One Try Only: Insider Trading Appeal Reminder Of Court's Deference To Commission

The Divisional Court's recent decision in Fiorillo,1 upholding the findings of the Ontario Securities Commission (the "Commission") that three traders violated the insider trading provisions of the Ontario Securities Act2, sustained rulings by the Commission on important evidentiary and procedural issues, and serves as a reminder that the Divisional Court generally defers to the Commission in securities enforcement cases.

The Commission found that Mr. Fiorillo, Mr. Wing, Ms. Stephany, and Pollen Services Limited (for which Mr. Wing has signing authority) (the "appellants") traded on material non-public information provided to them by Ms. Agueci, who was the administrative assistant of the Chairman of an investment bank.3 Ms. Agueci did not appeal the Commission's finding that she had tipped the appellants about material non-public information.4

The compelled examination transcript of a respondent who does not testify can be read-in

The Commission permitted Staff to read-in the compelled evidence of Ms. Agueci at the end of Staff's case, after Ms. Agueci's counsel had declined to give an undertaking to call her to testify. The Court rejected the appellants' argument that the Commission erred in law by doing so. First, the Court held that hearsay evidence, such as Ms. Agueci's examination evidence compelled under section 13 of the Securities Act, is admissible in an OSC enforcement proceeding. Second, the court noted that the appellants themselves could have called, examined, and cross-examined Ms. Agueci but elected not to. Lastly, the court pointed out that one of the appellants had also read-in evidence from Ms. Agueci's compelled examination, in which she denied that she had tipped anyone.

The Commission is entitled to control its process and hear allegations together

The appellants argued that it was improper for the Commission to hear all of the allegations against the appellants together in the same hearing. This occurred, they argued, because the Notice of Hearing alleged a "trading ring" among the respondents, which was not supported by the evidence called by Staff. In rejecting this argument, the court found that no unfairness resulted from the Commission hearing the matters together. The Commission was alive to the need to consider the allegations and evidence against each respondent, and denied Staff's requests to admit similar fact evidence from one respondent against other respondents, as well as Staff's request that evidence...