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New Lieberal Scandal: Insider Trading
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| ShadoWolf |
http://www.cbc.ca/story/business/na...ing-051125.html
Did Goodale's income trust announcement leak early?
Last Updated Fri, 25 Nov 2005 18:35:57 EST
CBC News
Some market observers are wondering if the federal government's announcement on income trusts leaked early, allowing those in the know to profit.
On Wednesday, just before 6 p.m. EST, the federal finance department officially announced it would cut the tax on dividends and would leave trusts alone. That's the type of news that is always announced after stock markets close at 4 p.m. EST because it would give a boost to those types of securities.
But trading in many trusts and dividend-paying stocks became much heavier than usual in the hour or two before the market's close on Wednesday, and share prices rose sharply.
Forensic accountant Al Rosen said it looks to him that Bay Street knew the details of Goodale's announcement well before he made it.
"Clearly, there was a leak between 2 and 4 [p.m. EST]," he told CBC News.
For example, the share price of BCE, which pays a rich dividend, climbed 4.9 per cent on Wednesday. The last hour featured a noticeable uptick in price and volume.
Similarly, income trusts like Aeroplan Income Fund and Yellow Pages Income Fund saw their unit prices jump 6.1 per cent and 6.6 per cent, respectively. Volume and prices turned up in late afternoon trading.
"We are seeing much greater rises that tell us someone knew or many people knew it [the coming Goodale announcement] was not just a clarification, but that dividends would be taxed at a lower rate and [income] funds would not be taxed at all," Rosen said.
Market Regulation Services, which monitors trading activity on the Toronto Stock Exchange, said it noticed unusual trading activity on Wednesday and is looking into it. A spokesperson said the spike in trading activity doesn't necessarily mean that something is amiss.
Goodale denied Friday that there had been any leak of his announcement. "We are always very careful and very discreet," he told reporters. "There was no leak."
Copyright ©2005 Canadian Broadcasting Corporation - All Rights Reserved |
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| ShadoWolf |
Trusts: Third World in action
Barry Critchley
Financial Post
Friday, November 25, 2005
It won't happen -- this is Canada. after all -- but if David Wilson, the relatively new chairman of the Ontario Securities Commission, wanted to express his complete disdain for the events of the past few days, he might like to order an insider-trading investigation into the way the federal government handled the income trust/dividend tax credit matter.
A starting point would be the appointment schedules of the officials in the finance department and of the staffers in the office of the Finance Minister. The investigation would focus on who met with whom, who told what to whom and whether that information was used by market participants. And during those investigations, the Ontario Securities Commission might like to point out that tipping, as Andrew Rankin, a former investment banker with RBC Capital Markets found out, can cause people to head to the slammer.
Clearly some people had better information than others about what has happening and there is only one place that information could have come from: the nation's capital.
How else are we to explain the sharp jump in the price of income trusts over the past few days, a rise that climaxed on Wednesday, the day of the federal government's announcement that there would be no new taxes on income trusts. On Wednesday, the S&P/TSX capped trust index rose by 1.49%, with the bigger business trusts posting even larger gains. For the week ending Wednesday, the index was up by 3.61%.
And how else to explain the action in the high dividend-paying stocks, such as BCE, on Wednesday. The stock, which hit a six-month low the previous day --jumped by 4.9% on Wednesday, on twice the normal volume.
To put that gain in perspective: It is BCE's largest gain in four years and it occurred on the day that announcements are made. Readers can work out whether it was a coincidence.
Clearly those with the good information made the best returns. Meanwhile, the poor mopes who didn't get the good information were selling.
And to support that contention, this column got a call yesterday from a well-known investment banker who is as Type A as the rest of them. And he was disgusted at what has occurred.
"I was talking to some prominent lawyers and bankers and they were up there in Ottawa earlier this week and they were basically told this was going to happen," added the banker, who over the years has won his share of the deals that are up for grabs. "It's all over the street. All the people are talking about who had a heads up and who didn't."
The events left the banker wondering whether Ottawa was interested in consultation or more interested in passing on inside information.
In this banker's mind, "It pays to consult. The government has leaked this out to their friends and cronies in the business community and [in so doing] panicked the little investors who sold.
"It's brutal. It's third world. It's unbelievable," he said.
And this banker wasn't just referring to the events of last Wednesday. Indeed, the process got off to a good start in early September, when Ottawa announced it was planning a consultation process on income trusts. A week or so later, the process reached amateur-hour proportions when the government announced it would not be giving any more advance tax rulings on trust conversions. More importantly, what did that decision mean for the process, which was kicked off with a 50-page report that indicated that everything was being analyzed?
Since then, it has been full-scale panic as Ottawa dealt with all sorts of anger from all sorts of people -- market participants, industry executives, retail investors and pension funds.
And the final straw: "The government then tells a bunch of Bay Street insiders what it is going to do so they can profit. And then it does it. It's insane," added the banker.
© National Post 2005 |
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| Jayx1 |
| these guys rot of corruption. Time for them to leave office. |
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| ShadoWolf |
http://www.ctv.ca/servlet/ArticleNe...1207?hub=Canada
Evidence suggests leak in income trust case
Kathy Tomlinson, CTV News
Updated: Tue. Dec. 6 2005 10:02 PM ET
In the two weeks since Canada's Finance Minister announced a tax cut to dividend-paying stocks, the big question in financial and political circles is whether some people had advance notice of his Nov. 23 announcement. A CTV Whistleblower investigation into what happened that day has found that may have been the case.
"I believe some information leaked out somewhere," said Christopher Thomas of Measured Markets, a company that analyzes stock trading patterns.
Ralph Goodale's announcement was good news for income trust investors -- and those who buy dividend-paying stocks. He reversed his earlier plan to possibly tax the trusts. He also decided to cut taxes on dividends, to help dividend-paying stocks look as attractive to investors as the popular income trusts do.
But, some of those stocks jumped inexplicably late in the afternoon, hours before Goodale told the Canadian public anything about his plan. CTV found more evidence of a possible leak than just that jump in trading.
First, several credible sources in financial circles confirmed to CTV they heard definitively -- before the markets closed -- that an announcement would be coming after the close of trading that day.
Many people were exchanging emails, about an anticipated 5 p.m. news conference. That seemingly advance notice contradicts the Finance Department's position that they told no one -- not even privately -- about the timing of the hotly anticipated announcement, not the day or the hour it would come.
"There was no specific advance notice whatsoever," Goodale told CTV.
More importantly, perhaps, CTV discovered evidence, in writing, that seems to suggest some people had advance knowledge of exactly what the finance minister was going to say.
That evidence is in public bulletin board postings on a popular investor's internet site called "Stockhouse". The first posting -- at 11:14 that morning -- came from someone who wrote, "Skuttlebutt is that he (Goodale) will soon announce a reduction on dividend taxation to 'even the playing field'". This information was posted a full seven hours before the minister's press conference, and possibly viewed by many potential investors before the markets closed.
The second posting on the same site came from another person, who also seemed to know what was coming. At 3:59, they posted this message, "The hot rumour is that the government's decision on the income trust issue is that they are going to make a more level playing field by reducing the degree of double taxation which currently exists on dividends by increasing the dividend tax credit."
The Finance Minister used almost that exact wording, when he made his announcement two hours later.
"We're going to help to level up the playing field as between corporations and trusts and we're going to be doing that by ending double taxation on dividends," said Goodale in his media conference that evening.
"Some people seemed to know more than others," said Thomas. "And possibly took advantage of the situation to improve their performance or their investment position."
When asked if there was any other plausible explanation for the postings, other than a leak, Thomas said, "The connection in the language between these two bulletin board postings and the final text that came out is too close to be random coincidence."
Goodale insisted the postings are pure speculation, and the term "level playing field" was being used by several groups that were urging the government to do what it did.
"That is the language that the market itself has used for years to describe the issue of double taxation with regards to dividends," Goodale told CTV. "There was no advance notice whatsoever about what the content of the decision would be."
Goodale also stressed not a single investigator from either the RCMP or the Ontario Securities Commission has contacted him or anyone in his office to ask any questions.
Thomas says those authorities should conduct a full investigation, immediately. "This should be followed up to let the world know we are prepared to investigate these things no matter who is involved." |
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| malek |
| yep heard of it, but there was no follow up in the medias. |
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| Irishaddict |
| Not the Lieberals again. :) |
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| ShadoWolf |
http://www.captainsquartersblog.com...ives/005947.php
Who Will Investigate The Liberal Insider Trading Scandal?
The insider trading scandal continues to fester this week as none of the normal agencies that would have jurisdiction have yet to announce any sort of investigation. The Medisys trades may only have been the tip of the iceberg, according to a CQ reader with knowledge of Canadian financial markets, and a check on the winners from the run on income trusts on November 23rd might demonstrate why Canadians may not get an investigation at all -- at least until the Americans decide to check into the action.
On Tuesday, Ontario House member Michael Prue (NDP - Beaches/East York) stood to query the Minister of Government Service, Gerry Philips, on why he had not initiated an independent investigation into the series of trades on income trusts that took place just hours before Goodale announced an end to taxation on these investment products, boosting their value considerably. Philips replied that the Ontario Securities Commission has the responsibility to perform oversight on any such trades, and that the new chief of the OSC, W. David Wilson, had to make that decision. Prue replied:
Minister, W. David Wilson, your new chair of the Ontario Securities Commission, has been silent to date on this matter. One only has to take a quick scan of the Elections Canada Web site to show that Mr. Wilson is an avid financial supporter of the Liberal Party of Canada, the only party to which he donates money. Mr. Wilson has already been forced to recuse himself from investigations into the Royal Group due to a potential conflict. You agreed with that. Today, Judy Wasylycia-Leis, the federal NDP critic, has asked Mr. Wilson to recuse himself again. I am asking you this question: Will you support the effort and will you order Mr. Wilson to recuse himself in this situation?
It turns out, however, that David Wilson has more reason to recuse himself than just his party affiliation. Wilson received his appointment as chairman of the OSC after working as CEO of Scotia Capital Markets until his official appointment to the OSC on November 1, 2005, just twenty-two days before this event. Why is this important? One of the revelations to come out in the last couple of days is a previously undisclosed meeting that Finance Minister Ralph Goodale held with Investment Dealers Association earlier on the 23rd. Shortly after this meeting ended, unusual volumes began trading in income trusts such as Yellow Pages, Aeroplan, Superior Plus, and BCE (a dividend equity).
A look at the trades for November 23rd shows that Scotia Capital played a large role in moving the shares of these products. Look at Yellow Pages as an example; in the PDF, Scotia Capital is broker #85. SC starts off by selling large chunks of Yellow Pages at $14.12 right from the opening bell. Through 10:30, they're still primarily selling even though the price has moved up to $14.36. Beginning at 11 am, they suddenly begin buying in small amounts, and then at 11:26 start buying in higher volumes -- almost 20,000 between 11:26 and 11:29, even though the price had moved up to $14.50. SC sells off a couple of thousand shares later in the hour at $14.65, and then nibbles most of the next couple of hours. At 14:22, SC suddenly starts selling again at $14.60, dumping several thousand shares while the price drops a few cents. Starting at 14:57 and continuing through the end of the session at 16:00, the stock explodes in volume, with a number of players pushing the stock price over $15.00 by the closing bell.
Or, for that matter, take a look at the trading pattern and volume for equity product BCE. The following large-volume trades took place with the major investment brokers on the Toronto Stock Exchange:
10:15:35 50,000 shares Scotia Capital
10:36:48 100,000 shares Scotia Capital
10:39:21 50,000 shares Desjardins
11:43:45 98,400 shares TD Securities
14:53:08 100,000 shares CIBC World Markets
15:42:59 50,000 shares Blackmont
15:56:36 50,000 shares CIBC World Markets
After the day was over, SC parent Bank of Nova Scotia shares rose to their highest level all year, $47.10, the next day. The stock peaked at $1 per share on the 24th, better than a dollar an hour higher than the stock price on the 22nd, a day before Goodale's meeting. Scotia Capital played a major role in moving large transactions for all four trusts on November 23rd.
All of this could just be a coincidence, of course, but the notion of coincidence keeps getting brought up as a possible defense, one that sounds weaker with each invocation. But unless the OSC decides to pursue an investigation, no defense will be necessary. And it appears that despite Wilson's words that "[d]eterrence is achieved when everyone knows with certainty that the enforcement of regulations will be impartial, swift and uncompromising", the ties to his former company have put the OSC chief in a position where he wants to take as much time as possible deciding whether he wants this investigated at all, let alone independently.
The Conservatives and the NDP should continue to press for a federal, independent investigation into the November 23rd trading activity. However, if they don't get it, the Americans may wind up riding to the rescue. BCE also trades on the NYSE, as does Bank of Nova Scotia. The SEC and its far more independent management might well choose to start looking into any unusual trading patterns inside the American exchanges. That could let Wilson off the hook -- or perhaps make his life a lot more complicated than it already is.
UPDATE AND BUMP: I'll let this one ride on top today. The key part to remember is that either the OSC or the RCMP would have to investigate this if anyone does at all, and unfortunately David Wilson gets to make that call for the time being. Eventually it will fall to the Ontario provincial government if Wilson punts, who will likely not have too much enthusiasm for exploring yet another Liberal Party financial scandal. |
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| ChadVanDyk |
| Vote Conservative! Trust the west and don't mind Harper ;) |
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| psychosomatica |
| You're too quick to call scandal man. It may not have been linked to the announcement since today, there was a re-weighting of the TSX to include income trusts... meaning 'indexers' needed to swap certain assets for others on the market (I won't get into it). This can cause major disturbances in the market. And even if the news were leaked, it's completely possible that the liberals didnt leak it on purpose. As we all know, the dissemination of information is ridiculously fast today. |
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