OSC accuses hedge fund trader of influencing share price

Date: Thursday, April 3, 2008
Author: Regan Ray, Investment Executive

The Ontario Securities Commission (OSC) has accused Oakville-based hedge fund trader Darren Delage of influencing the price of shares with his trading activity.

Delage was involved in trading shares of Environmental Applied Research Technology House Earth (Canada) Corp. (EAR) during the summer of 2005. He worked as a trader for Polaris Securities Inc., executing most of the trades for the Polaris Energy Offshore Master Fund, which is a $25 million offshore, non-prospectus, qualified hedge fund.

EAR stock was traded on the Canadian Venture Exchange.

In a statement released yesterday, the OSC said Delage engaged in trading which “he knew or ought reasonably to have known…would result in or contribute to a misleading appearance of trading activity in EAR shares, or an artificial price for those shares.”

The OSC alleges that Delage traded shares just before market close in order to make the stock price appear stronger. As well, it said he entered into trades at a higher price than the last reported trade, so-called “upticks” and ordered shares in quantities that dominated the daily market for EAR stock.

According to the OSC, the Polaris Fund was valued monthly on the basis of the closing price of the securities held on the last trading day of the month. The commission said in its statement of allegations that in June 2005, the market price of 2.75 million EAR shares positively impacted the value of fund.

Polaris Securities launched an investigation into Delage’s activity on July 6, 2005 and Delage was terminated July 15, 2005.

The OSC hearing into the matter is set for April 29th in Toronto.