Ontario Securities Commission Confirms Test For Severance

In a decision issued on July 24, 2018, the Ontario Securities Commission held that the test to determine whether a respondent's case should be severed and heard separately is the same test used in criminal proceedings.

The decision, Hutchinson (Re), 2018 ONSEC 40, is available here.

Allegations of insider trading and insider tipping

The OSC commenced proceedings against four individuals alleging insider trading and insider tipping with respect to the securities of eight companies.

Commission staff alleged that Donna Hutchinson, a legal assistant at a law firm, provided material non-public information to her friend Cameron Edward Cornish regarding M&A transactions being handled by her law firm. While the information was to remain confidential, Cornish was alleged to have shared it with Patrick Jelf Caruso and David Paul George Sidders. Before the information was generally disclosed, Cornish, Caruso, and Sidders acquired positions in the companies that improved after the information became public.

Hutchinson agreed to a settlement. She acknowledged that she provided material information, not generally disclosed, to Cornish about M&A transactions being handled by the law firm where she was employed.

The motion for severance

Sidders brought a motion to the Commission for an order severing his hearing from the hearing of Cornish and Caruso on the basis that most of the allegations either did not involve him or turned on different questions of fact than those at the heart of the allegations against Cornish and Caruso. Sidders also argued that his case would be unfairly tainted by any findings made against Cornish and Caruso, and he should not be exposed to the additional expense and delay associated with a joint hearing.

The Commission applies the criminal law test for severance

The Commission adopted the test for severance articulated by the Supreme Court of Canada in R v. Last, 2009 SCC 45, for criminal proceedings.

In Last, the Supreme Court identified a non-exhaustive list factors to be weighed when considering an application under section 591(3) of Canada's Criminal Code to sever a multi-count criminal indictment: (1) general prejudice to the accused; (2) the legal and factual nexus between the counts; (3) the complexity of the evidence; (4) whether the accused intends to testify on one count but not another; (5) the possibility of inconsistent verdicts; (6) the desire to avoid a multiplicity of proceedings; (7) the use of similar fact...