Susan Wolburgh Jenah

The Ontario Securities Commission held a hearing to consider sanctions against the respondent for failing to file required insider trading reports, which also constituted a breach of a previous settlement agreement.

The panel approved a settlement agreement between Staff and the respondent, finding it in the public interest.

The respondent was ordered to cease trading in certain securities, reprimanded, and ordered to pay an administrative penalty of $32,000 and costs of $5,000.

Staff of the Ontario Securities Commission alleged that the respondents, K.Y. Ho and Betty Ho, engaged in insider trading contrary to subsection 76(1) of the Securities Act by disposing of ATI shares prior to a public announcement that ATI would fall short of its forecasted revenue and earnings for Q3-2000.

The Commission dismissed the allegations, finding that Staff failed to establish that the revenue shortfall was a known fact at the time the shares were disposed of, and consequently, the respondents could not have had actual knowledge of it.

Furthermore, the Commission held that K.Y. Ho's charitable donations of shares were gifts made in good faith and did not constitute 'sales' for the purposes of the insider trading provisions.

The respondent brought a motion for a nonsuit at the close of Staff's case, arguing that Staff failed to establish a prima facie case of insider trading.

The Commission held that a nonsuit motion is available in its proceedings and exercised its discretion not to put the respondent to an election on whether to call evidence.

Applying the test of whether there is any evidence which, taken at its highest, establishes a reasonable inference in favour of Staff, the Commission found that a prima facie case had been made out.

The motion for a nonsuit was dismissed.

One Commissioner dissented on the issue of election, finding that the respondent should have been required to elect whether to call evidence.

The applicants sought to vary management cease trade orders (MCTOs) under section 144 of the Securities Act to permit trading in connection with a proposed going private transaction by Hollinger Inc. The Commission found that the applicants failed to demonstrate that varying the MCTOs would not be prejudicial to the public interest.

The Commission cited concerns regarding the lack of current audited financial statements, the adequacy of the independent valuation, the potential conflicts of interest in the proposed litigation trust, and evidence of undue influence exerted by related parties on the independent committee and valuator.

The applications were denied.

The applicant, Kwok Yuen Ho, brought a motion for an order requiring Staff of the Ontario Securities Commission to produce the working file of the investigator responsible for the insider trading investigation against him.

The applicant argued that the file was necessary to make full answer and defence, as the investigator would be a key witness at the hearing.

The Commission dismissed the motion, distinguishing between evidence obtained during an investigation (which must be disclosed) and materials created by an investigator (which need not be disclosed unless the investigator is giving expert opinion evidence).

As the investigator was only being called as a fact witness, the working file was deemed irrelevant and not subject to disclosure.

The applicant, a respondent in an insider trading proceeding, brought a pre-hearing motion seeking a ruling that the Commission could not make a public interest order against her under section 127 of the Securities Act if Staff failed to prove the specific allegation of insider trading under section 76(1).

A prior panel had dismissed the same motion as premature.

The Hearing Panel agreed with the prior panel, holding that it was inappropriate to tie the hands of the decision-makers before hearing the evidence and closing submissions.

The motion was dismissed as premature.

The applicant brought a motion requesting the Hearing Panel reconsider a prior panel's decision dismissing a motion to strike certain words from the Statement of Allegations.

The Hearing Panel found it had no jurisdiction to review the prior decision under section 144 of the Securities Act, Rule 9 of the Rules of Practice, or the common law doctrine of functus officio.

Even if jurisdiction existed, the panel would have dismissed the motion, finding that the inclusion of the words 'and contrary to the public interest' did not impair the applicant's right to know the case to meet.

The applicant, a registered trader, sought a hearing and review of a decision by the hearing panel of Market Regulation Services Inc. (RS) finding him guilty of frontrunning contrary to Rule 4-204(1) of the Rules of the Toronto Stock Exchange.

The applicant argued he was denied procedural fairness, that the RS Panel erred in law by finding that risk and disadvantage to the client were not elements of the offence, and that the RS Panel overlooked evidence suggesting the trade was meant to facilitate a client order.

The Commission affirmed the RS Panel's decision, holding that the applicant had notice of the case to meet, that risk and disadvantage are not elements of Rule 4-204(1), and that the applicant's proposed inference was unsupported speculation.

The sanctions, including a $15,000 fine and a one-month suspension, were confirmed.

Credit Suisse First Boston Canada Inc. (CSFB) applied for a hearing and review of a decision by the hearing panel of Market Regulation Services Inc. (RS) that disqualified its counsel, Stikeman Elliott, from acting in an RS proceeding.

RS alleged that Stikeman Elliott was in a conflict of interest because it had previously advised the Toronto Stock Exchange (TSE) on the creation of RS, and was now raising defences on behalf of CSFB that attacked the very regulatory structure it helped create.

The Ontario Securities Commission upheld the disqualification, finding that Stikeman Elliott owed a subsisting duty of loyalty to RS as a former client and possessed relevant confidential information with a risk of misuse.

The Commission concluded that permitting the law firm to repudiate its own prior legal advice would undermine public confidence in the administration of justice.