A U.S. investigation into illegal insider trading continues to gather steam amid reports this week that the FBI raided the offices of three hedge funds, one of which has links to an ongoing probe of Galleon Group, described as the largest hedge fund insider trading case ever. In Canada, meanwhile, the Ontario Securities Commission levelled its own stock- tipping allegations against Mitchell Finkelstein, a lawyer formerly at Davies Ward Phillips & Vineberg LLP, as well as several traders and brokers who allegedly profited from inside information about corporate deals.
But while white-collar crime investigations in the U.S. have often led to criminal charges, experts say that, if past history is any indication, the Canadian case is unlikely to result in jail time. Richard Powers, associate dean of the Rotman School of Management, says proving stock tipping in the criminal courts is extremely difficult in Canada, and that the OSC may be inclined to seek administrative penalties such as fines and trading sanctions because they require a much lower burden of proof. “My sense is that’s what is happening here—lots of phone calls, innuendo and timing points to tipping, but does it meet the criminal standard required for more severe penalties? Only the OSC knows at this point.”