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Bay Street's latest insider-trading scandal points to a confidence-eroding conspiracy that is far larger than the four individuals targeted Friday by Canadian regulators.

The Ontario Securities Commission alleged Friday that over more than four years, a former legal assistant at blue-chip law firm Davies Ward Phillips & Vineberg LP named Donna Hutchinson passed on tips about planned takeovers to a guy she used to live with, and has known for 17 years.

That individual, former Brant Securities stock trader Cameron Cornish, is alleged to have made money trading on Ms. Hutchinson's timely tips, and in turn passed on the information to two buddies, one of whom did his trading through an account at a brokerage house in Panama.

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Related: OSC alleges Davies law firm employee involved in insider-trading ring (for subscribers)

If the alleged illegal insider trading stopped there, we'd have ugly but contained wrongdoing; a few bad apples who made approximately $2.5-million and are likely going to be forced by regulators to disgorge those gains.

Unfortunately, the conspiracy appears to be much larger, sweeping in executives at a foreign investment bank, plus Canadian investors whom the regulator did not name, but clearly suspects behaved badly.

And what's really dispiriting about this whole scandal is the individuals who made the biggest gains on alleged illegal trading seem likely to avoid prosecution, and keep their cash.

In the opening line of Friday's statement of allegations, the OSC said illegal tipping and insider trading are "harmful to honest investors and erode confidence in capital markets." That loss of confidence is an understandable reaction to the full extent of the scandal that the OSC alleges began with Ms. Hutchinson's tips. Mr. Cornish and Ms. Hutchinson could not be reached for comment.

The OSC alleges Mr. Cornish and his pal with the offshore account knew "certain officers and employees of the Panamanian brokerage." The pair talked frequently with this crew at the same time they traded on a string of Canadian takeovers. On Friday, the regulators published a long list of trades made in accounts controlled by these executives that are similar to Mr. Cornish's trades. But the regulator stopped short of naming names.

A Canadian relative of an executive at the Panamanian brokerage, again, no name mentioned, also played these takeovers, according to the OSC. Collectively, this anonymous group made approximately $8.8-million trading the Canadian takeovers, according to the regulator.

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These unnamed traders took significant positions ahead of takeovers, far larger than those made by the four individuals cited Friday by the OSC. They allegedly loaded up on $6.8-million worth of shares in Tim Hortons Inc. ahead of a takeover bid, and made $1-million on a $10.9-million position in TMX Group.

Executives linked to the Panama brokerage made $510,000 on a takeover of Quadra FNX Mining Ltd. by acquiring shares three weeks before a deal was announced, and selling on news of an offer, and $705,000 on Rainy River Resources Ltd.; buying shares one week, and selling the next week when a takeover materialized.

Pause for a moment and consider what the regulator is alleging. Executives at an investment bank have an obligation to report suspicious trading. Officers at the brokerage house in Panama decided instead to jump right in, and invite relatives to join in the party.

The OSC has regional power. In targeting only four individuals Friday in this insider-trading case, the regulator is clearly trying to make a case that it can win.

However, stock trading is a global business. The actions of executives at the Panamanian brokerage house clearly erode investor confidence. The OSC cannot sanction this investment bank. That doesn't mean the brokerage house needs to remain anonymous.

The regulator should name and shame the Panamanian brokerage house. The OSC should work with U.S. regulators to block this investment bank's access to North American stock exchanges and other trading platforms. There are more than four bad apples in this scandal. Preserving investor confidence means targeting all those alleged to have profited from illegal insider trading.

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