A hearing panel has dismissed insider trading allegations levelled by Quebec's securities regulator against four current and former executives of toy maker Mega Brands Inc.
In a decision released Thursday, a panel from the Bureau de décision et de révision concluded the Autorité des marchés financiers (AMF) failed to prove that Mega Brands chief executive officer Marc Bertrand and three others traded shares of the company in 2005 while in possession of "privileged information or information known to the public and likely to influence the decision of a reasonable investor."
In a release Thursday, the AMF said it will study the ruling carefully "before announcing whether it will file an appeal" in Quebec court.
The AMF was seeking total payments of $6.5-million from Mr. Bertrand, chief innovation officer Vic Bertrand, former chief financial officer Alain Tanguay and former vice-president of business development Brahm Segal.
The men were accused of allegedly selling securities in 2005 before Mega Brands revealed a Seattle-area toddler had died from swallowing magnets from a Magnetix set manufactured by subsidiary Rose Art Industries Inc. The sets were recalled in 2007 after 27 children had been injured by swallowing magnets.
The hearing panel ruled that at the time the men traded securities, they did not know the toy was unsafe, the child's family had not indicated any plans to sue, and the accused could not "reasonably foresee" a recall would come in 2007. Moreover, the panel said other investors did not appear to have been influenced by the news of the child's death based on a review of analyst reports at the time and in following months.
"We conclude that the Autorité has not met its burden of establishing that the information in possession of the insiders at the time of the events was privileged information," the ruling says.
Mega Brands denied all the insider trading allegations when they were levelled last year, and Mega Brands vice-president Mark Girgis said Thursday the company is satisfied with the decision. Mega Brands itself was not named in the case, he added.
"The company is pleased with the outcome, obviously," he said.
Mr. Girgis added the an independent committee of Mega Brands's board launched an investigation into the trading concerns in 2008 with the help of independent legal advisers, and concluded that no action should be taken.