Skip to main content

Mitchell Finkelstein in the hall way of the Ontario Securities Commission during his trial, November 10, 2011.Brett Gundlock/The Globe and Mail

Today the Ontario Securities Commission handed down its ruling on allegations against a Toronto lawyer and a network of friends and colleagues who, they alleged, participated in a scheme sharing and trading on material, non-public insider information about numerous companies. Not following the case? Here's a quick rundown.

Who was at the centre of the investigation?
Mitchell Finkelstein, mergers and acquisitions lawyer. He worked at Davies Ward Phillips and Vineberg LLP, a prominent Toronto law firm, from 1997 to 2010. He received the Lexpert Top 40 under 40 award in 2007.

Who were the other accused?
Paul Azeff, investment advisor and former sales manager at CIBC Wood Gundy in Montreal, and a university friend of Mr. Finkelstein's. Previously, he had worked at Marleau Lemire Howard Miller. He also worked at Marleau Lemire Korin Bobrow, investment advisor, Marleau Lemire Howard Miller. He later worked as an investment advisor with CIBC and subsequently TD Securities. Mr. Bobrow and Mr. Azeff were close colleagues, often working at the same firms during their careers, according to the decision.

Howard Miller, investment advisor with CIBC and later TD Waterhouse. Commission staff alleged that Mr. Miller was an acquaintance of "LK," an unnamed client of Mr. Azeff's.

Man Kin "Francis" Cheng, salesperson with TD Waterhouse. Commission staff alleged that Mr. Miller was a colleague and mentor of Mr. Cheng.

What did the OSC staff allege?
According to the complaint, Mitchell Finkelstein tipped Paul Azeff, an investment advisor and friend about material, non-public information that a number of important takeover deals involving Davies, Mr. Finkelstein's firm, were imminent. Mr. Azeff allegedly shared the information with Korin Bobrow, as well as with "LK," who tipped Howard Miller, who tipped Francis Cheng. The OSC alleged that Mr. Azeff, Mr. Bobrow, Mr. Miller and Mr. Cheng bought large numbers of shares in the target companies for themselves, family members and clients.

Mr. Finkelstein was not accused of trading on the information, however OSC staff alleged that a number of cash deposits Mr. Finkelstein made were linked to tips he gave Mr. Azeff. In his testimony, Mr. Finkelstein responded saying that he stored cash amounts of up to $30,000 in tin boxes in his house.

Which deals were Mr. Azeff, Mr. Bobrow, Mr. Miller and Mr. Cheng alleged to have traded on?
On Dec. 22, 2004 private equity firm Kohlberg Kravis Roberts & Co. announced a takeover of Masonite for $40.20 a share, a premium of about 20 per cent.

On July 29, 2005 Vista Equity Fund LLP announced a takeover of MDSI for $8 (U.S.) per share, a premium of 60 per cent.

On Oct. 31, 2005, Barrick Gold Corp. announced an offer to acquire Placer Dome Inc. for $9.2-billion (U.S.) a premium of 27 per cent.

On Apr. 20, 2007, Sherritt International Corp. announced the acquisition of Dynatech for $1.6-billion, a premium of 29 per cent.

On July 12, 2007, an investment group led by Caisse de dépôt et placement du Québec announced a $2.5-billion deal to buy Legacy Hotels Real Estate Investment Trust at a 20 per cent premium.

On Aug. 14, 2007 Behringer Harvard REIT Inc. makde a takeover offer for $1.4-million (U.S.) for IPC US REIT at a modest premium.

What was the OSC's ruling?
The OSC concluded that, in the cases of the Masonite, Dynatec and Legacy deals, Mr. Finkelstein gave Mr. Azeff material, non-public insider information. Mr. Azeff gave the information to Korin Bobrow, and that both men subsequently tipped others – in the case of Masonite, including Mr. Miller and Mr. Cheng.

The prosecution wasn't wholly successful, however. Mr. Finkelstein and the other respondents were cleared of wrongdoing on the other three takeover deals in question – MDSI, Placer Dome, IPC – and Mr. Miller and Mr. Cheng were cleared of alleged involvement in Dynatec and Legacy.

Also, while the OSC called Mr. Finkelstein's practice of storing cash in tin boxes in his house "strange," the regulator said there was no reason to disbelieve his explanation of its origins. .

Sanctions and costs will be determined at a hearing on May 21, 2015.