OSC panel dismisses fund rep’s insider trading allegation

An Ontario Securities Commission (OSC) hearing panel has dismissed insider trading allegations against a former mutual fund rep, but found that he did mislead its investigators on another issue.

In late 2020, the OSC brought insider trading charges against three people. One was Taylor Carr, an employee of cannabis company WeedMD Inc. The other two defendants were mutual fund reps Trevor Rosborough (who was a friend of Carr) and Dimitri Graham.

Today, the regulator released the hearing panel’s decision in the case. The panel found that Carr admitted to trading while in possession of undisclosed material information — his company’s major expansion plans that had not yet been publicly announced — and that he tipped his friend, Rosborough, who also admitted to trading on that information in a settlement with the regulator last year.

However, Rosborough denied that he, in turn, passed along the inside information to Graham, who also denied trading on that information.

Ultimately, the panel accepted those denials.

“While the timing of Graham’s trades is suspicious, we cannot conclude on a balance of probabilities that Graham knew the material non-public information at the time he purchased WeedMD shares, particularly in the face of Rosborough’s denial and the fact that while Rosborough implicated Graham in other respects in his settlement agreement, he did not implicate Graham on this point,” the panel said in dismissing the insider trading allegations against Graham.

However, the panel upheld a separate allegation against Graham.

Alongside the insider trading allegation, the OSC also alleged that he misled its investigators in three areas of his testimony to them.

While the panel dismissed those charges in two areas, it did find that he misled the regulator in one area — whether he was involved with alleged “stealth advising” — specifically, “whether Graham assisted Rosborough with work-related activities at a time when Rosborough was not registered.”

A hearing on any sanctions in the case will be held by July 8.

Under the terms of his 2021 settlement with the OSC, Rosborough agreed to an eight-year ban, a $35,000 penalty, $5,000 in costs and to disgorge his illicit trading profit of $492.32.

Earlier this year, Graham was sanctioned by the Mutual Fund Dealers Association of Canada (MFDA) for violations arising from the alleged “stealth advising”.

In that case, the MFDA panel banned him for five years, imposed a fine of $30,000 and ordered costs of $10,000.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.