A former BMO Nesbitt Burns Inc. investment banking analyst has been ordered to pay almost $1.2-million in penalties after he admitted he engaged in illegal insider trading by buying shares of companies in advance of takeover deals.
The Ontario Securities Commission approved a settlement agreement Friday with Ming Chao Zhao, also known as Michael Zhao, that will see the former analyst banned for life from trading securities except in his own retirement plans. He also agreed to a 10-year ban from acting as a director or officer of a company and a permanent ban from being registered to work in the investment industry.
The OSC alleged Mr. Zhao earned profits of $416,000 from buying shares of five companies after learning they were involved in merger and acquisition deals in 2010 and 2011. Nesbitt Burns was working on all the deals, and Mr. Zhao admitted he learned about the transactions by accessing a shared network computer drive.
He bought shares of companies using an online brokerage account held by a family member with another name. The OSC said he did not disclose his trading in the account, contrary to compliance policies at Bank of Montreal.
OSC director of enforcement Tom Atkinson said in a statement Friday the commission is “establishing momentum” in detecting cases of illegal insider trading.
“We are pleased with the results so far and will continue to focus on cases where individuals misuse confidential information for their own personal gain,” Mr. Atkinson said.
As part of the settlement, Mr. Zhao agreed to pay an administrative penalty of $750,000, disgorge profits of $416,719 and pay costs of $30,000.
He was accused of illegally trading in shares of Menu Foods Income Fund, Consolidated Thompson Iron Miners Ltd., Forzani Group Ltd., Pacific Northern Gas Ltd., and Canmarc Real Estate Investment Trust.
Mr. Zhao worked at BMO from 2009 until the end of 2011. He did financial analysis of companies and compiled data for client pitches, including research to support valuations.