Michael Zhao, 28, also faces permanent bans on stock trading and working in the investment industry, according to the terms of the settlement deal.
“I believe the range and magnitude of the sanctions ordered today speak for themselves,” OSC commissioner Edward Kerwin said as he approved the deal and then reprimanded Zhao during a brief hearing on Friday.
“Deterrence should be the message to all.”
Zhao, also known as Ming Chao Zhao, “very much regrets his conduct,” co-operated with the investigation and agreed to the sanctions, his lawyer, Paul LeVay told the hearing.
From June 2010 to December 2011, Zhao traded stocks using inside information about coming mergers and acquisitions (M&A) that he obtained on the job, according to the settlement deal.
“As a result of his position, he had access to a shared computer network drive where confidential documents respecting the relevant M&A deals were stored,” the OSC documents say.
Using a family account at TD Waterhouse, Zhao bought or directed the purchase of shares of five companies: Menu Foods Income Fund, Consolidated Thompson Iron Mines Ltd, Forzani Group Ltd, Pacific Northern Gas Ltd., and Canmarc REIT, prior to the public takeover announcements, according to OSC documents.
After the deals were announced, the stocks shot up in value and the shares were sold.
The illegal trades earned a profit of about $416,000, the OSC said.
Zhao left BMO in December 2011, but continued to direct trading in the account, OSC lawyer Matthew Britton told the hearing. The profit from the trades was eventually lost in the market.
“The conduct in this case was serious. Though Mr. Zhao is a young man, he is clearly a capable person” and his trading was “surreptitious and calculated to avoid detection,” Britton said.
The OSC lawyer urged Kerwin to approve the settlement deal, which includes a 10-year prohibition on becoming an officer or director and permanent bans on these jobs at publicly-traded firms, in the public interest and to send a message of deterrence.
“The message that must fly from the hearing room and land in the investment banks in this city …[is that] you will be detected, you will be exposed,” Britton said. “In the end, your own misconduct will cost you your career.”
Under the settlement deal, Zhao was ordered to pay $750,000 in penalties, disgorgement of ill-gotten gains of $416,000, including $350,000 payable immediately, and investigation costs of $30,000.
He is permanently banned from trading securities, with the exception of mutual funds, ETFs, and index funds in his registered retirement savings plan or Tax-Free Savings Account.
Zhao declined to speak to reporters after the hearing.
Original Article
Source: thestar.com
Author: Madhavi Acharya-Tom Yew
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