On June 17, 2014, the Alberta Securities Commission released a decision, Re Hagerty. In this case, the Staff of the ASC (Staff) alleged that Sherry Hagerty and her spouse Gary Hagerty engaged in illegal insider trading and tipping. These allegations centred on a purchase by Mr. Hagerty of shares of Provident Energy Ltd. (Provident) on December 23, 2011 while Provident was engaged in confidential discussions with Mrs. Hagerty's employer Pembina Pipeline Corporation (PPC) about a potential acquisition of Provident by PPC. The acquisition proceeded and was announced in January 2012 at which point the trade became very profitable. The ASC Panel dismissed the allegations on the basis that the limited information Ms. Hagerty had, both non-confidential and through her employment, did not collectively amount to material information. The Panel concluded that the information allowed Ms. Hagerty to make some perspicacious speculations about the possibility of a transaction between her employer and Provident. This case affirms a hunch or suspicion held by an insider does not rise to the level of "material" information upon which one is precluded from trading. To prove insider trading the Staff must provide evidence of something more than an impression, speculation or abstract possibility. The law does not prevent people, even those working with the issuer who may have more knowledge than the public does, from trading on hunches, flashes, glimmers or feelings. Indeed many people trade on that basis. The law only prevents trading on undisclosed material facts or changes.
While this case may provide some comfort to employees in the oil and gas industry who get an inkling or suspicion that a deal is in the works, it does leave some uncertainty as to when the collective information known to the insider will be equated by the ASC as being material. This potential uncertainty should give potential insiders reason to pause and we expect that they will proceed with caution to ensure they do not cross the line of trading or tipping based on material non-disclosed information.
John Blair, QC of BLG represented the Hagertys in this matter. See the Panel's decision here.
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