OSC panel tosses out allegations in illegal insider trading case

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‎Ontario's securities watchdog suffered a setback on Monday as some of the allegations it had made in a high-profile insider trading case were tossed aside by a three-member panel of the Ontario Securities Commission.

In an oral ruling, Alan Lenczner‎, the OSC commissioner chairing the panel, sided with some of the "non-suit" motions made by lawyers for former Toronto TD Waterhouse investment adviser Howard Miller and former Montreal CIBC World Markets investment adviser Korin Bobrow last week. The decision reduces the number of allegations they face related to alleged illegal insider trading and tipping, but both men still face other allegations in the case. Those allegations have not been proven.

In Mr. Miller's case, Mr. Lenczner said the specific allegations the OSC made that Mr. Miller informed a colleague and a client about an impending takeover of Dynatec Corp. by Sherritt International Corp. in 2007 were first made by the OSC in August of this year, and so were barred by a limitation period.

In Mr. Bobrow's case, Mr. Lenczner ‎said the OSC had failed to substantiate its allegation that Mr. Bobrow had acted "contrary to the public interest" in relation to another of the deals at the centre of the OSC's insider trading allegations, the 2005 takeover of MDSI Mobile Data Solutions Inc. by Vista Equity Partners‎.

"We feel that there is no evidence that links him to those allegations," Mr. Lenczner said.

The two men are secondary characters in the OSC's high-profile case against former Bay Street lawyer Mitchell Finkelstein, who left his job at elite law firm Davies Ward Phillips & Vineberg LLP in 2010 after the securities regulator alleged he tipped a friend about impending corporate deals in return for cash.

‎Mr. Finkelstein spent a second day in the witness box on Monday, testifying before the OSC panel that either he did not know some of the confidential information he is alleged to have leaked to his friend, Montreal-base CIBC financial adviser Paul Azeff, or that he did not speak to him at the times the regulator's staff allege that he did. He has denied ever disclosing any information about impending deals his law firm was working on.

‎Mr. Finkelstein was among the Davies lawyers acting for Mississauga-based Masonite International Corp. when it was being acquired by U.S. private equity giant Kohlberg Kravis Roberts & Co. in 2004. The OSC alleges that in November, 2004, Mr. Finkelstein fed Mr. Azeff confidential information about the impending deal, including that the share price would be $40 and that the deal would done by Christmas. It was these details that appeared in a Nov. 24 e-mail sent to a client by Mr. Miller, whom the OSC alleges got hold of the tip from a client tipped by Mr. Azeff.

The OSC alleges Mr. Azeff bought shares in Masonite, starting Nov. 19, 2004. But Mr. Finkelstein ‎told the OSC panel on Monday that he was not aware of any pricing or timing information about the deal until after a Masonite board meeting held on Nov. 24 of that year. H‎is lawyer at the OSC hearing, Gordon Capern, submitted a letter from a former Masonite executive saying that such details were not discussed in meetings with Davies lawyers until then.

‎The case is taking place before the OSC, not a criminal court. The OSC can impose monetary penalties and can ban people from participating in the capital markets or from serving as company directors or officers. But it cannot mete out jail sentences.