In a rare case of market manipulation, the Bureau de
décision et de révision (the Bureau), the
Québec administrative tribunal specialized in financial
markets, recently issued a decision (available in French only), giving
effect to an agreement between the Autorité des
marchés financiers (the AMF) and Mr. Michel Galipeau
(Galipeau) condemning the latter to an administrative penalty of
While the Bureau's reasons are terse, given
the absence of a dispute before it, the decision takes on a certain
interest in so far as it reminds us of the actions and behaviours
which may draw the AMF's attention and may bring about the
enforcement of Section 195.2 of the Securities Act (the
Section 195.2 of the Act provides that the act of
"influencing or attempting to influence the market price or
the value of securities by means of unfair, improper or fraudulent
practices" constitutes an offence punishable by an
administrative penalty of up to $2,000,000.1 It is
interesting to note that the legislation does not provide a
definition of such "unfair, improper or fraudulent
practices" and these terms are scarcely mentioned in
jurisprudence, hence the importance of this case.
Galipeau's offences involved a series of transactions on the
securities of a company whose shares were traded on the TSX Venture
Exchange (the Company). For each transaction, Galipeau would
acquire the Company's shares at market price. Within minutes,
he would resell them at a higher price to one of his trading
companies. It appears from the AMF's statement of facts that
Galipeau thus cashed in a net profit of a little more than
Reiterating the goal underlying the prohibition of s. 195.2 of
the Act, namely to maintain public confidence in the integrity of
the markets, the AMF identified the indications of Galipeau's
tampering with the Company's stock price:
In order for his strategy to succeed,
Galipeau's buy orders as well as his companies' sell orders
were always set at distant bid and ask prices, for both the same
amount of shares and the same price per share, thus ensuring a
match. Such transactions are called "improper matched
Each transaction represented a
significant proportion (20% to 100%) of the daily volume of
operations on the Company's stock;
Transactions between Galipeau and his
trading company did not bring about a real change of beneficial
owner given that Galipeau effectively controlled both sides of the
transaction, which constitutes wash-trades;
Galipeau's transactions directly
impacted the company's stock price. In that sense, they
amounted to ramping, i.e. an artificial increase of a
stock price in order to give the false impression of activity on
that stock, thus turning a quick profit.
Ultimately, Galipeau acknowledged all of the facts exposed by
the AMF and the parties agreed on a $20,000 administrative penalty
amounting to three times the net profits pocketed by the
1. Section 273.1 of the Act. Take note that the AMF may
also file penal proceedings against an offender and seek the
penalties provided for at Sections 204.1 and 208.1 of the
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