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Mitchell FinkelsteinFernando Morales/The Globe and Mail

Mitchell Finkelstein was a rising star in the high-priced world of Bay Street deal-making.

The 41-year-old lawyer had built a steady career at Davies Ward Phillips & Vineberg LLP, holding a partnership for more than a decade and handling some of the biggest files at the powerhouse Toronto firm, including the 2005 takeover of Masonite International Corp.

Raised among Montreal's English-speaking elite before moving to Toronto and an exclusive neighbourhood, he had a stellar pedigree, complete with a fancy car and friends high up in the downtown towers.

Now his career and reputation are in jeopardy.

Mr. Finkelstein left Davies abruptly Thursday, and his name was removed from the firm's website, as regulators accused him of being at the centre of a large insider-trading scheme that strikes at the heart of Bay Street.

He is accused of passing on tips of pending deals to an old fraternity friend from his university days, who in turn is alleged to have traded on the information and passed it on to others.

None of the allegations announced Thursday by the Ontario Securities Commission has been proven, and Mr. Finkelstein could not be reached for comment.

The OSC investigation goes beyond Mr. Finkelstein and includes a constellation of deal makers, traders and brokers and friends who allegedly parlayed corporate secrets into personal profits. It has not only entangled one of Bay Street's premier law firms but also two of the country's top banks, Canadian Imperial Bank of Commerce and Toronto-Dominion Bank. The banks and Davies declined to comment on the specifics of the case, but said they were co-operating with the OSC.

Unlike insider trading scandals of the past that centred on individual bankers, executives or low-ranking lawyers, this investigation reaches right into the heart of Bay Street's deal machinery. The alleged breach of trust at such a senior level casts an unflattering light on Bay Street's ability to police itself.

Davies is one of the country's leading deal firms, whose partners include David Brown, who targeted insider trading as a priority when he was chairman of the OSC. Davies reputation for closely supervising its closely knit teams of hard working lawyers is so great that in some circles it is known in "Slavies."

Nothing in Mr. Finkelstein's background would have suggested this turn of events.

The allegations announced by the Ontario Securities Commission have stunned those who know him.

To them he is a class act, a razor sharp lawyer once ranked among Canada's top tier under 40.

"I just can't believe it," said Bayo Odutola, an Ottawa lawyer who attended law school with Mr. Finkelstein in the early 1990s.

Born in Montreal, he attended the Lower Canada College, a private school where the city's English-speaking elites, such as the Molson family, send their children to be educated. Friends say Mr. Finkelstein always kept a cheery countenance in class and on the basketball court, where he started as a guard for several years.

Like most of his classmates, Mr. Finkelstein left Montreal after graduating in 1986. He headed to the University of Western Ontario in London, Ont., where he met another Montrealer, Paul Azeff. The two joined the same fraternity and became friends. They remained close even after graduating and going their separate ways - Mr. Finkelstein to the University of Ottawa's law school and Mr. Azeff back to Montreal for a career in the investment world at CIBC World Markets Inc.

Mr. Finkelstein joined Davies in 1997 and became a partner two years later. He specialized in financings and mergers and acquisitions, handling clients as varied as Masonite, TSX Group and EdperBrascan.

Colleagues described Mr. Finkelstein as a driven workhorse who logged in long hours of work and was always available to lend his expertise to the assembly line of takeovers and financings that flowed through the law firm.

"He was a smart, solid deal maker that you could depend on," said a corporate lawyer with another Bay Street firm that occasionally worked on transactions with Mr. Finkelstein.

Added another: "He's a big deal maker who made a lot of money; it makes no sense".

His career blossomed. By some accounts he earned more than $500,000 a year. He owns a mansion in the exclusive Toronto neighbourhood of Forest Hill, drives a BMW convertible and had influential friends across Bay Street.

In 2008, he and his wife took out an $850,000 mortgage, property records show.

According to the OSC allegations, Mr. Finkelstein started passing on information about upcoming mergers to Mr. Azeff at CIBC in 2004. Mr. Azeff allegedly passed the tips on to his colleague Korin Bobrow, a close friend he had known since they attended St. George's School together in Montreal.

The tips allegedly included information about four pending deals, including the $3-billion takeover of Masonite by Kohlberg Kravis Roberts & Co. in 2004 and Barrick Gold Corp's $10.3-billion purchase of Placer Dome Inc. in 2005.

According to the OSC's statement of allegations, the entire group of buyers accumulated shares in the target companies worth a total of $16.5-million before the public announcements of the takeover deals. The potential profit earned on the securities totalled at least $3-million, according to the statement.

The OSC alleges Mr. Azeff and Mr. Bobrow made trades based on the information and passed the tips on to family members and friends as well. The insider information also allegedly flowed to two former brokers at TD Waterhouse who also profited from it along with clients, according to the OSC.

Mr. Azeff and Mr. Bobrow were not available for comment.

The OSC allegations claim Mr. Finkelstein and Mr. Azeff spoke several times just before each deal was announced publicly and that Mr. Finkelstein made cash deposits in a bank account afterward. Those deposits, the commission alleges, were typically in $50 and $100 bills.

The OSC's allegations are an expansion of an insider trading investigation revealed earlier this year that focused on two employees of Toronto Dominion Bank's securities arm. The regulator alleged that trader Howard Miller and salesman Francis Cheng and their families pocketed a profit of $130,000 by buying Masonite shares weeks before a takeover of the Toronto-based door maker was announced in December, 2004.

The alleged source of the pair's information was not revealed until Thursday, when the OSC claimed Mr. Miller was tipped by a client of Mr. Azeff.

CIBC said in a statement that "as a result of the charges filed by the staff of the Ontario Securities Commission yesterday, these two individuals have been suspended immediately."

A spokeswoman for TD said that Mr. Miller and Mr. Cheng are no longer employed at the bank. "We have a strong risk and governance culture and take the trust our clients place in us very seriously," she added.