Canada: Walton V Alberta (Securities Commission)

Last Updated: September 4 2014
Article by John Blair, QC and Andrew Pozzobon

Most Read Contributor in Canada, November 2017

On August 29, 2014, the Alberta Court of Appeal released its decision in Walton v Alberta(Securities Commission), 2014 ABCA 723 ("Walton"). The decision is significant as it is extremely rare for an appellate court to overturn a decision of a securities commission, since the latter are recognized as having particular expertise in their field and are accorded considerable deference by courts. In Alberta, only once previously had the Alberta Court of Appeal overturned a decision of an Alberta Securities Commission (ASC) tribunal. The Court of Appeal in Walton identified a number of conclusions made by the ASC Panel and was particularly scathing of the conclusions as, despite its relative expertise, the ASC Panel:
(i) improperly interpreted the provisions of the Securities Act related to "recommending or encouraging" a trade; (ii) relied on speculation and conjecture rather than drawing reasonable inferences in making its decisions; and (iii) imposed excessive sanctions without justification or transparency.


As background, in late 2008 Eveready Inc.'s unit price was depressed, parallel with the global economic downturn and it became a potential takeover target. Eveready eventually attracted the attention of Clean Harbours Inc. The prospect of a takeover by Clean Harbors became sufficiently realistic to meet the threshold of being a "material fact" by late January 2009. The Staff of the ASC (Staff) alleged that nine respondents (Respondents) had obtained knowledge of the proposed takeover and then traded in shares of Eveready, making improper use of the information prior to the press release in April 2009. The linchpin of the factual matrix was John Herbert Holtby, one of the directors of Eveready, who admittedly knew about the Clean Harbors takeover discussion and improperly passed on knowledge about that material fact to others as well as trading himself.

In its decision, the ASC Panel found that Holtby  had engaged in insider trading and improperly disclosed the material fact to others. In addition, the Panel found that Holtby and a number of the other Respondents had engaged in informing (tipping) and recommending or encouraging others to purchase Eveready shares before the acquisition was publicly disclosed. Under section 147 of the Alberta Securities Act tipping and recommending/ encouraging are different offences, one being passing on the fact and the other pushing a person to trade but without disclosing the fact. The Panel ultimately ordered sanctions against Holtby and the other Respondents which included significant administrative penalties, the disgorgement of profits, the payment of costs for the investigations and bans from trading in securities and acting as directors  and officers. The severe monetary sanctions imposed against the Respondents amounted to $2.8 million including a $1.75 million administrative penalty against Holtby alone.

The Court Of Appeal Decision

The Respondents appealed the decision of the Panel, including the sanctions, to the Alberta Court of Appeal. As noted, it is extremely rare for a reviewing court to overturn the decision of a securities commission. Courts have less expertise than securities commissions in determining what is in the public interest in the regulation of financial markets. The courts also have less expertise in interpreting securities statutes given the broad policy context within which securities commissions operate. Despite this, the Court of Appeal in Walton overturned the decisions against Kenneth Burdeynet, Gayle Walton and John Shepert, and overturned all of the sanctions that the Panel had imposed. The Court of Appeal recognized that the ASC is an expert tribunal, charged with the administration and interpretation of the Securities Act and its interpretation was entitled to deference. In this case however, the decisions made by the Panel were found to be unreasonable as it had improperly interpreted the provisions of the Securities Act related to the rarely used "recommending or encouraging provision", it had made determinations based on bare speculation rather than drawing them from reasonable inferences and it had imposed unreasonable sanctions without justification and transparency.

(I) Interpretation Of The Securities Act

While the interpretation of the Securities Act by the Panel is entitled to deference, it can be disturbed on appeal if it is unreasonable. In this case, the Court of Appeal held that the Panel's interpretation of "insider trading" and "tipping" was reasonable and supported by the case law. However its interpretation of "recommending or encouraging" was unreasonable and could not be sustained. The Panel had concluded that there was no requirement for the recommender or encourager to know or intend that the recipient would buy or sell the particular securities, thus making use of the recommendation or encouragement.

The recommending or encouraging provision (s. 147(3.1)) of the Securities Act requires "knowledge of a material fact" and also an act of recommending or encouraging. The Court of Appeal held that the ordinary meaning of "recommending or encouraging" includes some intention to convey information with the expectation that it may be relied on. Just because a person in a special relationship with the issuer says something positive about the issuer does not necessarily amount to recommending or encouraging even if the comment piqued the interest of the recipient of the information, or caused him to make further inquiries, or even to purchase the security. As the Panel had incorrectly interpreted the provisions of the Act related to recommending or encouraging the decisions made by the Panel had to be examined having regard to the appropriate legal standard.

(II) Speculation and Drawing Inferences

While findings of fact made by the Panel are also entitled to deference, they can be overruled if they demonstrate palpable and overriding error. In this case, the Court reviewed the findings of fact made by the Panel that were based on circumstantial evidence. As we have noted in previous bulletins, it is only possible to prove insider trading cases based on circumstantial evidence and inferences drawn from the conduct of those involved. There is however, a legal distinction between speculation and drawing inferences. Speculation can be described as the drawing of an inference in the absence of any evidence to support that inference or in situations where there is no "air of reality" to the inference.

In Walton, the Court of Appeal overturned many of the decisions made by the Panel as they were made on "bare speculation" and conjecture and the Panel had not drawn proper inferences. Holtby, for example, had been found culpable for encouraging an acquaintance to purchase Eveready shares based on a conversation at a golf course and a telephone conversation. The Panel had concluded that based on the conversations with Holtby and the acquaintance's subsequent purchase of Eveready shares, an inference could be drawn. The Court held that the fact that the individuals may have been encouraged by Holtby's general attitude, that he said generically positive things or his statements that Eveready was "busy making money" could not be turned into a finding that he told the individuals about the takeover, nor that he recommended or encouraged the purchase of Eveready shares. A finding that anything more than this was speculation, not inference and there was nothing on the record that could support an inference that Holtby did anything amounting to encouraging. Similarly, the Court overturned a number of the other decisions for recommending or encouraging against the other Respondents as the factors relied upon by the Panel amounted to nothing more than evidence of opportunity, and could only support speculation and not justifiable inferences. The Court noted that the reasoning of the Panel was "too tenuous to support the findings it made" and the Panel's reasoning "included a number of presumptions that had no basis in the evidence." The finding of the Court confirms that there does come a time when the facts may be so remote that there are just too many steps or leaps in the chain of reasoning to say that an inference can be reasonably drawn. The Court also noted the unlikelihood of Holtby being inclined to tip or make recommendations to someone he barely knew.

(III) Sanctions

The appropriateness of remedial orders or sanctions is also within the expertise of the Panel and will not be overturned on appeal unless they are demonstrably unfit or are otherwise unreasonable. In this case, all of the Respondents opposed the sanctions that had been imposed by the Panel, arguing that they were demonstrably unfit in the circumstances. Generally, sanctions are not intended to be directly punitive but rather are exercised prospectively to the public interest to protect capital markets. Nevertheless, individual and general deterrence is a legitimate consideration in formulating the appropriate sanction.

In this case, the penalties imposed against Holtby and Kowalchuk (the only two whose decisions were not overturned) were severe. The Panel had declined to determine the administrative penalties by any formula and did not indicate how it arrived at these amounts. The Court of Appeal, in reviewing the decision of the Panel, held that the sanction must be proportionate and reasonable for each appellant. The pursuit of a general deterrence does not warrant imposing a crushing or unfit sanction on an individual. The Court noted that based on the record it was impossible to determine whether the sanctions imposed were reasonable. The severity  of the sanctions left cause for concern as it lacked the justification and transparency that a proper decision making process requires. As such, the sanctions imposed against Holtby and Kowalchuk were set aside and remitted back to the Panel for reconsideration.


Recently John Blair from BLG, wrote an article on Alberta Insider Trading Cases (found here), in which he identified the difficulty the ASC has had recently in prosecuting insider trading and tipping. The decision in Walton is significant and underscores the difficulties that securities commissions may face in proving insider trading cases. Further, while it is rare for appellate courts to question decisions made by securities commission, they will do so where the law is improperly interpreted or where determinations are made that are unsupportable on the record.

About BLG

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.

In association with
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
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

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