Vancouver man pays $337K to regulator in insider trading settlement

A TSX ticker is shown in Toronto on May 10, 2013. (Frank Gunn / The Canadian Press)

A Vancouver man has paid $337,500 to the B.C. Securities Commission as part of an insider trading settlement, the financial regulator announced Friday.

Under the terms of the settlement, Aaron Keay is also prohibited from various market activities for periods ranging from one to three years. 

The settlement stems from misconduct Keay engaged in back in May 2022. At that time, he was aware of an upcoming "reverse takeover" of a B.C. company with which he had a "special relationship," according to a news release from the BCSC.

A reverse takeover is a corporate merger in which a private company acquires a publicly traded one, generally as a way to become a publicly traded company itself, without having to go through the process of issuing an initial public offering.

Before the transaction was made public, Keay "directed the purchase" of roughly $134,000 worth of shares in the public company, purchases that were made in accounts held by two of his close relatives, according to the BCSC.

Shortly after Keay directed those purchases, the TSX Venture Exchange – where the company was listed – halted trading on the company pending approval of the reverse takeover.

The settlement indicates that the TSX-V contacted Keay while trading was halted to ask whether he "or any associates, affiliates or persons related to him or his company" had traded the stock in the month leading up to the end of trading.

He said neither he nor anyone related to or affiliated with him had ever traded the stock, which he admits in the settlement was not true.

Neither Keay nor his relatives sold the shares when trading resumed after the reverse takeover. At that time, the $134,000 worth of shares could have been sold for a profit of $200,000 to $225,000, according to the settlement.

The $337,500 penalty he agreed to pay to the BCSC represents the profit he could have made from his insider trading, plus 50 per cent.

"It is a significant mitigating factor that Keay voluntarily approached the executive director about settlement and entered into this settlement agreement prior to the issuance of a notice of hearing, which has resulted in savings of time and costs," the settlement reads.

"Keay has expressed remorse for his conduct."

In addition to the fine, Keay agreed to a one-year ban on "becoming or acting as a director or officer of any issuer or registrant." He also agreed to three-year bans on "trading in or purchasing any securities or derivatives," except in his own accounts, and "trading in or purchasing any securities of an issuer with whom he is in an special relationship."