Canadian Lawyer

w w w . C A N A D I A N L a w y e r m a g . c o m J U N E 2 0 1 5 39 he Ontario Securities Com- mission's ruling in the Mitchell Finkelstein "insider tipping" case has sent ripples through the Bay Street legal community, act- ing as a wake-up call to law firms to review their access protocols to confidential files. In a decision based on circum- stantial evidence, a three-member OSC panel ruled in March that Finkelstein, while a partner and M&A lawyer at Davies Ward Phillips & Vineberg LLP, tipped Paul Azeff, then an adviser at CIBC, with confi- dential details on three pending corporate takeovers between 2004 and 2007. Charges against Finkelstein involving three other deals were dismissed. The panel ruled several other market participants were also involved in a chain based on the passing of confidential information. OSC staff alleged, in total, the group bought $16.5 million of shares in takeover bids ahead of major public announcements. The potential profit earned was at least $3 million, the commission staff calculated. The ruling represents one of the few times a Canadian securities regulator has successfully pursued market gatekeepers — securities lawyers, investment bankers, or stockbrokers — for violations of insider trading rules. The OSC staff scored a simi- lar success in February when an OSC panel found Eda Marie Agueci, a former execu- tive assistant at Toronto brokerage GMP Securities, tipped associates to "material facts" about pending takeovers of four mining companies, and that some of the "tipees" violated insider trading rules by trading on that confidential information. But it is the OSC's Finkelstein decision that has raised legal eyebrows on Bay Street. "Up 'til now, there hasn't been a decision such as Finkelstein which has laid out, in a very thoughtful, considered way, how the commission is going to approach [insider trading]," says Martin Kovnats, a partner at Aird & Berlis LLP. "Now that OSC staff knows how the commission is going to approach it, that gives staff guidance on how they should be approaching it." However, Kovnats' Aird & Berlis col- league, Susan Wolburgh Jenah, a former vice chairwoman at the OSC, does not regard Finkelstein as a game-changer. "I don't think it's going to embolden the Canadian Securities Administrators. The CSA has already put more emphasis on enforcement and regulation of market par- ticipants." (The OSC declined to be inter- viewed on the implications of the ruling.) An OSC hearing to determine sanctions and costs in the Finkelstein case is L E G A L R E P O RT \ S E C U R I T I E S L AW PETE RYAN Meta-data, circumstantial evidence, and a lower threshold for evidence at regulatory hearings make it hard for 'market gatekeepers' to hide. By Sheldon Gordon Don't be tempted to tip T The Issue Money

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