Vive Le Canada

'Suspicious' Trades Precede Most Big Canada Mergers, Study Says
Date: Friday, March 23 2007
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'Suspicious' Trades Precede Most Big Canada Mergers, Study Says

By John Kipphoff and Joe Schneider

March 22 (Bloomberg) -- Lingerie suddenly became very popular on the Toronto Stock Exchange in October.

Daily trading for La Senza Corp., Canada's biggest retailer of women's undergarments, more than doubled compared with its 12- month average, and the stock price arced toward a record high. On Nov. 15, Limited Brands Inc. announced it would buy Toronto-based La Senza and pay shareholders a 48 percent premium.

That unusual trading wasn't so unusual for the Canadian market. Aberrant trading patterns preceded 33 of the 52 Canadian mergers valued at more than C$200 million ($172.6 million) last year, says a study by Measuredmarkets Inc. for Bloomberg News. Those patterns could indicate insider trading.

``Insider trading goes on all the time,'' says Stephen Jarislowsky, 81, chief executive officer of Montreal-based Jarislowsky Fraser Ltd., which manages about C$63 billion. ``There's no real surveillance.''

The rate of unusual trading found in Canada -- 63 percent -- was higher than in the U.S., where a Measuredmarkets study last year flagged 41 percent of comparable mergers. The London- based Financial Services Authority said March 7 that insider trading may have preceded almost 25 percent of U.K. merger announcements in 2005.

No National Watchdog

``If there's no publicly available news that might explain the stock's aberrant behavior, then one might deem it suspicious,'' says Measuredmarkets President Christopher Thomas, whose Port Hope, Ontario, company alerts subscribers to odd trading patterns.

``It would appear that suspicious trading is more prevalent in Canada than the U.S.''

Canada's high rate stems partly from its fractured, underfunded regulatory system, market experts say. There are 13 provincial and territorial agencies regulating securities markets in Canada, making it the lone member of the Group of Eight industrial nations without a national watchdog.

The Ontario Securities Commission oversees the Toronto exchange, the nation's main bourse.

``The tools available to regulators in Canada are not as strong as in the U.S.,'' says Thomas, 64.

http://www.bloomberg.com/apps/news?pid=20601082&sid=aWEkKs084ISM&refer=canada







[Proofreader's note: this article was edited for spelling and typos on March 23, 2007]

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