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Cormark Securities: OSC has claims that Company engaged in a “illegal” short-selling scheme.
About the Cormark Securities
The business model of Cormark Securities Inc. is that of an investing firm. While serving as a trusted advisor to institutional investors, the Company also offers shares in a diverse group of fast-growing businesses. Investors may come to Cormark Securities from all across the globe.
What OSC has to say?
Three “strong market players,” including investment firm Cormark Securities Inc., have been charged with “illegal and abusive” short selling by the Ontario Securities Commission.
Late on Wednesday, Canada’s primary capital markets regulator released a statement of allegations in which it accused Cormark, William Jeffrey Kennedy (the head of equity capital markets at the investment dealer), and client Marc Bistricer of participating in a complex scheme involving Canopy Growth Corp. The government agency overseeing the cannabis industry is making no accusations of fraud.
According to the timeline laid out by the OSC, Saline sold short shares of the cannabis company in the open market, bought an equal number of Canopy shares in the private placement, swapped the private placement shares for free-trading Canopy shares under a securities lending agreement, and then used the free-trading Canopy shares to settle the short sales.
The OSC said the series of transactions amounted to a “backdoor underwriting,” a prohibited method of distributing Canopy shares.
There has been no evidence to support the claims made, and a conference call preliminary hearing is scheduled on November 23.
Kennedy’s attorney, Melissa MacKewn , has said that her client would “powerfully” defend himself. She said that the OSC’s position is based on “revisionist history,” or the act of opposing a previously accepted kind of transaction in an industry long after it has become popular.
“We plan to strongly contest the charges and are confident in our chances of success before the Capital Markets Tribunal.”
A representative for Bistricer also responded, stating that he disagrees with the OSC’s judgment and that the company intended to “powerfully” defend the five-year-old transactions in court.
In his own words, “these charges are strange and seem to be a total misrepresentation of regular transactions that benefit all parties,” including Canopy Growth, index funds, and retail investors. We always did what we thought was right and were always honest and responsible.
According to the statement, OSC employees are under the false impression that their profit was the result of a risk-free market trading.
In response to claims made by the Ontario Securities Commission, Cormark Securities’s lawyer David Di Paolo claimed the investment dealer completely rejects them.
According to an email from Cormark CEO Dan Di Paolo sent out Thursday morning, “contrary to those claims, the main facts related to the transactions at question were disclosed to the issuer,” he said.
Cormark made no more than conventional trading commissions on the transactions at issue, which took place more than five years ago and involved a non-brokered private placement designed in consultation with the issuer.
He continued, saying that Cormark “strongly” disputes the charges and that the company’s reputation with customers is essential to its brand.
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