By James Langton

(April 4 – 12:00 ET) – RBC Dominion Securities Inc. says it has hired forensic accounting and securities investigation firm, Kroll Lindquist Avey, to help it investigate possible illegal insider trading in offshore client accounts.

DS says the shady trading seems to related to merger and acquisition transactions, in most of which RBC DS acted as an advisor. A statement from DS chairman Tony Fell, and new president and CEO, Chuck Winograd, indicates that illegal insider trading could be afoot.

“Late last week, the compliance department at RBC Dominion Securities became aware of suspicious client trading activity in offshore accounts. The trading appears to be related to certain merger and acquisition transactions, in most of which RBC DS acted as an advisor. Our investigations to date indicate the identified trades were not material relative to the size of the transactions, but reflect a suspicious level of knowledge regarding details of the transactions.”

In certain cases, primarily in the United States, investment bankers have been accused of tipping clients to impending M&A activity, allowing profitable trading. In most deals, the target firm will see its stock jump sharply after a deal is announced, while the acquiring firm will often see its price fall. Advance knowledge of a deal makes for easy pickings for unscrupulous traders.

Perhaps the most notorious recent case, saw a Wall Street investment banker tipping his Vancouver-based girlfriend, and former porn star, Kathryn Gannon, to impending deals his firm was working on as an M&A advisor. It has yet to be revealed if this is a similar case.

Fell and Winograd indicate that DS immediately notified the Ontario Securities Commission, the Toronto Stock Exchange and the Investment Dealers Association, “to alert them to the situation and to seek their assistance in conducting a full-scale and comprehensive investigation”. Royal Bank also notified the Office of the Superintendent of Financial Institutions and DS hired Kroll.

“We place an extremely high value on our reputation for integrity and fair dealing. We have therefore launched an intensive investigation, which we will drive forward aggressively seeking a full explanation. Kroll Lindquist Avey has advised us that the decisive and timely public disclosure of this matter and the scrutiny it will bring, should put an immediate stop to this activity.”