Amaya Inc.'s top two executives have come under scrutiny from Quebec's securities regulator, and the company's board of directors, as part of a broad investigation into trading in the Montreal business's stock ahead of a $4.9-billion takeover last summer.
According to people familiar with an investigation by the Autorité des marchés financiers, AMF, the regulator seized documents and records of communications in December from the online gambling company's chief executive and co-founder David Baazov and chief financial officer Daniel Sebag.
In a statement to The Globe and Mail Wednesday, Ben Soave, a member of Amaya's compliance committee and an adviser to the board of directors, said it has "thoroughly reviewed the relevant internal activities" surrounding the acquisition of the online gambling site PokerStars.
Mr. Soave, a retired RCMP superintendent, said the probe "found no evidence of any violation of Canadian securities laws or regulations including tipping and insider trading by CEO David Baazov and CFO Daniel Sebag as well as its directors, officers and employees. Additionally, the company has not been provided with any evidence that any executives, directors or employees violated any securities laws or regulations."
According to a search warrant that was released from a publication ban on Wednesday by a Quebec court, the AMF won court approval to take possession of all computer memory cards, data keys and other storage devices used by three Amaya employees. The identities of the employees were redacted in the document.
Late Wednesday, Amaya issued a statement saying it was "confident that at the end of the investigation the AMF will come to the same conclusion as Amaya has – that if there were violations of Canadian securities laws, they were not committed by the Company, officers or directors."
The targeted Amaya officials are part of a large circle of company associates, advisers and independent fund managers, brokers and investors who have come under regulatory scrutiny after a sharp runup in Amaya's stock in the months ahead of the small online gambling company's announcement of the ambitious takeover of PokerStars. Amaya's stock price nearly doubled in price in heavy trading in advance of the news in June 2014 and doubled again to more than $30 a share after the news.
The AMF is the primary regulator on the case because Amaya is based in Montreal. Unusually active trading in the company's stock has also drawn scrutiny from Britain's Financial Conduct Authority, the Ontario Securities Commission, the Investment Industry Regulatory Organization of Canada and Wall Street's self-regulator, the Financial Industry Regulatory Authority (FINRA).
The AMF has executed search warrants on three companies: Amaya, its lead financial adviser Canaccord Genuity Corp. and the Dorval branch of Manulife Securities Inc.
"The investigation reveals that certain individuals in possession of privileged information transmitted that information to several people. These people then took advantage of that information and traded on Amaya shares," the AMF said in its affidavit for the search warrant.
In the affidavit, the regulator revealed it has been investigating the three companies since late June, shortly after it received tips from two whistleblowers.
One of the whistleblowers is identified as an employee at Manulife. The AMF search warrant cites a so-called gatekeeper report by Manulife to the regulator that uncovered "manipulative and deceptive" activities involving Amaya's stock by a group of more than a dozen employees in its Dorval branch, located near Amaya's head office. Manulife tracked trading by the employees from the initiation of takeover talks in December, 2013, to the June takeover announcement.
According to sources, the targeted Manulife employees are brokers and broker assistants
The AMF dispatched investigators to follow some Manulife employees, which, on one occasion led to a local bar and restaurant where one broker was seen examining stock data while checking messages on his phone.
A spokesperson for Manulife said the company is co-operating with regulators and that all of the employees targeted by the AMF continue to work at the Dorval branch.
The AMF warrant said it sought information and records relating to two Canaccord employees who are not identified. One is described as a broker and the other a derivative specialist.
A spokesperson for Canaccord said the firm has completed an internal review and has no concerns about the employees' conduct.