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CIBC suspends traders amid OSC allegations

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Two employees of Canadian Imperial Bank of Commerce (CM-T) who are facing allegations of participating in a widespread insider trading scheme have been suspended by the bank.

 

The Ontario Securities Commission unveiled a sweeping case late Thursday, accusing prominent Bay Street lawyer Mitchell Finkelstein of passing along tips about pending takeover deals to CIBC traders Paul Azeff and Korin Bobrow, who worked in the Montreal office of CIBC World Markets Inc.

 

"As a result of the charges filed by the staff of the Ontario Securities Commission yesterday, these two individuals have been suspended immediately," CIBC said in a statement early Friday. "We have and will continue to co-operate fully with the OSC investigation."

 

The bank said it would make no further comment on the case at this time. No charges have proven, and the men at the centre of the allegations could not be immediately reached for comment.

 

Finkelstein and Azeff were long-time friends and former fraternity brothers. Bobrow was a business partner of Azeff and worked exclusively with him at CIBC. The two men had a private compensation arrangement at the bank to reflect their respective client split of their annual trading activity, according to the OSC allegations.

 

Azeff and Bobrow worked as retail brokers at CIBC and did not deal with institutional clients.

 

The OSC alleges Finkelstein held a series of private meetings with Azeff between 2004 and 2007 after learning about takeover deals he was either working on or that he learned about after searching the documents management system at Davies.

 

After each deal, the OSC alleges, Finkelstein made cash deposits of $50 and $100 bills to his two bank accounts. The commission has not revealed how much money was deposited in his accounts.

 

Finkelstein is a former partner at Davies Ward Phillips & Vineberg LLP in Toronto, working in the firm's corporate finance and securities practice and in its mergers and acquisitions practice.

 

Sources said he left the firm Thursday shortly before the OSC allegations were released.

 

Both the bank and the law firm were alerted months ago that they were the subject of an OSC insider trading investigation, according to sources, but they did not know any details about the case until it became public Thursday.

 

In a statement late Thursday, Davies managing partner Shawn McReynolds said the firm has co-operated fully with the OSC.

 

"We have reviewed the allegations and have concluded they are isolated to actions allegedly taken years ago by one individual who is no longer with the firm,” he said.

 

The OSC alleges Finkelstein passed along information about four prominent deals that took place between 2004 and 2007. They were the acquisition of Masonite International Corp. by Kohlberg Kravis Roberts & Co.; Vista Equity Partners' puchase of MDSI Mobile Data Solutions Inc.; Barrick Gold Corp.'s purchase of Placer Dome Inc.; and Sherritt International Corp.'s purchase of Dynatec Corp.

 

Davies acted on behalf of one of the parties in all four of the deals.

 

The OSC also alleges Azeff passed along information about the deals to a client, who in turn informed TD Waterhouse Canada Inc. investment advisor Howard Miller about the transactions. Miller and TD colleague Francis Cheng are also accused by the OSC of illegal insider trading.

 

The OSC alleges the four CIBC and TD traders who knew about the deals - Azeff, Bobrow, Miller and Cheng - bought securities for their own accounts and also recommended them to dozens of friends, family members and clients.

 

According to the OSC's statement of allegations, the entire group of buyers accumulated shares in the affected companies worth a total of $16.5-million prior to the public announcements of the takeover deals. The potential profit earned on the securities totalled at least $3-million, according to the statement.

 

The allegations do not accuse Finkelstein of buying securities.

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