Kim Goodman, left, walks with Mitchell Finkelstein, alleged insider-trading tipping lawyer, in the hall way of the Ontario Securities Commission during his trial, November 10, 2011. Finkelstein’s sentencing hearing begins Wednesday.Brett Gundlock/The Globe and Mail
An Ontario Securities Commission panel will hear arguments Wednesday about the penalties it should impose on former Bay Street lawyer Mitchell Finkelstein and four others accused of passing along tips or trading on insider information about major takeover deals.
The OSC ruled in March that Mr. Finkelstein, a former senior partner with law firm Davies Ward Phillips & Vineberg LLP, passed along tips about deals to long-time friend Paul Azeff, a former CIBC investment adviser in Montreal, who was found to have passed the information to others.
The ruling was seen as an important victory for the commission in a high-profile case involving insider trading allegations, which have proven difficult to successfully prosecute in other cases.
The hearing panel must now decide on penalties in the case, which can include monetary fines of up to $1-million for each violation, requirements to pay back profits made from improper trading, and bans from serving as a director or officer of a public company, working as a registrant in the financial industry or trading securities in Ontario.
The commission does not have the power to impose jail sentences in cases conducted as commission hearings.
The panel's March ruling concluded Mr. Finkelstein tipped Mr. Azeff about deals, and found that Mr. Azeff traded on insider information and passed it along to others.
The panel, headed by commissioner Alan Lenczner, ruled Mr. Azeff passed along information to his business partner at CIBC, Korin Bobrow, who also traded on insider information and passed it to clients.
The commission's panel also said two former TD Securities investment advisers, Howard Miller and Man Kin (Francis) Cheng, traded on insider information that originated with Mr. Finkelstein and was passed down to them through a chain of contacts.
The hearing panel ruled Mr. Finkelstein provided tips about three deals involving Masonite International Corp., Dynatec Corp. and Legacy Hotels REIT, but dismissed allegations involving three other deals because of a lack of evidence.
The panel also rejected commission staff's suggestions that Mr. Finkelstein received large amounts of cash from Mr. Azeff after takeover deals.
Mr. Finkelstein denied the claims and testified he tended to keep large amounts of cash around his house and would deposit it in bank accounts at various times.
The hearing panel said no evidence or testimony was presented to "disbelieve Finkelstein on his explanations and accounting."
Janet McFarland