The Ontario Securities Commission offices in Toronto.Fred Lum/The Globe and Mail
A former legal assistant at a blue-chip law firm was at the centre of an insider-trading ring that made $2.5-million over more than four years on takeovers involving companies such as Tim Hortons Inc. and Valeant Pharmaceuticals International Inc., according to Ontario regulators.
The Ontario Securities Commission said Friday in a statement of allegations that Donna Hutchinson, who worked at law firm Davies Ward Phillips & Vineberg L.P., tipped off stock trader Cameron Cornish on a series of takeover offers that played out between October, 2011, and April, 2016. Ms. Hutchinson and Mr. Cornish have a relationship that dates back 17 years and lived together for two years, according to the securities commission.
Mr. Cornish, as a trader at investment bank Brant Securities Ltd., made money by investing ahead of the deals and passed on tips to two friends, who also profited from buying based on insider information, according to the market watchdog. There is no allegation that Ms. Hutchinson received any money.
The OSC alleges Mr. Cornish tipped off David Sidders, who lives in Bermuda, and that Mr. Sidders engaged in insider trading through two accounts at a brokerage house in Panama. Mr. Cornish is also alleged to have passed on tips to Patrick Caruso, who traded through accounts in Canada and the British Virgin Islands.
Ms. Hutchinson, Mr. Cornish, Mr. Sidders and Mr. Caruso could not be reached for comment.
In total, the commission alleges the three friends made $2.5-million from illegal insider trading. The market regulator said other, unnamed investors at Mr. Sidders's Panamanian brokerage made similar trades and earned an additional $8.8-million.
Davies managing partner Shawn McReynolds said Friday that Ms. Hutchinson was fired when the firm became aware of the allegations, and that the firm co-operated with the investigation. Mr. McReynolds said in an e-mail: "We have reviewed the allegations and have concluded that they are isolated to actions allegedly taken some time ago by a legal assistant in flagrant breach of our policies on confidentiality."
This is the second insider-trading case involving an employee of Davies, a firm with approximately 240 lawyers in Toronto, Montreal and New York that focuses on mergers and acquisitions. In 2015, the commission ruled former Davies partner Mitchell Finkelstein engaged in insider trading by tipping off a friend from his university fraternity.
"Davies demands and expects that its personnel will at all times adhere to the highest legal, professional and ethical standards," said Mr. McReynolds. "Our firm's policies concerning our duty to keep client matters confidential are very clear, and are well understood by our people. We will tolerate no breach."
Brant Securities said that Mr. Cornish is a former employee and had no comment Friday on the commission's allegations.
The allegations focus on trading in 10 transactions that involved Ms. Hutchinson through her work at Davies, including offers for Quadra FNX Mining Ltd., TMX Group, Rainy River Resources Ltd., Osisko Mining Corp. and Allergan Inc., which was targeted by Valeant.
While these transactions were still confidential, the commission alleges Ms. Hutchinson phoned or texted Mr. Cornish, who then contacted his two friends. The regulator said that all three investors made money from buying securities before takeovers were announced, then selling after the deals were made public.
The commission also alleges that a numbered company owned by Mr. Cornish received $220,000 from the Panamanian brokerage in 40 electronic transfers, "in amounts that all fell below FINTRAC's $10,000 reporting requirement." The brokerage in Panama also gave Mr. Cornish $123,000 to cover trading losses on his account in Canada, according to the securities commission.