The Court of Appeal for B.C. has upheld a Law Society of BC ruling that found Vancouver securities lawyer Samuel Theodore Gray Cole committed professional misconduct when his actions assisted a client to perform insider trading.
Cole committed the misconduct by counselling his client “KR” to use his girlfriend as a nominee to indirectly buy shares (via a private placement) so as to secure a reverse takeover of a private company (referred to as “M Co.”) by the public company KR directed.
The transactions occurred contrary to the directives of TSX-V officials, the society’s hearing panel ruled on Oct. 13, 2021.
“The purpose of the [Cole’s] advice was to circumvent the directive of the regulator that prohibited insiders such as KR from taking part,” in the sale of shares, noted the ruling, adding that “such conduct is dishonest and falls far below the standard that the Law Society expects of lawyers.”
However, Cole argued before the appeal court that the panel “made palpable and overriding errors of fact” in its findings by making inferences from witness testimony.
But Justice Bruce Butler dismissed the appeal, ruling the panel’s inferences were reasonable, specifically in that the girlfriend was a nominee purchaser.
The panel noted KR had admitted, in a settlement with the B.C. Securities Commission, to insider trading during the reverse takeover, which was announced on April 25, 2014.
A BCSC settlement agreement from 2018 shows Vancouver stock promoter Keir Reynolds admitted to trading shares of Mezzi Holdings Inc. contrary to the B.C. Securities Act while acting as the firm’s chairman and CEO. Reynolds announced his company’s reverse takeover on April 25, 2014, according to the BCSC settlement, which barred Reynolds from acting as a company director for three years and fined him $15,000, which he has paid.
According to the panel’s ruling “KR also testified that he had agreed to facts that were untrue when settling with the B.C. Securities Commission and suggested that he had not committed insider trading.”
Following a decision on facts and determinations, the society typically proceeds to a sanctions hearing, which has not occurred, to date, for Cole.
Both the society and commission proceedings are administrative. The appeal can be found online.