December 14, 2010 by Canadian Underwriter
The Ontario Securities Exchange Commission (OSC) is examining accusations of insider trading against a former senior accountant of Kingsway Financial Services and her son.
The securities regulator is holding a Jan. 27, 2011 hearing to examine allegations that Helen and Paul Kuszper made a profit of more than $321,000 based on insider knowledge that Kingsway would report a loss in 2008 Q1.
The allegations have not been proven. Helen and Paul have denied the claims to the OSC.
In a statement of allegations posted on the OSC Web site, OSC investigators claim Helen learned on Apr. 29, 2008 that Kingsway, a property and casualty insurer, would post a net loss of $26.4 million in 2008 Q1.
OSC investigators say Helen became aware of the information in her capacity as a senior accountant of Kingsway’s investment reporting group. Her son, Paul, was employed as an accountant in Antigua at the time.
Kingsway first publicly reported the net loss in a press release issued on May 7, 2008.
Between Apr. 29 and May 7, the OSC alleges, the Kuszpers traded in Kingsway “puts” and “call” contracts knowing the company would report a loss and the company’s share price would fall as a result.
Put contracts give the owner the right to sell a specified amount of assets at a set price within a specified time. A call is an option contract giving the owner the right, but not the obligation, to buy a certain amount of a security at a set price and specified time.
OSC investigators say Helen and Paul communicated with each other in code language – referring to options as “potatoes” and Kingsway as “barabola” – to discuss their put and call trading.