OSC Staff has earned a long sought victory in its quest to
police insider and related trading activity. But its victory was
only partial, and the case reinforces the evidentiary challenges
faced in these cases. InIn the matter of Eda Marie Agueci et al.,
a 154 page decision released on February 11, 2015, a Panel of
the OSC ("Panel") found that Eda Marie Agueci, an
executive assistant in the mining group of GMP Securities LP,
tipped several of her associates and acquaintances about certain
mining transactions that took place in 2007 and 2008 and that such
activity was contrary to section 76(2) of the Securities
Act (the "Act") and contrary to the public interest.
The Panel also held that in several instances, certain tippee
respondents (i.e., respondents who had been tipped by Agueci) used
the information they received to trade in securities contrary to
section 76(1) of the Act and contrary to the public interest.
However, not all of the allegations made by OSC Staff were
successful, as a number of the allegations against other tippee
respondents, including the allegations against a further
down-stream tippee respondent, were dismissed.
OSC Staff, investors and other
market participants are currently awaiting the decision in another
high profile insider trading case in In the matter of Paul
Azeff, Korin Bobrow, Mitchell Finkelstein, Howard Jeffrey Miller
and Man Kin Cheng (a.k.a. Francis Cheng)
("Finkelstein"). Like the Agueci
decision, Finkelstein involves allegations of a chain of
tipper-tippee misconduct, including the alleged misconduct of
several down-stream tippees. In Finkelstein, a former Bay
Street lawyer, Mitchell Finkelstein, is alleged to have used his
position at his firm to acquire material, non-public information
concerning pending corporate transactions and shared that
information with his friend Paul Azeff, who in turn, tipped other
respondents. One of those other respondents, it is alleged, then
tipped another respondent, who is alleged to have informed yet
In Agueci, much of the evidence tendered by OSC Staff
to prove its allegations was circumstantial in nature, including
the relationships between respondents and the timing of trades made
by respondents following communications they had with Agueci. In
arriving at its conclusions, the Panel weighed the circumstantial
evidence advanced by OSC Staff against the direct evidence of
certain of the respondents who testified at the hearing. For
certain of the respondents, the circumstantial evidence was
sufficient to establish tippee liability. For other respondents,
however, the Panel concluded that the circumstantial evidence was
not sufficient to infer that material non-public information had
been received from Agueci which lead to the subsequent trade by the
respondent. Interestingly, the tippee allegations that were
successfully proven by OSC Staff were those against the respondents
who provided direct viva voce evidence in the course of the
proceeding. This outcome appears to reflect the upheaval that
the Newman decision has ushered in, causing both the SEC
and state prosecutors in the US to reconsider their approaches in
Leave from the Supreme Court of Canada has been sought in
Walton, while prosecutors in the US are seeking a rehearing en
banc of the Second Circuit's decision in Newman.
The ultimate outcome of these cases (and any potential appeal of
the Agueci decision) will provide an opportunity for
courts on both sides of the border to provide much needed clarity
to an increasingly confusing area of law. Such clarity is needed
not just for white collar enforcers and adjudicators, but to assist
market participants and their advisors in ensuring adequate
compliance with their obligations under the law.
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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