In its recent decision in AMF vs Filiatreault, the
Tribunal administratif des Marchés Financiers (TMF)
finds that: a) an accountant who was asked by the CEO to
provide job opportunities for him in the near future was in
possession of insider information relating to the potential sale of
the issuer; and b) stock options (in favour of certain
employees and board members) contemplated prior
to, but voted by the board after receipt
of, a verbal offer constitute insider trading as
prohibited by section 187 of the Quebec Securities
Act. The TMF finds that such operations are contrary to the
fundamental principle of equality for all investors in terms of
knowledge at the time of operations on an issuer's
stock. As such, the TMF levied administrative penalties
equivalent to twice the value of the gross profits gained by each
plus $20,000 for each director.
This matter involves operations in the stock of NSTEIN during
negotiations for its acquisition by Open Text in 2010 and was
discoverd during the AMF's investigation into significant
insider trading by an IT team leader working for a prominent
Montreal law firm (see AMF vs Dominic
Côté) where fines of over $1.3M were
The TMF refers to the definition of "spring loading"
developped in US caselaw: "The practice of
« spring loading » stock options involves
making market-value options at a time when the company possesses,
but has not yet released, favorable, material non-public
information that will likely increase the stock price when
At paragraph  of its decision, the TMF states the the
legislator established the principle of equitable use of
information for purposes of investing in reporting issuers because
it is essential for maintining public confidence in capital markets
and to undermine this fundamental principle in setting up
operations that essentially seek to skirt it is tantamount to
nothing more that cutting off the branch upon which the whole
modern market ecomony rests.
The Respondents raised various grounds of defence to
justify the issuance of the stock options, all of which were
rejected by the TMF based on the evidence on file. Perhaps
most importantly, the TMF found that while the internal decision to
issue the options may have been desirable or useful for the issuer,
it was certainly not "necessary in the course of the
issuer's business" which would otherwise exempt
from insider trading as per section 187 of the
Quebec Securites Act.
This decision is important as it reviews all of the
fundamental principles underpinning insider trading legislation,
and spotlights the importance of who knew what, when, and how this
affects the decisions that the board of a reporting
issuer is prevented from making when in possession of
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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