The Ontario Divisional Court has dismissed an appeal of an Ontario Securities Commission (OSC) decision in a major insider trading case involving merger tips that a Bay Street secretary allegedly passed on.
Specifically, Henry Fiorillo, Dennis Wing and Kimberley Stephany appealed an OSC ruling from 2015 that they had received inside information regarding pending merger deals from Eda Marie Agueci, a secretary with GMP Securities LP, and that they traded on that information in certain cases.
See: OSC bans two for insider trading
According to the decision, Fiorillo objected to the fairness of his compelled examination by the OSC, including the notice and documentary disclosure he received prior to the examination.
“There is no merit in this objection,” the court ruled, noting that these investigations “are a fact of life for persons trading in securities or registered in the securities industry. “
The court also found that there was no unfairness in the OSC hearing itself and that the regulator’s conclusion that Fiorillo traded on inside information from Agueci was reasonable.
“The commission did not infer insider trading only from the opportunity to illegally access material nonpublic information,” the court’s decision states. “The commission’s conclusion that material nonpublic information passed from Ms. Agueci to Mr. Fiorillo was based on the commission’s assessment of the totality of the evidence, including the evidence referred to in these reasons.”
To second-guess that conclusion, the court’s decision states, would be inconsistent with the “deferential standard of review that this court in earlier decisions decided to apply to insider trading decisions of the commission.”
The court also rejected the argument that contextual evidence was ignored in the OSC hearing.
“The commission did not ignore contextual evidence,” the decision states. “Rather, it drew inferences from its assessment of the evidence with which the appellant disagrees and with respect to which this court ought not to interfere.”
In addition, the court found that the OSC did not reverse the burden of proof in its decision. Instead, the court found that the OSC did not accept Fiorillo’s explanations for his trading activity.
“In conclusion, there is no merit in any of the grounds of appeal advanced by Mr. Fiorillo and as a result, his appeal against the findings of insider trading is dismissed,” the court said.
The court also dismissed Fiorillo’s appeal on the sanctions the OSC handed down, noting that there was no error in the regulator’s sanctions decision and that the court must show deference to the OSC’s expertise in this area.
Similarly, Wing appealed the OSC’s finding on insider trading and the sanctions it imposed, but did not appeal its finding that he misled OSC staff.
According to the court, Wing argued that the OSC concluded that he traded on inside infuriation based on “unfounded circumstantial evidence and in the face of direct evidence to the contrary and equally plausible explanations for Mr. Wing’s activities.”
However, again, the court sided with the OSC, ruling that the regulator’s reasons “demonstrate that it based its findings on inferences from established facts and not on inferences from speculation and innuendo.”
The court declined to interfere with the OSC’s decision here too, and it found that “the sanctions imposed upon Mr. Wing were not excessive.”
Finally, the OSC dismissed the appeal from Stephany, once again upholding the OSC’s reasoning in the case.
“The commission’s inferences are based on facts that were proven in the evidence,” the court’s decision states. “They’re not based on facts that are hypothetical or assumed.”
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