www.lexpert.ca | LEXPERT • December 2014 | 27
SECURITIES ENFORCEMENT
Baffi nland was eventually acquired in a joint bid by Arcelor-
Mittal and Nunavut, and Waheed and Walter were charged with
not just insider trading and tipping but also conduct contrary to
the public interest.
A er 43 hearing days, they were completely cleared of any
wrongdoing.
Because Waheed had acquired information about the company
in early 2010, but the toehold purchase wasn't made until Septem-
ber of that year, the OSC panel found the information obtained
during his retainer was stale.
Larry Lowenstein, a litigation partner at Osler, Hoskin &
Harcourt LLP in Toronto, says the decision underscores that
insider information can lose its materiality in a matter of weeks
or months in a fast-paced deal environment.
"What it shows is that where change is occurring rapidly over
the course of protracted business negotiations, information can
quickly become out-of-date," says Lowenstein.
"Intervening events and the passage of time can negate or dimin-
ish the importance of confi dential business information. If it's stale,
it doesn't impact the market. You're not carrying a secret."
Baffi nland also clarifi ed the signifi cance of the US probability/
magnitude test, he says. In the past, the OSC has used the test to
fi nd that information about a potential, signifi cant future event
is material – even if there is a low likelihood that it will occur.
e OSC panel rejected staff 's argument that the probabil-
ity/magnitude test should apply, saying the market-impact test
governs the OSC's assessment of the materiality of a contingent
event. "So the real question is whether disclosure of that informa-
tion could reasonably be expected to have a signifi cant eff ect on
the market price."
e OSC panel's decision to clear the two men of allegations
of conduct contrary to the public interest is creating a lot of buzz.
In the past, the OSC has been accused of using the public-
interest jurisdiction as a net to catch behavior that cannot be
caught by the Ontario Securities Act.
In Baffi nland, OSC staff asked the commission to fi nd that
Waheed and Walter engaged in conduct contrary to the public
interest even if they didn't determine an actual breach of the act,
says Leon.
e panel declined to do so, "which has been interpreted by
"ONTARIO IS saying we should
allow no-contest settlements where it
makes sense to do so while
I have the impression US regulators
are going in a whole different direction,
pulling back on when and if they'll
use them because of judicial
criticism and public concern."
>
Jeffrey Leon, Bennett Jones LLP
