Canada: Administrative Penalty For Insider Trading – Criteria To Set The Penalty

AMF v. Roy (2015 QCBDR 43)

In AMF v. Roy, the Autorité des marchés financiers (the AMF) accused Mrs. Renée Roy (Roy) of having traded in the securities of a reporting issuer while she was in possession of privileged information. On July 2, 2014, the Bureau de décision et de révision agreed with the AMF and reserved its decision on the administrative penalty to be imposed in the circumstances.

On March 27, 2015 the Bureau condemned Roy to a $60,000 administrative penalty. The Bureau also reviewed in detail the criteria enabling the determination of the appropriate penalty in the circumstances. The penalty claimed by the AMF was three times the profits made by Roy, while the latter pleaded that the penalty should be limited to the actual profits (i.e., $30,570).

Following a detailed study of the various decisions rendered by the securities regulators of other Canadian provinces as well as decisions by the Bureau itself, the Bureau reiterated the objectives sought through the exercise of its jurisdiction over the financial sector, namely the preservation of market integrity, crackdown on insider trading and general dissuasion.

The Bureau underlined in particular that, in an effort to preserve the public's confidence in the financial markets, when faced with an offence of this nature, it is important for the financial authorities to deal severely with offenders.

In that sense, the AMF recalled the numerous criteria developed in case law which may be relevant1 to the determination of the amount of the administrative penalty. The AMF reviewed the following criteria for this file:

  • The seriousness of the breach – Insider trading constitutes serious misconduct justifying "serious consequences"
  • Position of the offender within or vis-à-vis the issuer (i.e.,) was the person an insider of this reporting issuer or rather a "tippee"
  • Offender's past record and general conduct
  • Intentionality of the actions taken – Numerous hints can reveal the offender's intentions, including the action of borrowing in order to invest further in the stock while in possession of privileged information
  • The extent of offender's repentance – In this file, the Bureau noted that during the hearing on responsibility, Roy had mostly attempted to drag a red herring over her tracks. While it was open to her to present a defence, this position led the Bureau to conclude that Roy did not actually feel any regret, despite the representations she made during the hearing on sanctions.
  • Profits made – Once again, the fact that Roy borrowed in order to maximize her monetary profits, combined with the spectacular returns one can expect from a transaction made while in possession of privileged information, certainly had an impact on the Bureau's determination of the sanction to be imposed.
  • Mitigating factors, including the following examples, most of which may be applied to Roy:
    • collaboration with the AMF's investigation
    • general inexperience with financial markets
    • was not one of the reporting issuer's insiders
    • particular factual background
    • absence of risk of re-offending
  • Damages caused to the market's integrity – Even in the absence of specific evidence as to the damage suffered by specific investors, the Bureau stated that investors had been generally swindled and suffered harm. In the end, the main victim of insider trading is the public who loses trust in the functioning and integrity of the financial markets.
  • Sanctions imposed in similar situations – In its decision, the Bureau noted certain precedents2 in which the penalty imposed amounted to double the profits made.

Above all, orders rendered by the Bureau must serve to regulate the financial markets with a mind to prevent offences and enforce the law. Their purpose is not to punish. Nevertheless, in the eyes of the Bureau, the need to deter players of the financial markets from adopting a similar behaviour to Roy's justifies an administrative penalty in the amount of $60,000, which represents twice the profit made by Roy.


1. Autorité des marchés financiers v. Demers, 2006 QCBDRVM 17.

2. Autorité des marchés financiers v. Lefebvre, 2011 QCBDR 121; Autorité des marchés financiers v. Claude Cajolet, 2010 QCBDRVM 12 

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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