Manulife Securities Inc. alerted Quebec's securities regulator last summer that a group of its brokers were actively investing in Amaya Inc. stock ahead of a $4.9-billion takeover that sent its stock price into orbit.
According to people familiar with the case, an internal Manulife investigation revealed about a dozen of its brokers or family members had purchased Amaya stock or options in the months before the takeover agreement was struck in June. These sources said Manulife advised the Autorité des marchés financiers (AMF) about the unusual trading shortly after Amaya announced on June 12 that it was buying PokerStars, the world's largest online gambling company.
These sources said the brokers are closely connected by family ties to the Lebanese community in Montreal and account for about a quarter of the investment advisers at a Manulife branch in Dorval, a Montreal suburb. The brokers are still employed at the branch and there is no allegation of any wrongdoing.
Manulife's report is believed to have prompted the AMF to launch an investigation into trading in Amaya stock ahead of its PokerStars acquisition. In December, the regulator executed warrants to search the offices of Manulife's Dorval branch, Amaya and Canaccord Financial Inc., the lead financial adviser on the takeover.
A spokesperson for AMF could not be reached.
A spokesperson for Manulife declined to discuss the details of the AMF investigation. In a statement to The Globe and Mail, Marianne Harrison, a Manulife senior executive vice-president, said the company is co-operating with authorities.
"Our co-operation began before the issue of the warrant and has continued throughout the investigation. Our securities dealer has the obligation to notify authorities of unusual trading activity and we take our regulatory obligations very seriously. We are hoping that our own investigation will assist the authorities in determining if any wrongdoing has in fact taken place," she said.
Investors who purchased Amaya stock ahead of the PokerStar news hit the jackpot. In the 10 weeks before the takeover was revealed, the company's stock price doubled to more than $14 a share in heavy trading. The stock price soared to more than $30 a share within two months of the news.
The heavy predeal trading in Amaya stock has also drawn the attention of Wall Street's self-regulator, the Financial Industry Regulatory Authority (FINRA), and Canada's market watchdog, the Investment Industry Regulatory Organization of Canada. Amaya's stock is listed on the Toronto Stock Exchange and trades on the U.S. over-the-counter market.
In December, Washington-based FINRA sent questionnaires to Amaya and about half a dozen of its takeover advisers seeking information about potential ties or communications with more than 300 investors who purchased large volumes of Amaya securities ahead of the PokerStars deal.
The lengthy list of investors is believed to be one of the largest ever compiled by FINRA, which regularly reviews stock trades in the wake of major transactions such as takeovers. The regulator seldom targets more than a few dozen investors for questioning.
According to sources familiar with the list, it includes a broad cross-section of Toronto and Montreal financial institutions, fund managers, brokers, business executives and wealthy individuals. There is no implication of wrongdoing by the identified investors.