Insider Trading In Canadian Securities
Insider trading in Canada is governed primarily by provincial securities acts, such as:
Ontario Securities Act (OSA), s. 76
British Columbia Securities Act, s. 57.2
Alberta Securities Act, s. 147
Québec Securities Act (AMF jurisdiction), s. 187
What is Insider Trading?
Insider trading occurs when a person:
Possesses material non-public information (MNPI) about a publicly traded issuer,
Knows or ought to know that the information is material and non-public, and
Buys or sells securities, or
Tips someone else who then trades (a separate offence called tipping).
Key Concepts
Material: Information that would reasonably be expected to have a significant effect on the price of a security.
Non-public: Not generally disclosed or made available to the market.
Person in a Special Relationship:
Directors, officers, employees
Consultants, insiders, affiliates
Tippees who receive non-public information
Anyone who knows or should know the information came from someone in a special relationship
Penalties
Administrative sanctions (cease trade orders, bans, disgorgement)
Civil liability (investor lawsuits)
Criminal charges (fines, imprisonment up to 10 years under the Criminal Code + provincial statutes)
Major Canadian Insider Trading Cases (Detailed)
Below are six significant insider trading cases analyzed in detail.
1. R. v. Felderhof (Ontario Court of Justice, 2007) – The Bre-X Scandal
Facts
John Felderhof, an executive of Bre-X Minerals, was charged with insider trading after selling shares during a time when internal reports suggested the company’s gold findings in Indonesia were fraudulent or significantly overstated. The share price later collapsed.
Issues
Did Felderhof possess material non-public information?
Did the OSC conduct an unfair prosecution?
Decision
Felderhof was acquitted, not because insider trading was disproven, but because:
The OSC failed to establish beyond a reasonable doubt that Felderhof had knowledge that the gold find was overstated at the time of his trades.
The court criticized the OSC for procedural issues but still allowed the case to proceed.
Importance
Reinforced the burden of proof required for insider trading in quasi-criminal proceedings.
Demonstrated difficulties in proving a person knew the non-public information.
2. R. v. Rankin (Supreme Court of British Columbia, 2011)
Facts
James Rankin was an investment advisor who obtained confidential information about a major corporate acquisition from a close friend. He then traded in securities of the target corporation before the acquisition was publicly announced.
Issues
Was Rankin a “person in a special relationship”?
Did he knowingly use MNPI?
Decision
Rankin was convicted. The court found:
Even though he was not an insider of the corporation, he knew the information came from someone who had a duty of confidentiality.
This placed him within a “special relationship.”
Importance
Expanded insider trading liability to tippees who indirectly receive MNPI.
Made it clear that actual knowledge is enough; formal insider status is not required.
3. Re Donnini (Ontario Securities Commission, 2002)
Facts
Donnini, an employee of TD Securities, traded in the shares of Hollinger Inc. while in possession of confidential earnings information.
Issues
Was the information “material” and “non-public”?
Did Donnini misuse his position as a broker?
Decision
The OSC found Donnini guilty of insider trading and imposed:
Trading bans
Administrative penalties
Disgorgement of profits
Importance
One of the earliest large administrative insider trading cases in Ontario.
Clarified that internal brokerage information can be material non-public information even if informally obtained.
Reinforced the broad interpretation of “special relationship.”
4. Re Finkelstein (Ontario Securities Commission, 2018; affirmed by Court of Appeal in 2021)
Facts
A complex tipping chain involving:
Howard Miller, a lawyer with MNPI from a client merger,
Who tipped Finkelstein (a friend),
Who tipped others in multiple layers,
Resulting in extensive trades before a merger announcement.
Issues
Can liability extend through multiple layers of tippees?
How to infer knowledge that information is confidential?
Decision
The OSC found all participants liable, including tippees several steps removed.
Importance
Clarified that tipper-tippee liability extends far beyond the original insider.
If circumstances would make a reasonable person suspicious that the information is confidential, the tippee is liable.
A key modern Canadian insider trading precedent.
5. Re Agueci (OSC, 2015) – The Investment Banker Dinner-Party Case
Facts
Agueci worked at a bank's M&A department. She disclosed MNPI about pending mergers to a close group of friends during social interactions (dinners, gatherings). Several traded and made significant profits.
Issues
Was social disclosure “tipping”?
Did the tippees know or should they have known the information was MNPI?
Decision
Both Agueci and the tippees were found liable. Heavy penalties and trading bans were issued.
Importance
Shows that insider trading can arise from casual social interactions.
Courts will infer knowledge of confidentiality from:
Context (investment banker role)
Timing of trades
Correlation with news events
6. AMF v. Conway (Québec, 2017) – Québec’s Landmark Criminal Insider Trading Case
Facts
Conway obtained confidential information about a major corporate transaction from a family member. He traded aggressively before the official announcement.
Issues
Application of Québec’s more rigorous statutory framework
Whether the AMF proved he “knowingly” used MNPI
Decision
Conway was convicted in a rare criminal insider trading case in Québec.
Importance
Demonstrates the AMF's willingness to pursue criminal (not only administrative) actions.
Emphasized the importance of circumstantial evidence (timing, pattern of trading).
7. R. v. Cheng (Ontario, 2013) – Fraud & Insider Trading Hybrid
Facts
Cheng received MNPI regarding a pending acquisition. He used multiple accounts to disguise trading activity.
Issues
Overlap between insider trading and fraud under the Criminal Code.
How deceptive behaviour affects liability.
Decision
Cheng was convicted on multiple counts.
Importance
Shows that insider trading can also be prosecuted as fraud if deception is involved.
Reinforces that the Crown can use evidence of concealment to prove mens rea.
Summary of Key Takeaways from All Cases
1. Knowledge is Key
Courts focus heavily on whether the accused knew or ought to have known the information was MNPI.
2. Tippees Are Equally Liable
Cases like Finkelstein show the law extends liability across multiple layers of tipping.
3. Social and Informal Settings Count
Cases like Agueci prove insider trading isn’t limited to corporate boardrooms.
4. Circumstantial Evidence Carries Weight
Timing of trades, patterns, and relationships often establish liability even without direct proof.
5. Criminal vs Administrative
Criminal cases require proof beyond a reasonable doubt, while OSC/AMF administrative actions only require evidence on a balance of probabilities.
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