The Ontario Securities Commission (OSC) has ordered almost $1.5 million in monetary penalties and costs against a husband and wife that were found to have traded on inside information.
The OSC handed down its sanctions decision Thursday in its case against husband and wife, Shane Suman and Monie Rahman. Earlier this year, an OSC panel found that Suman tipped his wife that the company where he worked, MDS Sciex (a subsidiary of MDS Inc.), was planning to acquire Molecular Devices Corp., and that they then traded on that inside information.
Couple’s MDS trades “contrary to the public interest”
On Thursday, the commission ordered that Suman disgorge $954,938 to the commission, and pay a $250,000 penalty. It also ordered $250,000 in costs against the pair. Suman is permanently banned from trading, and Rahman is banned for five years (although the ban will only be lifted if the costs order has been paid in full); and they are permanently banned from serving as directors or officers.
In its decision, the OSC panel found that the conduct of Suman and Rahman, “constitutes serious misconduct . . . that deserves severe sanctions”. It said that the “role of a senior information technology professional within a reporting issuer is a role which places the individual in a position of trust. We must deter others in similar positions from abusing that trust.”
The decision indicates that the couple agreed to OSC staff’s proposed sanctions , but that they currently have limited means. Suman is currently unemployed, Rahman is unable to work outside of the home, and they don’t live in Ontario any more.
Additionally, it notes that the $250,000 penalty against Suman reflects the fact that U.S. regulators have already ordered a $2 million civil penalty against Suman and $1 million against Rahman, along with over $1 million in disgorgement. Absent the civil penalties in the U.S., OSC staff would have sought the maximum administrative penalty of $1.0 million, it says.
In view of the U.S. order, OSC staff did not seek a disgorgement order against Suman. However, the panel ordered it anyway, adding that it won’t pursue collection of that order as long as the US Securities and Exchange Commission (SEC) is trying to collect on its order. Ordering double disgorgement would not be fair or appropriate, it says. Any amounts paid to satisfy the disgorgement ordered in the U.S. will be credited against the OSC disgorgement order.
“This recognises the fact that the improper trading profits obtained by the respondents came from trading in U.S. capital markets in the securities of a U.S. public company. Notwithstanding, we believe that it is appropriate that we impose a disgorgement order against Suman that can be directly enforced in this jurisdiction if doing so would be efficacious,” it says.
No monetary sanctions or disgorgement is ordered by the OSC against Rahman because she was not found to have violated securities laws (Molecular Devices was not a reporting issuer in Ontario at the time), but the panel concluded that the trading did violate the public interest.