The August 1, 2012 decision of the Ontario Securities Commission
("OSC") in the insider trading case involving Paul Donald
("Donald"), a former employee of Research in Motion Ltd.
("RIM"), provides a clear indication of the perspectives
of the regulator on improper trading activities and on the breadth
of its powers and preparedness to act where it concludes that there
has been inappropriate trading.
The OSC concluded that Donald, a former employee of RIM, had
learned at a RIM golf event that RIM was considering an acquisition
of Certicom. The day after the golf event Donald purchased $300,000
of Certicom shares, a purchase from which he benefited personally
when he received $600,000 of proceeds from RIM when RIM acquired
all of the shares of Certicom the following year for a gross profit
The OSC concluded that Donald was not guilty of insider trading
under the Securities Act (Ontario) (the "Act"), a
determination based primarily on the fact that at the relevant time
RIM had not yet reached the stage of formally proposing to acquire
Certicom despite expressed interest known internally in respect of
such a potential transaction. However, the OSC concluded that
though there was not any technical breach of the insider trading
provisions of the statute, the purchase of Certicom shares by
Donald while he was in possession of undisclosed material facts
regarding RIM's interest in Certicom constituted conduct
contrary to the public interest and was abusive of the capital
markets and to confidence in the capital markets. The OSC panel
stated that market participants and officers of public companies
are expected to adhere to a high standard of behaviour and that by
purchasing securities with knowledge of material facts which had
not been generally disclosed, Donald failed to meet that standard.
The OSC has scheduled a sanctions hearing for September 13, 2012
with respect to the finding.
The OSC's decision is a clear example of how the regulator
will use its discretion under the Act to look beyond the technical
provisions of the Act and make an order in circumstances where it
concludes that there is conduct contrary to the public interest.
The OSC speaks in particular of the high standard of behaviour that
should apply to public company executives and is a decision that
clearly indicates that rigour and prudence should be applied to all
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