A fiercely-contested insider trading case against a former airline executive has been dropped, with a settlement that saw the company admit to failing to disclose the material change that was the focus of the insider trading allegations.
In 2021, the British Columbia Securities Commission (BCSC) alleged that Mark Morabito — the former executive chairman and a director of low-cost, airline startup, Canada Jetlines Ltd. — breached insider trading rules in connection with the company’s alleged failure to disclose a material change to its operations.
Specifically, the regulator alleged that Canada Jetlines failed to disclose that its plan to launch operations in the summer of 2018 had been delayed to the end of that year after an aircraft lease was cancelled.
While the company told the Canada Transportation Agency about the delay in early 2018, this wasn’t disclosed to investors until mid-March 2018.
“The delay to the start of flight operations was a material change,” the BCSC said — adding that the failure to also immediately disclose the delay to investors breached securities rules.
Now, the company — which is under new management and known as Global Crossing Airlines Group Inc. — has admitted to breaching the securities rules. And, Morabito admitted to breaching the same provision by permitting the company’s breach.
To settle the allegations, they voluntarily agreed to jointly pay $100,000 — and, the regulator decided that it would not pursue any other sanctions in the case.
In the wake of the settlement, the BCSC discontinued the proceedings, which also previously alleged that Morabito breached insider trading rules in connection with the undisclosed material change — specifically, it alleged that he transferred shares in the company to his wife, who then sold those shares, before the negative news was released, and the company’s share price dropped.
That allegation became ensnared in a lengthy legal battle, after Morabito sought a stay of the enforcement case against him, alleging that the proceedings amounted to an abuse of process.
While the regulatory hearing panel initially rejected that claim, in November 2024, the Court of Appeal for B.C. ruled that the panel mishandled the case by holding a “blended hearing” that considered the insider trading allegations alongside Morabito’s application for a stay and his “abuse of process” claims.
However, the court stopped short of granting a stay of the enforcement case, and ruled that it should be sent back to the BCSC to be adjudicated by a new hearing panel.
Back in March, Morabito and the company filed for a permanent stay of the case, again claiming that it represented an abuse of process, and the commission scheduled a hearing, which was to start Dec. 8, to hear the abuse of process applications.
Now, after reaching a settlement agreement with Morabito and the company, the BCSC has discontinued the rest of its enforcement proceedings against them, ruling that ” it would not be prejudicial to the public interest to do so…”