In Re Neher (reasons and order) a foreign partner in a major national law firm who worked for a publically-traded company admitted to trading shares in that company while the company was included on the firm's restricted list. He had not pre-cleared his intended purchase as required by the firm's policy, but had he done so, he would have learned that trading in the shares was prohibited. There was no allegation that the partner contravened Ontario securities law, nor that he was in possession of material non-public information at the time. There was no allegation that he engaged in abusive, wilful or knowing misconduct, or that he knew any information that would explain why the issuer was on the restricted list. The Commission found that a $10,000 fine, an 18 month trading ban and $20,000 in costs would be in the public interest.
The Commission recognized that the firm had a gatekeeper role and contributed to the integrity of the capital markets by maintaining a pre-clearance policy, and that as someone in a special relationship with the issuer, the partner had an obligation to be particularly cautious. The Commission also held that it was in "uncharted territory" as it was the first case of its kind, and that it engaged the animating principles of the Securities Act.
As the Commission noted, this case is notable because it is the first instance where the Ontario Securities Commission has levied a sanction for breach of a law firm's internal policy where there was no breach of securities law. It suggests an expanding focus for enforcement staff, and all those even tangentially involved in the capital markets should take note.