B.C. regulator alleges North Vancouver man engaged in insider trading

A sign board displays the TSX in the Richmond Adelaide Centre in the financial district in Toronto on Wednesday, September 29, 2021. THE CANADIAN PRESS/Evan Buhler

Vancouver -

British Columbia's securities regulator is accusing a North Vancouver man of failing to disclose material information about a company for which he was an executive, as well as engaging in insider trading.

The allegations from the executive director of the B.C. Securities Commission against Mark Morabito and his former company Canada Jetlines Ltd. have not been proven. The executive director will present his evidence at a hearing to be scheduled next month.

The commission outlined the allegations against Morabito in a news release Friday, saying that the North Vancouver resident was the executive chairman and a director of Canada Jetlines in September 2017, when the company announced that it had entered into a letter of intent to lease two aircraft.

The announcement stated that the planes would be delivered in April 2018, and that the ultra-low-cost airline would begin flight operations in June of that year.

According to the BCSC, the letter of intent was terminated in December 2017, "after Canada Jetlines tried unsuccessfully to extend the payment terms."

The termination was a "material change" to the company's situation, and it led to a delay to the start of flight operations, another material change, the commission said.

Canada Jetlines did not make the news of either of these changes public until three months after they occurred, a delay the commission said constitutes a violation of the B.C. Securities Act.

When the company published news of the termination and delay on March 13, 2018, its stock price decreased by 38 per cent over two days, according to the BCSC.

During the period between the termination of the letter of intent and the public release of that information, the commission alleges that Morabito transferred 352,945 shares of the company to his spouse, with the knowledge that the shares would be sold.

The BCSC alleges that this transfer of shares constituted insider trading.

According to the commission's notice of hearing, Canada Jetlines' share price was $1.42 before the March 13 announcement. By March 15, it had fallen to 87 cents.

The commission does not cite a specific dollar amount of material gain from the alleged insider trading. However, the commission's numbers indicate 352,945 shares would have been worth more than $500,000 on March 13, 2018, and would have been worth just over $300,000 two days later.