The tradition of golf course gossip may be under fire, after an Ontario Securities Commission (OSC) hearing panel ruled that a corporate insider’s trading on information gleaned at a golf outing was abusive.
The OSC Thursday issued its decision and reasons in its case against Paul Donald, a vice president at Research in Motion (RIM), who bought $300,000 worth of shares in Certicom Corp. in 2008 after learning from another RIM executive at a golf outing that RIM was interested in acquiring Certicom.
The OSC panel ruled Donald’s trading did not technically breach securities laws because RIM wasn’t on the verge of making a bid for Certicom. Nevertheless, it found that his trading did violate the public interest as he did so with knowledge of undisclosed material facts — namely, that RIM had been interested in acquiring Certicom, but Certicom was not interested; RIM personnel were in the process of recommending to its senior management that it take steps to acquire Certicom anyway; and, that Certicom was undervalued based on RIM’s valuation of its patents and licensing agreements.
“Market participants and the officers of public companies, such as Donald, are expected to adhere to a high standard of behaviour. In our view, by purchasing securities with knowledge of material facts which had not been generally disclosed, Donald clearly failed to meet that standard and did so in a manner that impugns the integrity of Ontario’s capital markets,” the panel said; adding that it finds his conduct to be contrary to the public interest, and abusive of the capital markets and to confidence in the capital markets.
It set a hearing on sanctions and costs for September 13.