Canada: OSC Imposes Significant Sanctions On Suman And His Wife For Illegal Tipping And Conduct Contrary To The Public Interest

Last Updated: September 18 2012
Article by Ellen Bessner and Geoffrey Breen

On August 22, 2012, the Ontario Securities Commission ("OSC") released its sanctions and costs decision in the matter of Shane Suman ("Suman") and Monie Rahman ("Rahman").

You may recall the decision on the merits in this matter was released earlier this year. In that decision, the OSC found that, in 2007, Suman had acted contrary to subsection 76(2) of the Ontario Securities Act (the "Act") by providing his wife, Rahman, with material undisclosed information, which he and Rahman then used to carry out trades and earn significant profits. As a result and in addition to the breach of subsection 76(2) by Suman, the OSC also concluded that both Suman and Rahman had acted contrary to the public interest.

Suman had been employed as an IT expert with a company called MDX Sciex ("MDX"), a reporting issuer under the Act. Based only on circumstantial evidence, the OSC concluded that Suman had gained access to materials which revealed that MDX planned to acquire Molecular Devices Corporation ("Molecular"), a NASDAQ listed company in the United States, which he then disclosed to his wife, and both purchased shares and options in Molecular. Following the public announcement of the acquisition, stock prices in Molecular shot up and Suman and Rahman cashed in on their shares and options for a profit of US$954,938.07.

While this case was determined entirely on circumstantial evidence, the evidence was very strong. Factors supporting the OSC's conclusions included the fact that during the relevant period and prior to purchasing the securities, Suman had access to confidential information relating to the acquisition and specifically, had conducted internet searches for Molecular and "Monument", MDX's code name for the acquisition. In addition, phone records showed that Suman had an unusually long telephone conversation with Rahman the day before they began making significant purchases of Molecular shares and options. Further, the OSC's investigation revealed that Suman had caused files to be permanently deleted from several computers, which made Suman's conduct even more suspicious.

Note that while Suman's "tip" to Rahman involved MDX, a reporting issuer under the Act, and was contrary to subsection 76(2), the actual trading in securities by Suman and Rahman did not technically constitute insider trading contrary to subsection 76(1) because the trading was in Molecular, which was not a reporting issuer under the Act. Nonetheless, the OSC found the impugned trading in Molecular securities to be tantamount to insider trading and therefore "conduct contrary to the public interest".

With respect to the sanctions decision at hand, because Rahman was not found to have breached a specific provision of the Act, no disgorgement or administrative monetary penalty could be awarded against her. Instead the OSC could only place restrictions on her future participation in Ontario's capital markets.

As for Suman, who had breached a specific provision of the Act, OSC staff ("Staff") did not pursue a disgorgement order against him either. The rationale for this was that the disgorgement of the profits had already been ordered in a parallel action brought by the Securities and Exchange Commission ("SEC") in the United States.

While Staff did pursue an administrative monetary penalty against Suman, they again took into account the U.S. judgement, which required Suman to pay a civil penalty of US$2 million and Rahman to pay a civil penalty of US$1 million. As a result, Staff indicated that they were pursuing only a $250,000 administrative penalty against Suman rather than the $1 million that they would have otherwise pursued – of course, $1 million would have been substantially more than the administrative penalties ordered in the precedents cited by the OSC.

In determining an appropriate administrative penalty, the OSC considered the circumstances, including the U.S. judgment, the fact that Suman had committed a serious breach of the Act and that Suman had lied about his conduct and otherwise purposely undermined the investigation. In this light, the OSC agreed that $250,000 was appropriate.

Further, despite the fact that Staff did not pursue an order for disgorgement, the OSC nonetheless ordered that Suman disgorge profits in the amount of US$954,938.07. However, any amounts paid as disgorgement pursuant to the U.S. judgment will be credited against this amount and, so long as the SEC takes reasonable steps to recover, the OSC directed Staff not to pursue the amount

The OSC also imposed a permanent ban on Suman from trading, acting as a director or officer of a reporting issuer and from acquiring any securities. With respect to Rahman, the OSC imposed a five year ban on acquiring or trading in any securities and also imposed a permanent ban on acting as director or officer of a reporting issuer.

Finally, the OSC ordered that Suman and Rahman pay a costs award of $250,000, which Staff had argued was reasonable and fair considering the actual costs in the investigation and 19 days of hearings were over $517,373.48. Accordingly, despite the fact that Rahman was insulated from a monetary penalty, she was still left with a significant financial burden in the costs award.

To summarize, the sanctions imposed were:

This decision is yet another example of the fact that illegal insider trading and tipping remain a top priority for the OSC. Indeed, even in taking notice of substantial penalties in the parallel U.S. action, the OSC made a statement by ensuring that stiff financial penalties were also imposed in Ontario and that the respondents were significantly limited in participating in Ontario's capital markets in the future.

This decision also points to the fact that the OSC is not going to shy away from insider trading in the face of a technicality. While, in this case, there was no breach of subsection 76(1) of the Act, the OSC essentially sanctioned Rahman and Suman for insider trading under its broad public interest power – albeit, with more limited penalties than would have been available in the case of a breach of subsection 76(1).

Further, given the OSC's comfort with circumstantial evidence, those contemplating trading in securities should take all reasonable measures, including consulting any workplace blackout lists, to ensure that unfortunate coincidences are avoided.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Ellen Bessner
Geoffrey Breen
In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions