A hearing panel of the British Columbia Securities Commission (BCSC) has dismissed an insider trading charge against a former broker, but found that he lied to regulators and acted contrary to the public interest.
The BCSC released a decision Tuesday in which a hearing panel dismissed an allegation that former broker, Douglas William Falconer Wood, purchased shares of Highland Copper Co. Inc. while in a special relationship with the company, and with knowledge of undisclosed material facts about the company.
In this case, the alleged material fact involved negotiations about a possible copper project. The panel dismissed the allegation, noting that it didn’t have enough evidence to assess whether the copper project in question was material to the company.
“We do not have any factual background or analysis to put the copper project into the context of Highland’s current business and its prospects. Without evidence of the existing “story” of Highland … the panel is unable to determine whether a reasonable investor would expect the price or value of its shares to be impacted by the information at issue,” it said.
“We are unable to answer the question of whether the reasonable investor would have viewed the copper project as material without speculating,” it said.
However, the panel did find that he violated the public interest when he traded securities that were on his firm’s restricted list, set up an offshore trading structure to conceal his trading activity (and intentionally withheld this information from his employer), and then lied to staff from the Investment Industry Regulatory Organization of Canada (IIROC) when questioned about his trading.
“Individually, these facts might not be serious enough for a finding that they are contrary to the public interest but, when combined, lead us to the conclusion that the respondent’s conduct fell far short of what is expected of registrants. As such, the respondent’s conduct is contrary to the public interest,” the panel said in its decision.
The panel directed both sides to make submissions on sanctions next month.