On April 7, 2014, the Bureau de décision et de
révision (BDR) ruled on an application by the
Autorité des marchés
financiers (AMF) seeking an administrative penalty
against a director of a reporting issuer for having allegedly
contravened tipping restrictions under the Securities Act
(Quebec). The AMF claimed that a general comment made by the
director about the general status of the business of the reporting
issuer to the effect that "things were going badly"
should be considered as "privileged information" and
could lead to a violation of tipping restrictions. (Tipping
prohibitions under the securities acts of other Canadian
jurisdictions refer to "material fact" and "material
change" rather than "privileged information" but
have the same purpose, namely ensuring that the investing public
has equal access to information relating to reporting issuers.)
The comment in this case would have been made during an informal
conversation between the director and a former CFO of the company,
at a time when the company was faced with the prospect of having
the relationship with its one and only client terminated
prematurely. Shortly after this alleged conversation took place,
the former CFO sold a significant amount of shares she held in the
The BDR ultimately dismissed the AMF's allegations against
the director and concluded that the statement "things are
going badly" is not precise enough to be considered privileged
information. The BDR also cautioned that innocuous remarks should
not be turned into privileged information simply because they are
uttered in a particular context. To be considered privileged
information, the information must be precise and not be random in
nature. A simple eventuality or possibility can hardly constitute
an important fact susceptible to affect the decision of a
The BDR also emphasized that information relating to the
deteriorating situation of this reporting issuer had already been
publicly disclosed in the issuer's disclosure documents.
Still, this decision serves as an important reminder of the
tipping prohibition, and a fair warning that the AMF closely
monitors insider trading and tipping and appears inclined to
intervene whenever there is the slightest appearance of potential
misconduct. In this context, reporting issuers are also reminded of
the importance of keeping their insider trading and tipping
policies up to date and of ensuring that their insiders are
educated with respect to these restrictions and reminded of them
from time to time.
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.
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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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