Michael Cowpland, the founder and former CEO of software maker Corel Corp., was in front of the Ontario's stock market regulator yesterday. He is accused of and admitted yesterday to insider trading for a trade in 1997 in which he sold $20-million worth of stock a few weeks before Corel surprised the market with disastrous financial results.
This is an important case for Canadian stock market regulators. Unlike the U.S.Securities and Exchange Commission, Canadian stock market regulators — there is no national regulator but one for each province — have relatively weak enforcement powers. None can, like the SEC, send anyone to jail and they have little power to actually levy fines. Any fines paid by those who break securities laws are 'voluntary' fines.
Cowpland and regulatory investigators are proposing total fines of about $1.6-million for the $20-million trade. Cowpland and investigators say the loss he avoided by the early sale is anywhere between zero and $1.3-million, so total fines of $1.6-million means he will be worse off after the fines. But critics of Canada's regulatory system say you could calculate the loss he avoided differently and that when you do that, he actually avoided losing $5-million. By that yardstick, he has still benefited from breaking the law.
You can watch the report I did on this story for last night's CTV National News here. The original statement of allegations by the Ontario Securities Commission is here.