Negotiations Cease to be Material with Passage of Time and
Failure to Complete Transaction
In the Matter of Jowdat Waheed and Bruce Walter
A panel of the Ontario Securities Commission ("OSC")
has dismissed allegations against Jowdat Waheed and Bruce Walter of
insider trading, tipping and conduct contrary to the public
interest in connection with a toehold purchase and subsequent
hostile takeover bid of Baffinland Iron Mines Corporation
("Baffinland") in a decision released on
August 27, 2014. It was alleged that Waheed obtained material
confidential information about a potential joint venture by
Baffinland while working there as a consultant, which he passed on
to Walter with whom he formed Nunavut Iron Ore Co. ("Nunavut
Acquisition"). Both were alleged to have relied upon that
information in launching a hostile takeover bid for Baffinland.
Waheed had worked as a consultant for Baffinland, a
publicly-traded junior mining company, from February to April 2010.
In August 2010, after his role as a consultant ended, Waheed formed
Nunavut Acquisition with Walter.
On September 9, Nunavut Acquisition acquired a toehold stake in
Baffinland with its purchase of 20 million common shares and five
million warrants. OSC Staff alleged that Waheed and Walter made the
toehold purchase while in a special relationship with Baffinland
and with knowledge of an advanced state of negotiations between
Baffinland and ArcelorMittal S.A. ("ArcelorMittal")
regarding a potential joint venture.
On September 22, Nunavut Acquisition launched a hostile takeover
bid for Baffinland. OSC Staff alleged that Nunavut
Acquisition's takeover bid was launched mere days before
Baffinland and ArcelorMittal were expected to finalize their joint
After the Baffinland Board of Directors employed a shareholder
rights plan, ArcelorMittal launched its own takeover bid for
Baffinland. Nunavut Acquisition and ArcelorMittal eventually made a
successful joint bid for Baffinland in January 2011.
Following a lengthy hearing on the merits, the OSC determined
that Waheed did not make or allow the purchase of a toehold
position in Baffinland while in a special relationship with the
company with knowledge of material facts about the status of its
talks with ArcelorMittal, or tip Walter. Though Waheed had been
aware of negotiations between Baffinland and ArcelorMittal while he
was a consultant, the negotiations ceased to be a material fact
with the passage of time and the failure of the parties to complete
a transaction. During the post-consultancy period, the evidence did
not establish that Waheed was informed by anyone at Baffinland that
the company was in an advanced state of negotiations with
ArcelorMittal, including the provision of an August 10 term sheet,
or that they had entered into a Second Exclusivity Agreement.
The OSC also declined to find that Waheed and Walter had
breached the public interest provisions of s. 127 of the Ontario
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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