Fiorillo v Ontario Securities Commission: Deference Wins The Day On Insider Trading Appeal

The Divisional Court recently upheld an Ontario Securities Commission (Commission) decision sanctioning a number of individuals for insider trading and tipping, and acting contrary to the public interest.1

This is the latest in a series of unsuccessful appeals from Commission decisions, suggesting that the courts' significant deference to decisions of that tribunal makes most appeals an exercise in futility.2

Background

On February 11, 2015, the Commission released its decision finding that Eda Ageuci, Henry Fiorillo, Dennis Wing, and Kimberly Stephany had contravened the insider trading and tipping provisions under s. 127 of the Securities Act (the Act)3. The sanctions were set out in a later decision released on June 24, 2015.4

The Commission concluded that Ms. Agueci, an administrative assistant at an investment bank, had access to material non-public information about transactions her firm was working on. Ms. Agueci tipped Mr. Fiorillo, Mr. Wing, and Ms. Stephany who all went on to make well-timed and profitable trades. Mr. Fiorillo, Mr. Wing, and Ms. Stephany appealed. Ms. Agueci did not.

The appeal

In a decision written by Associate Chief Justice Marrocco, the Divisional Court rejected the appellants' arguments that the Commission had drawn improper inferences from the evidence before it, which was largely circumstantial, that they had been deprived of procedural fairness, and that the sanctions ordered were excessive.

Inferences Drawn From Circumstantial Evidence

In rejecting the appellants' submissions about the inferences drawn by the Commission, Justice Marrocco closely examined the factual findings of the Commission, the evidentiary record before it, and the errors alleged by the appellants. The suggestion that the cases of Walton v Alberta (Securities Commission)5 and Re Azeff6 required a rigid "approach" to assessing circumstantial evidence in insider trading cases was rejected.7 The types of circumstantial evidence that may constitute indicia of insider trading or tipping are not fixed and will vary according to the case.

Justice Marrocco went on to undertake a detailed assessment of the evidence before the Commission, finding there was sufficient support in the record before the Commission for the factual findings made and inferences drawn.

In reasons concurring with the result, Justice Morawetz took a different approach than Justice Marrocco, declining to enter into a detailed review of the evidence and relying instead upon...