BCSC settles disclosure breach, drops insider trading allegation

A fiercely contested insider trading case against a former airline executive has been dropped, with a settlement that saw the company admit to failing to disclose the material change at the centre of the allegations.

In 2021, the British Columbia Securities Commission (BCSC) alleged that Mark Morabito — the former executive chairman and a director of low-cost airline startup Canada Jetlines Ltd. — breached insider trading rules in connection with the company’s failure to disclose a material change to its operations.

Specifically, the regulator alleged that Canada Jetlines failed to disclose that its plan to launch operations in the summer of 2018 had been delayed to the end of that year after an aircraft lease was cancelled.

While the company told the Canada Transportation Agency about the delay in early 2018, it wasn’t disclosed to investors until mid-March of that year.

“The delay to the start of flight operations was a material change,” the BCSC said, adding that failing to immediately disclose the delay to investors breached securities rules.

The company — now under new management and known as Global Crossing Airlines Group Inc. — has admitted to breaching securities rules. Morabito admitted to breaching the same provision by permitting the company’s breach.

To settle the allegations, they voluntarily agreed to jointly pay $100,000.

At the same time, the BCSC discontinued the rest of its case against Morabito.

The regulator had previously alleged that he breached insider trading rules by transferring shares to his wife, who then sold those shares before the negative news was released and the company’s share price dropped.

That allegation became ensnared in a legal battle after Morabito sought a stay of the enforcement case, alleging the proceedings amounted to an abuse of process.

While the regulatory hearing panel initially rejected that claim, in November 2024 the Court of Appeal for B.C. ruled the panel mishandled the case by holding a “blended hearing” that considered the insider trading allegations alongside Morabito’s application for a stay and his “abuse of process” claims.

The court stopped short of granting a stay of the enforcement case and ruled it should be sent back to the BCSC to be adjudicated by a new hearing panel.

In March, Morabito and the company filed notices of application for a permanent stay of the case as an abuse of process, and the commission scheduled a hearing to start Dec. 8 to hear the applications.

Now, after reaching a settlement agreement with Morabito and the company, the BCSC has discontinued the rest of the enforcement proceedings, ruling that “it would not be prejudicial to the public interest to do so…”