer of Sinopec Daylight Energy Ltd. says he made an error in judgment when he bought shares of his company after receiving an unsolicited letter proposing a possible acquisition by a China-based oil giant.
Anthony Lambert has agreed to pay $229,000 to settle allegations levelled by the Alberta Securities Commission that he acted contrary to the public interest when he bought Daylight Energy Ltd. shares in August, 2011, after receiving a letter three days earlier from Sinopec International Petroleum Exploration and Production Co. proposing talks on a "major strategic investment transaction."
Mr. Lambert has also agreed not to serve as a director or officer of a public company for two years or buy shares of a public company except in his RRSP account or in "blind" accounts managed on a discretionary basis by a financial adviser.
Daylight was acquired by Sinopec in December, 2011, and has been renamed Sinopec Daylight Energy Ltd. Mr. Lambert continues to serve as president and CEO after the takeover. The firm is wholly owned by the Chinese company and its shares do not trade publicly.
Mr. Lambert said in the settlement agreement that he sought advice from his company's internal and external lawyers when he received the first Sinopec letter on Aug. 5, 2011, asking them whether he could proceed with plans to buy shares in the company.
Both lawyers said they felt there was no need for a trading blackout because the approach from Sinopec was unsolicited and contained no financial terms, and the company was not "in play" and seeking buyers. Daylight had also previously received other expressions of interest from parties about transactions which had not proceeded.
But Mr. Lambert also acknowledged in the settlement agreement that he was "obliged to be carefully attuned to trading issues and the possible materiality of information that came to his attention."
Although he said he did not buy shares because of the approach from Sinopec, Mr. Lambert agreed "that he made an error in judgment in purchasing Daylight securities at that time."
"Mr. Lambert agrees that the prudent course of action as Daylight's president and chief executive officer would have been to err on the side of caution in the circumstances and refrain from any further trading in Daylight securities," the settlement agreement says.
He also agreed it would have been prudent to ask his general counsel again on Aug. 8 whether it was still appropriate to buy shares on that day. By that point, Daylight had replied to Sinopec that it was interested in holding talks.
Mr. Lambert bought 60,000 shares of Daylight for $462,000 on Aug. 8, ultimately reaping a profit of $129,000 when the shares were acquired by Sinopec as part of the takeover bid.
He agreed to repay the profit to the ASC, and pay a further $100,000 toward investigation and hearing costs.
Mr. Lambert's lawyer, John Blair, said his client admitted to no breaches of securities rules in the settlement, but acknowledges he should have been more careful with his trading.
"In no sense does he feel he broke any securities rules or laws or acted contrary to the public interest, but he did acknowledge at this point in time that he made an error in judgement back in the day," Mr. Blair.
Mr. Blair said Mr. Lambert did not believe the initial approach from Sinopec was material information at the time because similar approaches had been made by others in the past.
ASC chairman Bill Rice said in a release Thursday it is important for senior company officials to understand they cannot trade while in possession of material undisclosed information, even if it is information that the company is not yet obliged at that point to disclose to the public.
"Additionally, in if doubt, insiders should always err on the side of caution and not trade," Mr. Rice said.
Janet McFarland