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The Ontario Securities Commission has said via court records that its investigation of two software developers for Intrado Corporation dates back to late 2020, when it received a tip.Melissa Tait

Two Toronto-area programmers for GlobeNewswire, one of the largest wire services in the world, are under investigation as part of an insider-trading probe launched by the Ontario Securities Commission, The Globe and Mail has learned.

The regulator alleges that two software developers for Intrado Corporation, the U.S.-based telecommunications company that owns GlobeNewswire, regularly texted each other about draft corporate press releases scheduled to be issued, and executed trades on that material, non-public information.

The allegations are contained in an application filed in court in March by the OSC. The regulator is asking a judge to extend a freezing order on the TD trading accounts of one of the GlobeNewswire programmers, Harpreet Saini.

None of the allegations has been proven in court.

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GlobeNewswire is one of several wire services contracted to disseminate information on behalf of businesses around the world. Such disclosures are a key condition of operating as a public company in most jurisdictions. The wire service boasts of its worldwide reach, which extends to 92 countries in 35 languages.

In an e-mailed statement, a spokesperson for Intrado said the company could not comment on this specific case, citing the continuing investigation by the regulator.

“As a more general matter, we can confirm that Intrado co-operates with law enforcement and regulatory agencies any time that co-operation is requested,” said Dave Pleiss, Intrado’s vice-president, investor and public relations.

The OSC says in court records that its probe dates back to late 2020, when it received information that another Ontario-based Intrado employee, John Lester Mandac Natividad, sold stock in a way that appeared to be linked to 10 U.S. companies releasing news about their operations.

After this tip, the OSC executed a number of search warrants, including one on Mr. Natividad’s residence, an OSC forensic auditor, Anthony Long, said in an affidavit.

As part of those searches, investigators discovered WhatsApp exchanges showing Mr. Natividad had been discussing, with another individual, possible price movements in the stock of companies due to issue news through GlobeNewswire, Mr. Long alleges. The OSC sought and obtained phone subscriber information that showed the other individual’s phone number was registered to Mr. Saini, and the regulator seized Mr. Saini’s trading records.

Mr. Long alleges that, in Mr. Saini’s trading records, there are 250 instances where the software developer executed a trade in a company on the same day, or shortly before, that same company issued a news release on GlobeNewswire.

The total proceeds from the alleged insider trading, however, is not clear. In his affidavit, Mr. Long cites eight companies whose stock Mr. Saini traded in – almost all of them microcap pharmaceutical issuers – shortly before a press release was issued. The proceeds from those trades amount to about $36,000, but Mr. Long states they are “only a sample” of the alleged activity.

Between May, 2018, and July, 2021, Mr. Saini’s trades resulted in a total profit of US$1.1-million, Mr. Long states. However, his affidavit does not detail whether all of the trades that contributed to that profit fit the alleged pattern of misusing information from GlobeNewswire.

As for Mr. Natividad, the court records deal exclusively with the freeze on Mr. Saini’s accounts and do not address how much he profited, if at all, from this alleged trading. There are no court applications showing that any of Mr. Natividad’s accounts have been frozen.

Mr. Natividad could not be reached for comment. James Camp, a securities lawyer representing Mr. Saini, declined to comment.

The court records show that GlobeNewswire maintains an electronic system for tracking employees who click on news releases before they are publicly issued – which might have offered a potential clue about employees who traded based on that information.

However, Mr. Long said that investigators had learned of a workaround, where employees could hover their cursor over a partial headline, which would reveal the entire headline “without leaving an audit trail.”

The initial freezing of Mr. Saini’s TD accounts was ordered by the OSC on March 8, and the order was signed by Grant Vingoe, the regulator’s chair and highest-ranking official. The law governing such freezes requires the OSC to apply to the court within 10 days if it wishes to extend the order.

The OSC’s application is scheduled to be heard on June 16.

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