Litigation Brief

Ontario Securities Commission staff alleges tipping by lawyer, insider trading by others

Staff of the Ontario Securities Commission yesterday issued an Amended Statement of Allegations accusing a partner at a prominent Toronto law firm of sharing information concerning pending corporate transactions with a friend and fraternity brother, allowing the latter to commit insider trading. The lawyer is alleged to have sought out the non-public information from documents he had access to through his and his firm’s work on behalf clients in the corporate finance, securities, and mergers & acquisition practices, and given it to his co-accused, who made investments, and gave advice to family members and clients, based on the illicitly-obtained data.

The lawyer is now accused of having committing “tipping”, in breach of s. 76(2) of the Ontario Securities Act, R.S.O. 1990, c. S.5 , as are receivers of the information, who also face liability for insider trading in breach of s. 76(1) of that act. The penalties for those alleged offences include imprisonment for a term of not more than five years less a day and a fine that is: (a) at a minimum equal to the profit made by reason of the contravention; and (b) at maximum equal to the greater of $5 million and the amount equal to triple the amount of the profit made by reason of the contravention. Tipping and insider trading may also be indictable offences under s. 382.1 of the Criminal Code, R.S.C., 1985, c. C-46.

To read the full Amended Statement of Allegations, click here.

BC Securities Commission imposes sanctions for fraud on Panterra

On October 7, 2010, a panel of the British Columbia Securities Commission (the “BCSC”) ordered that Giuliano Angelo Tamburrino, Andrew Gordon Walker, and Dale Michael Paulson pay over $350,000 in penalties and be prohibited from engaging in certain activities in securities market, as a sanction for their role in perpetuating a fraud on Panterra Resources Corp. (“Panterra”).  In the case of Mr. Tamburrino, who acted as a signing officer for Panterra despite being prohibited by the TSX-V from doing so, the bans are permanent. 

BC Securities Commission overruled by Court of Appeal, ordered to reconsider disclosing investigation documents to Appellant

Michael Hu has successfully appealed two decisions of the British Columbia Securities Commission concerning the disclosure of documents from an investigation into alleged insider trading. The investigation was undertaken by the Alberta and British Columbia Securities Commissions. In June 2009, Mr. Hu applied to the British Columbia Securities Commission for orders to produce certain investigation-related documents to him in their possession and in the possession of the Alberta Securities Commission. The British Columbia Securities Commission disclosed some documents and refused to disclose others to Mr. Hu on the basis that they were not relevant.

Former RIM executive charged with securities law violations for insider trading

 Paul Donald, a former vice-president at Research In Motion Limited, is being investigated by the Ontario Securities Commission for insider trading. In a Statement of Allegations, the OSC alleges that Mr. Donald bought 200,000 shares of Certicom, a cryptology manufacturer, when he knew the shares were undervalued and that RIM was in acquisition talks with Certicom. After RIM acquired Certicom, Mr. Donald sold his Certicom shares for almost double the price he paid for them, making a profit of $295,000 according to the OSC. Mr. Donald is charged with violating RIM's insider trading policy, and trading with undisclosed material information. He is scheduled to appear at an OSC hearing on June 7. 

BC Securities Commission holds that staff's disclosure was adequate

Michael Kyaw Myint Hua Hu was alleged to have engaged in insider trading. He had obtained an order directing the executive director of the British Columbia Securities Commission (“BCSC”) to request that the Alberta Securities Commission (“ASC”) provide all relevant information gathered by the ASC in a joint investigation. The executive director disclosed the information provided by the ASC, but Mr. Hu argued that the BCSC could not be confident that the ASC had disclosed all relevant information. In a decision reported as 2009 BCSECCOM 566, the BCSC held that there was no basis to conclude that any relevant information remained with the ASC that had not been disclosed.

The BCSC held that “relevance is determined, not by categories of documents, but document by document,” that the task of determining relevance and making disclosure lies with staff, and that Mr. Hu failed to meet the onus on him to provide evidence that staff had not disclosed relevant information.

Although the BCSC declined to grant an adjournment sought by Mr. Hu, the Court of Appeal has since stayed the BCSC hearing (2009 BCSECCOM 581) pending the outcome of Mr. Hu’s appeal of the BCSC’s rulings.

To read the full BCSC decisions, click here and here.

Executive Director of BC Securities Commission ordered to request information from Albertan counterpart on behalf of respondent

BC Securities Commission (“BCSC”) staff have alleged that Michael Kyaw Myint Hua Hu engaged in insider trading.  Mr. Hu applied for orders directing the BCSC’s executive director to disclose certain documents and classes of documents, including documents obtained in a joint investigation by BCSC staff and the Alberta Securities Commission (the “ASC”). In a decision reported as Michael Kyaw Myint Hua Hu, 2009 BCSECCOM 506, the BCSC directed the executive director to ask the ASC to provide the BCSC staff with all relevant information gathered under the ASC investigation and to disclose that information to Mr. Hu. The BCSC held that “Regulators have established, appropriately, flexible and cooperative mutual-assistance and information sharing arrangements in order to promote effective investigation and prosecution of securities market misconduct. It is inconsistent with that regime for respondents to face technical barriers when seeking the disclosure to which they are entitled.”

To read the full BCSC decision, click here.