Commission must determine whether documents in alleged insider trading case are relevant or not

The British Columbia Court of Appeal has upheld an appeal of a decision by the B.C. Securities Commission concerning whether the regulator has properly disclosed evidence in an alleged insider trading case.

Michael Kyaw Myint Hua Hu appealed two decisions made by the BCSC in September 2009. Hu sought disclosure from the commission, and the Alberta Securities Commission, of documents obtained in an investigation into allegations that he had committed illegal insider trading violations. Some of the documents he sought were disclosed, but others were withheld on the basis that they were “not relevant”.

When he sought to challenge that decision, the commission found that the onus was on him to provide evidence that the disclosure standard had not been met, and that he can’t simply make an unsubstantiated claim that it hasn’t been met.

“Mere speculation or suspicion that the disclosure obligation has not been met is insufficient,” the commission found. “Otherwise, the criteria of relevance would be meaningless. The disclosure obligation would amount to an obligation to disclose all information, relevant or not.”

However, the B.C. Supreme Court disagreed with the BCSC, siding with Hu, on the question of whether the onus is on him, or the commission staff, to determine whether the disclosure standard has been met. The court found that the commission cannot “wholly delegate the determination of relevancy to its staff and that, if the staff’s determination of irrelevancy is challenged, the B.C. Commission must itself determine whether the documents in question are relevant or irrelevant.”

“On an application dealing with disclosure of documents, the onus is on the party resisting disclosure to justify non-disclosure,” the court said, adding that the commission was in error when it stated that the onus was on the appellant to provide evidence that the staff had not met the disclosure standard. “The onus remained on the executive director at all times to justify non-disclosure.”

The court allowed the appeal, and sent the matter back to the commission.

IE