On November 4, 2008, Justice Shamai of the Ontario Court of Justice released reasons in R. v. Landen, an insider trading and tipping case brought pursuant to sections 76(1) and 76(2) of the Ontario Securities Act. Justice Shamai found the defendant, Barry Landen, guilty of selling securities of Agnico-Eagle Mines Limited ("Agnico-Eagle") while in possession of material undisclosed information. Mr. Landen was acquitted of tipping his friend, Stephen Diamond, of material undisclosed information and Mr. Diamond was accordingly acquitted of engaging in insider trading himself.

The Ontario Securities Commission (the "OSC"), having decided to bring proceedings in criminal court rather than before a regulatory tribunal, was required to prove its case beyond a reasonable doubt. As is common with allegations of tipping, the OSC’s case was circumstantial. Both Messrs. Landen and Diamond denied that Mr. Landen had shared material undisclosed information about Agnico-Eagle with Mr. Diamond. The OSC relied on evidence of their long friendship, a joint trading account held in both of their names and a transfer of funds from Mr. Landen to Mr. Diamond in the days before Mr. Diamond engaged in fortuitously timed and profitable trades in Agnico-Eagle. Evidence was also introduced indicating that the Agnico-Eagle options purchased by Mr. Diamond accounted for the vast majority of the total put options traded in Canada and the United States on the days in question, and were "of a volume unmatched in any previous trade on either the Canadian or American exchange".

Mr. Diamond responded to the circumstantial evidence relied upon by the OSC by providing other, plausible explanations in each instance. He admitted to a long friendship with Mr. Landen, but testified that he and Mr. Landen had decided to never discuss Mr. Landen’s business, particularly in light of the fact that Mr. Diamond was a somewhat active trader. Mr. Diamond further testified that he and Mr. Landen held a joint trading account to prevent Mr. Diamond’s former wife from obtaining or freezing the assets in the account and explained that Mr. Landen had no involvement with the account (the trades in question were not conducted through the joint account). Finally, Mr. Diamond described the money he received from Mr. Landen in the days preceding his trades as a loan intended to assist with the renovation of his home and adduced invoices and receipts into evidence in support of this testimony. Finally, there was evidence before the court that Mr. Diamond was a trader with a pattern of accepting increased risk.

In acquitting Mr. Landen of tipping, and Mr. Diamond of insider trading, the court relied on case law to the effect that a finding of guilt can only be made where there is no other rational explanation for the circumstantial evidence. In this case, while noting that the theory of the prosecution was attractive, the credible testimony of Mr. Diamond in support of an innocent explanation foreclosed the conclusion, on the requisite standard, that he was an insider of Agnico-Eagle by virtue of being tipped by Mr. Landen.


As reported in November’s Brokers’ Report, a Hearing Panel of the Investment Industry Regulatory Organization of Canada ("IIROC") quashed proceedings against two respondents, Paul Van Benthem and Anthony Petriccione, finding that IIROC did not have jurisdiction over former members pursuant to the Ontario Divisional Court’s decision in Taub. The Hearing Panel has since released its reasons.

The reasons reveal that the Hearing Panel was persuaded that it was bound by the principle of stare decisis to follow Taub as it had been decided (i.e., at the time of the Hearing Panel’s decision) and as such it was not permitted to consider contradictory decisions in British Columbia or that leave to appeal the Taub decision had been sought.

However, in so doing the Hearing Panel made it clear that its order did not necessarily forever end the proceedings against the respondents. It was not dismissing the case, nor was it holding, independent of Taub, that IIROC had no jurisdiction over former registrants. Instead, the Hearing Panel noted that the proceedings were void, ab initio (i.e., in the first instance), but that if Taub were reversed they would then be considered valid, ab initio. As such, if Taub were reversed it was open to IIROC to continue with the proceedings. The Hearing Panel’s order reflects this reasoning, providing that "[t]hese proceedings are quashed, unless and until Taub is reversed or another binding court decision decides that IIROC has jurisdiction over former registrants …"

Since the Hearing Panel’s decision, the Ontario Court of Appeal has granted IIROC leave to appeal the Taub decision.