Litigation Brief

Ontario Securities Commission Recognizes Alpha as a Stock Exchange

The Wall Street Journal reported earlier today that the Ontario Securities Commission (“OSC”) has approved Alpha (Alpha Trading Systems Limited Partnership and Alpha Exchange Inc.), Canada’s largest alternative trading platform to the TSX, as a stock exchange (see: Ontario Securities Regulator Allows Alpha to be Exchange).

The OSC’s Recognition Order sets out the terms and conditions of Alpha’s recognition as an exchange and the review process to be followed for the rules, policies and other similar instruments of Alpha Exchange.

The TMX, which owns and operates the TSX, is currently subject to a Cdn. $3.8 billion friendly bid by Maple Group, which requires, in addition to Provincial securities regulatory approvals in Ontario, Quebec, Alberta and British Columbia, clearance by the federal Competition Bureau.  Alpha’s shareholders include a number of the Maple Group consortium’s investors including CIBC, Dejardins, National Bank and Scotia.

Last week the Commissioner of Competition expressed “serious concerns” about the Maple/TMX transaction, which is currently subject to a second stage review by the Bureau (see: Commissioner of Competition Addresses Current Enforcement Priorities in Two Wide-ranging Talks in Vancouver).

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For the OSC’s Notice of Approval and Recognition Order see:

Recognition of Alpha Trading Systems Limited Partnership and Alpha Exchange Inc. as an Exchange

 

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 Court of Appeal grants leave to appeal securities commission's interpretation of "interesting" provisions

The Court of Appeal today granted Patricia McLean leave to appeal from a decision of the B.C. Securities Commission that she had argued was procedurally unfair and based on a misinterpretation of a limitation period in the B.C. Securities Act. 

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. 

Ontario man sentenced to four months in jail for failing to reply to securities regulator questions

A Ontario man, Peter Robinson, was sentenced to four months imprisonment for contempt of court for failing to answer questions in respect of an investigation by the Ontario Securities Commission ("OSC"). 

In July 2009, Robinson was summoned on several occasions to appear before a hearing of the OSC in connection with his involvement with three companies under investigation - Global Energy, York Rio, and Uranium 308. In response to the multiple summons, Robinson would occasionally appear but claim to be too ill to testify, or appear but refuse to say anything. Eventually, the OSC sought and obtained a court order compelling Robinson to attend and answer pursuant to the summonses issued by the OSC. Robinson failed to comply with the court order. 

BC Securities Commission holds it has power to review governance of self-regulatory body

Partners in Planning Financial Services Ltd. (“Partners”) applied under s. 28(1) of the Securities Act, RSBC 1996, c. 418 (the “Act”) for a hearing and review of the Mutual Fund Dealers Association of Canada (the “MFDA”)’s procedure for approving amendments to its bylaws.  Among other allegations of procedural impropriety, Partners maintained that the MFDA's board sought to increase term limits for directors during a time in which the board was composed in part by directors whose term limits had since expired, and that the MFDA pressured members to provide proxies for a special meeting through the participation of compliance staff in the proxy solicitation process.  

In a decision report as 2009 BCSECCOM 665, the British Columbia Securities Commission (the “BCSC”) held that "it is essential that  [regulatory organizations] operate, and are seen to operate in a manner that leaves no room to question the integrity of their governance, procedures and practices".  It held that the allegations at issue were precisely those that could raise such concerns, and allowed the hearing under s. 27(1) of the Act, which permits the BCSC to initiate such reviews when in the public interest to do so.  The BCSC did not make a decision as to the applicability of s. 28(1) of the Act, which enables a person to apply to the BCSC for a hearing and review if a person is affected by, among other things, a decision of a self-regulatory body.

To read the full BCSC decision, click here.