The Ontario Securities Commission has published its reasons for rejecting a proposed settlement agreement to resolve OSC allegations of illegal insider trading against former Corel Corp. CEO Michael Cowpland.

In the settlement agreement, Cowpland and his company MCJC Holdings agreed to be reprimanded by the commission, a $500,000 payment, that Cowpland will not act as a director of a registrant or a reporting issuer for two years and that M.C.J.C. will make payment of $75,000 to the commission.

An OSC hearing panel did not approve this settlement agreement as being in the public interest. Today it issued its reasons, noting, “Of particular significance, we are faced with the fact that there is an admission of illegal insider trading, an admission of knowledge of a material fact, and an admission that the price of the stock declined significantly following the public disclosure of the material fact. We were advised that Cowpland did not understand the materiality of the information and that he did not act out of malice aforethought. However, we are not prepared to make assumptions in favour of the respondents that are not supported by facts before us.”

It says, “We believe that if we were to approve this settlement agreement on the agreed facts, members of the public would be entitled to criticize the regulatory system as not looking after investors. Our duty is to look after investors. We have a duty to take steps to make sure that manipulative or other improper practices in the financial marketplace are not tolerated and that there is a reason for confidence in that marketplace.”

The panel called illegal insider trading “a cancer that erodes public confidence in the capital markets”; and it said, “If we do not act in the public interest by sending an appropriate message in appropriate circumstances, then we fail in doing our duty. Appearance is important. The public record has to reflect all relevant facts to give credibility to any decision that any settlement agreement is in the public interest.”

“Any sanctions that might be proposed in a new settlement as being in the public interest should result in real consequences to illegal conduct that sends a real message, not only to the respondents, but to others, by having a proportional impact on the respondents. Persons engaging in illegal insider trading should not, after the full impact of sanctions are taken into account, be seen to have benefited from their illegal conduct,” it noted.