Eda Marie Agueci et al.

Ontario

Securities

Commission

Commission des

valeurs mobilières

de l’Ontario

22nd Floor

20 Queen Street West

Toronto ON M5H 3S8

22e étage

20, rue queen oust

Toronto ON M5H 3S8

Citation: Eda Marie Agueci et al., 2015 ONSEC 2

Date: 2015-02-11

IN THE MATTER OF THE SECURITIES ACT,

R.S.O. 1990, c. S.5, AS AMENDED

- AND -

IN THE MATTER OF EDA MARIE AGUECI, DENNIS WING, SANTO IACONO,

JOSEPHINE RAPONI, KIMBERLEY STEPHANY, HENRY

FIORILLO, GIUSEPPE (JOSEPH) FIORINI, JOHN SERPA, IAN TELFER,

JACOB GORNITZKI and POLLEN SERVICES LIMITED

REASONS AND DECISION

Hearing:

September 30, 2013, October 1, 2, 4, 7, 9-11, 15-18, 23-25, 28-31,

2013, November 1, 4, 6-8, 11, 12, 15,18, 20, 22, 25-29, 2013,

December 2, 4, 5, 9-11, 16, 18, 2013 and January 15, 16, 17, 20-22,

2014 and February 3, 4, 6, 7, 2014 and March 5, 2014 and April 28-

30, 2014

Decision:

Panel:

February 11, 2015

Edward P. Kerwin

-

Commissioner and Chair of the

Panel

Deborah Leckman

AnneMarie Ryan

-

Commissioner

Appearances: Cullen Price

Usman Sheikh

Albert Pelletier

Clare Devlin

-

For Staff of the Commission

Nigel Campbell

Erin Hoult

Patricia McLean

Donald Sheldon

Peter Howard

-

For Jacob Gornitzki

For Dennis Wing

For Henry Fiorillo

For Joseph Fiorini

Ellen Snow

David Hausman

2

Appearances

continued:

Ken Jones

David Moore

James Douglas

Caitlin Sainsbury

Melissa MacKewn

-

For Kimberley Stephany

For Eda Marie Agueci

-

For Josephine Raponi

For Santo Iacono

John Serpa

Mark Polley

Neil Gross

3

TABLE OF CONTENTS

I.

OVERVIEW

A.

B.

C.

Introduction

The Allegations

The Respondents

II.

PRELIMINARY ISSUES

A.

B.

The Standard Of Proof

Evidence

1.

2.

3.

Hearsay Evidence

Compelled Evidence

Circumstantial Evidence and Inferences

(a)

(b)

(c)

Staff’s Submissions

The Respondents’ Submissions

Legal Analysis and Conclusions

4.

5.

Similar Fact Evidence

Credibility

(a)

(b)

(c)

Staff’s Submissions

The Respondents’ Submissions

Legal Analysis and Conclusions

III.

IV.

THE ISSUES

RELEVANT LAW ON INSIDER TRADING, TIPPING, AUTHORIZING, PERMITTING

OR ACQUIESCING IN THE NON-COMPLIANCE WITH THE ACT AND CONDUCT

CONTRARY TO THE PUBLIC INTEREST

A.

INSIDER TRADING AND TIPPING

1.

2.

3.

4.

Special Relationship to the Issuer

Material Fact and Assessment of Materiality

Generally Disclosed Information

Informing Others of an Undisclosed Material Fact

B.

C.

AUTHORIZING, PERMITTING OR ACQUIESCING IN THE NON-COMPLIANCE

WITH THE ACT

CONDUCT CONTRARY TO PUBLIC INTEREST

V.

NU ENERGY - ANALYSIS AND FINDINGS ON ALLEGATIONS OF INSIDER

TRADING, TIPPING AND CONDUCT CONTRARY TO THE PUBLIC INTEREST

A.

B.

Overview of the Nu Energy Transaction

Were there Material Facts Relating to Nu that were Not Generally

Disclosed?

Gornitzki

C.

1.

2.

Was Gornitzki in a Special Relationship with Nu?

Did Gornitzki have Knowledge of the Nu Material Facts on April 16,

2007?

3.

Agueci

Did Gornitzki Inform Agueci of the Nu Material Facts?

D.

E.

F.

Wing, Iacono, Raponi, Fiorillo, Fiorini and Serpa

Did Gornitzki, Agueci, Wing, Iacono, Raponi, Fiorillo, Fiorini and/or Serpa

Engage in Conduct Contrary to the Public Interest?

4

1.

2.

3.

Gornitzki

Agueci

Wing, Iacono, Raponi, Fiorillo, Fiorini and Serpa

G.

Conclusions

VI.

EMC - ANALYSIS AND FINDINGS ON ALLEGATIONS OF INSIDER TRADING,

TIPPING AND CONDUCT CONTRARY TO THE PUBLIC INTEREST

A.

B.

Overview of the EMC Transaction

Were there Material Facts Relating to EMC that were Not Generally

Disclosed?

Agueci

C.

1.

2.

Was Agueci in a Special Relationship with EMC?

Did Agueci have Knowledge of the EMC Material Facts Beginning on

May 8, 2007?

D.

Did Agueci Inform, and did Wing, Pollen, Fiorillo, Stephany, Fiorini,

Raponi, Iacono and/or Serpa Purchase, EMC Securities, with Knowledge of

the EMC Material Facts?

1.

2.

3.

4.

5.

6.

7.

Wing and Pollen

Fiorini

Fiorillo

Stephany

Raponi

Iacono and Serpa

Did Agueci Breach subsection 76(2) of the Act?

E.

Were Wing, Pollen, Fiorillo and/or Stephany in a Special Relationship with

EMC?

1.

2.

3.

Wing and Pollen

Fiorillo

Stephany

F.

Did Wing, Pollen, Fiorini, Fiorillo, Stephany, Raponi, Iacono and/or Serpa

Breach subsection 76(1) of the Act?

G.

H.

Did Wing Authorize, Permit or Acquiesce in Pollen’s Non-Compliance with

the Act?

Did Agueci, Wing, Pollen, Fiorini, Fiorillo, Stephany, Raponi, Iacono and/or

Serpa Engage in Conduct Contrary to the Public Interest?

1.

2.

3.

Agueci

Stephany

Wing, Pollen, Fiorillo, Fiorini, Stephany, Raponi, Iacono and Serpa

I.

Conclusions

VII.

NORTHERN ORION - ANALYSIS AND FINDINGS ON ALLEGATIONS OF INSIDER

TRADING, TIPPING AND CONDUCT CONTRARY TO THE PUBLIC INTEREST

A.

B.

Overview of the Northern Orion Transaction

Were there Material Facts Relating to Northern Orion and/or Meridian that

were Not Generally Disclosed?

C.

Agueci

1.

Was Agueci in a Special Relationship with Northern Orion and/or

Meridian?

2.

Did Agueci have Knowledge of the NNO Material Facts Beginning on

May 28, 2007?

5

D.

E.

Did Agueci Inform, and did Wing, Pollen, and/or Fiorini Purchase, Northern

Orion and/or Meridian Securities, with Knowledge of the NNO Material

Facts?

1.

2.

3.

Wing and/or Pollen

Fiorini

Did Agueci breach subsection 76(2) of the Act?

Was Pollen, through Wing, in a Special Relationship with Northern Orion

and/or Meridian?

F.

G.

Did Wing, Pollen and/or Fiorini Breach subsection 76(1) of the Act?

Did Wing Authorize, Permit or Acquiesce in Pollen’s Non-Compliance with

the Act?

H.

I.

Did Agueci, Wing, Pollen and/or Fiorini Engage in Conduct Contrary to the

Public Interest?

Conclusions

VIII. HUDBAY - ANALYSIS AND FINDINGS ON ALLEGATIONS OF INSIDER TRADING,

TIPPING AND CONDUCT CONTRARY TO THE PUBLIC INTEREST

A.

B.

Overview of the HudBay Transaction

Were there Material Facts Relating to HudBay that were Not Generally

Disclosed?

Agueci

C.

1.

2.

Was Agueci in a Special Relationship with HudBay?

Did Agueci have Knowledge of the HudBay Material Facts Beginning

on July 17, 2007?

D.

Did Agueci Inform, and did Wing, Pollen, Fiorini, Fiorillo, Stephany,

Raponi, Iacono and/or Serpa Purchase, HudBay Securities, with

Knowledge of the HudBay Material Facts?

1.

2.

3.

4.

5.

6.

7.

Wing and Pollen

Fiorini

Fiorillo

Stephany

Raponi

Iacono and Serpa

Did Agueci Breach subsection 76(2) of the Act?

E.

Were Wing, Pollen, Fiorillo and/or Stephany in a Special Relationship with

HudBay?

1.

2.

3.

Wing and Pollen

Fiorillo

Stephany

F.

Did Wing, Pollen, Fiorini, Fiorillo, Stephany, Raponi, Iacono and/or Serpa

Breach subsection 76(1) of the Act?

G.

H.

Did Wing Authorize, Permit or Acquiesce in Pollen’s Non-Compliance with

the Act?

Did Agueci, Wing, Pollen, Fiorini, Fiorillo, Stephany, Raponi, Iacono and/or

Serpa Engage in Conduct Contrary to the Public Interest?

1.

2.

3.

Agueci

Stephany

Wing, Pollen, Fiorillo, Stephany, Fiorini, Raponi, Iacono and Serpa

I.

Conclusions

6

IX.

COALCORP- ANALYSIS AND FINDINGS ON ALLEGATIONS OF INSIDER TRADING,

TIPPING AND CONDUCT CONTRARY TO THE PUBLIC INTEREST

A.

B.

Overview of the Coalcorp Transaction

Were there Material Facts Relating to Coalcorp that were Not Generally

Disclosed?

Agueci

C.

1.

2.

Was Agueci in a Special Relationship with Coalcorp?

Did Agueci have Knowledge of the Coalcorp Material Facts on

January 29, 2008?

D.

Did Agueci Inform, and did Fiorini, Fiorillo, Stephany and/or Raponi

Purchase, Coalcorp Securities, with Knowledge of the Coalcorp Material

Facts?

1.

2.

3.

4.

Fiorini

Fiorillo

Stephany

Raponi

E.

Were Fiorillo and Stephany in a Special Relationship with Coalcorp?

1.

2.

Fiorillo

Stephany

F.

Did Fiorini, Fiorillo, Stephany and/or Raponi Breach subsection 76(1) of

the Act?

G.

Did Agueci, Fiorini, Fiorillo, Stephany and/or Raponi Engage in Conduct

Contrary to the Public Interest?

1.

2.

Agueci

Fiorillo, Stephany, Fiorini and Raponi

H.

Conclusions

X.

LAW AND ANALYSIS ON ALLEGATIONS OF MISLEADING STAFF

A.

B.

Relevant Law

Analysis and Findings

1.

Did Wing Engage in Conduct Contrary to section 122 of the Act?

a.

Failing to disclose his connection to Pollen

b.

Failing to disclose involvement in the significant

trading done by Pollen in numerous jurisdictions

c.

d.

e.

Failing to disclose a beneficial interest in the Pollen

SG Account

Failing to disclose his own personal banking account

in Switzerland

Conclusion

2.

Did Agueci Engage in Conduct Contrary to section 122 of the Act?

a.

Failing to disclose her direct or indirect interest and

involvement in other brokerage accounts, including

the First and Second Secret Accounts

b.

Advising Staff that Iacono did not execute trades on

her behalf in the Second Secret Account when, in

fact, he did and that she did not know what

investments were in this account when, in fact, she

did

7

c.

Advising Staff that she assisted her mother in trading

in the First Secret Account by calling with her mother

on the line and having her mother confirm her

identity when, in fact, Agueci would impersonate her

mother on the phone and make the trades in her

account

d.

e.

Failing to disclose payments, including the nature or

source of payments received and made by her as well

as others on her behalf, including payments provided

to her from the Second Secret Account

Conclusion

3.

Did Wing and Agueci Engage in Conduct Contrary to the Public

Interest?

XI.

DID WING AND IACONO ENGAGE IN FURTHER CONDUCT CONTRARY TO THE

PUBLIC INTEREST?

XII.

LAW AND ANALYSIS ON ALLEGATIONS OF BREACH OF CONFIDENTIALITY

A.

B.

Relevant Law

Analysis and Findings

1.

2.

Submissions of the Parties

Did Agueci engage in conduct contrary to section 16 of the Act and

contrary to the public interest?

C.

Conclusion

XIII. CONCLUSION

8

REASONS AND DECISION

I.

OVERVIEW

A. Introduction

[1]

This was a hearing before the Ontario Securities Commission (the

“Commission”) arising from a Notice of Hearing issued pursuant to sections 127

and 127.1 of the Securities Act, R.S.O. 1990, c. S.5, as amended (the “Act”), in

connection with a Statement of Allegations filed by Enforcement Staff (“Staff”)

on February 7, 2012 against Eda Marie Agueci (“Agueci”), Dennis Wing

(“Wing”), Santo Iacono (“Iacono”), Josephine Raponi (“Raponi”), Kimberley

Stephany (“Stephany”), Henry Fiorillo (“Fiorillo”), Giuseppe (Joseph) Fiorini

(“Fiorini”), John Serpa (“Serpa”), Jacob Gornitzki (“Gornitzki”) and Pollen

Services Limited (“Pollen”) (collectively, the “Respondents”) and Ian Telfer

(“Telfer”).

[2]

In the Statement of Allegations, Staff alleges that the Respondents engaged in

conduct in breach of the Act and contrary to the public interest, including insider

trading and/or tipping contrary to section 76 of the Act. Agueci and Wing are

also alleged to have made misleading statements contrary to section 122 of the

Act and Agueci is alleged to have disclosed information regarding Staff’s

investigation contrary to section 16 of the Act. Staff further alleges that Wing

authorized, permitted or acquiesced in Pollen’s breaches of the Act and is

therefore, deemed to have not complied with Ontario securities law in

accordance with section 129.2 of the Act.

[3]

[4]

On September 20, 2013, the Commission approved a settlement between Telfer

and Staff (Re Eda Marie Agueci et al. (2013), 36 O.S.C.B. 9341).

On September 26, 2013, Staff filed an Amended Statement of Allegations

against the Respondents, which contained substantially similar allegations as

thosearticulated above.

[5]

This hearing was held over 57 days, including three days for closing submissions,

between September 30, 2013 and April 30, 2014 (the “Merits Hearing”). Each

of the Respondents was represented by counsel at the Merits Hearing and each

counsel participated to various degrees throughout, with the exception of

counsel for Pollen, who did not appear or make submissions. Certain limited

portions of the Merits Hearing were heard in camera on an interim basis until we

issued our decision on a confidentiality motion on March 5, 2014. We allowed the

confidentiality motion, in part, and determined that some of the content that was

the subject of the request fell within intimate financial or personal matters or

other matters contemplated in subsection 9(1) of the Statutory Powers

Procedure Act, R.S.O. 1990, c. S.22, as amended (“SPPA”).

[6]

On September 30, 2014, Staff and certain of the Respondents made written

submissions with respect to the application of a recently issued decision of the

Alberta Court of Appeal, which considered, and in some respects reversed, a

decision of the Alberta Securities Commission pertaining to insider trading and

tipping (Walton v. Alberta (Securities Commission), 2014 ABCA 273 (C.A.)

(“Walton”), leave to appeal to SCC requested).

B.

The Allegations

9

[7]

At the conclusion of the Merits Hearing, Staff has, in some instances, described

the allegations against the Respondents more broadly than in the Statement of

Allegations, particularly thoserelating to conduct contrary to the public interest.

The Respondents are entitled to notice of the allegations to which they must

respond and it is not open to Staff to modify the allegations during the hearing

from thosemade in the Statement of Allegations. Accordingly, consistent with

the principles of procedural fairness and the practice of the Commission, we have

confined our analysis to the allegations as set out in the Statement of Allegations

and summarized below.

[8]

Staff alleges that on or before April 17, 2007, while Gornitzki was in a special

relationship with Nu Energy Uranium Corporation (“Nu” or “Nu Energy”),

Gornitzki advised Agueci, other than in the ordinary course of business, of

material facts related to the proposed acquisition of Nu prior to that information

having been generally disclosed, contrary to subsection 76(2) of the Act. Staff

alleges that Agueci subsequentlypurchased Nu securities, contrary to subsection

76(1) of the Act, in her own account and in her mother’s account (the “First

Secret Account”) and failed to advise her employer, GMP Securities L.P.

(“GMP”) of her trades in the First Secret Account, as required by GMP’s

compliance policies. Staff further alleges that Agueci provided material non-

public facts concerning the proposed acquisition of Nu, at a time when Agueci

was in a special relationship with Nu, to Iacono, Raponi, Fiorillo, Wing and

Fiorini, contrary to subsection 76(2) of the Act, each of whom subsequently

purchased Nu securities, contrary to subsection 76(1) of the Act. Furthermore,

Staff alleges that Serpa received material non-public facts concerning the

proposed acquisition of Nu from Iacono, at a time when Iacono was in a special

relationship with Nu, contrary to subsection 76(2) of the Act and that Serpa

subsequently purchased Nu securities, contrary to subsection 76(1) of the Act.

[9]

Staff alleges that on or before May 8, 2007, in her capacity as executive

assistant in the investment banking department of GMP, Agueci became aware of

material non-public facts concerning a proposed acquisition of Energy Metals

Corporation (“EMC”) and advised Iacono, Stephany, Raponi, Wing, Pollen, Fiorini

and Fiorillo, other than in the ordinary course of business, of the material

undisclosed facts related to the proposed acquisition of EMC, contrary to

subsection 76(2) of the Act, each of whom subsequently purchased EMC

securities, contrary to subsection 76(1) of the Act. Staff further alleges that

Serpa received material non-public facts concerning the proposed acquisition of

EMC from Iacono, at a time when Iacono was in a special relationship with EMC,

contrary to subsection 76(2) of the Act and that Serpa subsequently purchased

EMC securities, contrary to subsection 76(1) of the Act. Furthermore, Staff

alleges that Stephany used the material non-public facts to recommend that her

client, S.P., purchase EMC shares and that two other friends of Agueci purchased

EMC shares during the same period.

[10] Staff alleges that on or before May 28, 2007, in her capacity as executive

assistant in the investment banking department of GMP, Agueci became aware of

material non-public facts concerning a proposed three-way business combination

between Yamana Gold Inc. (“Yamana”), Northern Orion Resources Inc.

(“Northern Orion”) and Meridian Gold Inc. (“Meridian”), and advised Wing on

behalf of Pollen and Fiorini, other than in the ordinary course of business, of the

material undisclosed facts related to the proposed three-way business

combination, contrary to subsection 76(2) of the Act. Staff alleges that Wing, via

10

Pollen, subsequently purchased Northern Orion and Meridian securities and

Fiorini subsequently purchased Northern Orion securities, contrary to subsection

76(1) of the Act.

[11] Staff alleges that on or before July 17, 2007, in her capacity as executive

assistant in the investment banking department of GMP, Agueci became aware of

material non-public facts concerning a proposed acquisition of HudBay Minerals

Inc. (“HudBay”), and advised Wing, Pollen, Stephany, Fiorini, Fiorillo, Raponi

and Iacono, other than in the ordinary course of business, of the material

undisclosed facts related to the proposed acquisition of HudBay, contrary to

subsection 76(2) of the Act, each of whom subsequently purchased HudBay

securities, contrary to subsection 76(1) of the Act. Staff further alleges that

Serpa received material non-public facts concerning the proposed acquisition of

HudBay from Iacono, at a time when Iacono was in a special relationship with

HudBay, contrary to subsection 76(2) of the Act and that Serpa subsequently

purchased HudBay securities, contrary to subsection 76(1) of the Act.

Furthermore, Staff alleges that Stephany used the material non-public facts to

recommend that her client, S.P., purchase HudBay shares and that at least one

other friend of Agueci purchased HudBay shares during the same period. Staff

also alleges that Agueci received payments from Wing in connection with his and

Pollen’s profitable trades described above.

[12] Staff alleges that on or before January 29, 2008, in her capacity as executive

assistant in the investment banking department of GMP, Agueci became aware of

material non-public facts concerning a proposed acquisition of Coalcorp Mining

Inc. (“Coalcorp”), and advised Raponi, Stephany, Fiorini and Fiorillo, other than

in the ordinary course of business, of the material undisclosed facts related to

the proposed acquisition of Coalcorp, contrary to subsection 76(2) of the Act,

and that each of them subsequently purchased Coalcorp securities, contrary to

subsection 76(1) of the Act.

[13] Furthermore, Staff alleges that Wing was a person who authorized, permitted or

acquiesced in Pollen’s breaches of the Act with respect to conduct relating to

EMC, Northern Orion, Meridian and HudBay and, as such, Wing is, by virtue of

section 129.2 of the Act, deemed to have not complied with subsection 76(1) of

the Act in respect of Pollen’s conduct.

[14] Also, Staff alleges that Agueci’s brother-in-law, Iacono, assisted Agueci to access

and/or trade in a brokerage account (the “Second Secret Account”) that was

not disclosed to GMP, as required by its compliance policies. Staff alleges that

Agueci’s conduct in arranging, maintaining and failing to disclose to GMP her

interest and trading in the First and Second Secret Accounts was contrary to the

public interest. In addition, Agueci’s ongoing trading in those accounts, as well

as the manner of withdrawals from those accounts, was contrary to the public

interest. Staff also alleges that Iacono’s conduct in assisting Agueci to maintain

and illicitly trade in an account that was not disclosed to GMP, as well as the

manner of withdrawals from this account in allotments of less than $10,000, was

contrary to the public interest.

[15] Staff further alleges that during each of Agueci’s and Wing’s compelled

examinations during Staff’s investigation, they made numerous statements that,

in a material respect, were misleading or untrue or did not state a fact that was

required to be stated or that was necessary to make the statements not

misleading, contrary to section 122 of the Act. In particular, Staff alleges that

11

Wing made misleading statements concerning his activities and involvement with

offshoreentities and other brokerage and bank accounts, including offshore

accounts relating to Pollen. Staff also alleges that Agueci made misleading

statements regarding her interest, involvement and knowledge with respect to

the First and Second Secret Accounts and regarding payments received and

made by her.

[16] Furthermore, Staff alleges that Agueci divulged the nature and content of her

compelled examinations to others who were interviewed by Staff, contrary

section 16 of the Act.

[17] Lastly, and in any event, Staff alleges that all conduct in paragraphs [7] to [16]

is conduct contrary to the public interest.

C.

The Respondents

[18] From 2007 through 2011, Agueci was a resident of Toronto, Ontario and an

employee of GMP. Agueci previously worked at First Marathon Securities Limited

(“First Marathon”) for 14 years, beginning in 1987, until joining GMP in 2002.

While working at First Marathon, Agueci met Stephany and Fiorillo. From 2002 to

2011, Agueci was employed as an executive assistant in the mining group of the

corporate finance department at GMP. Agueci has taken the Canadian Securities

Course.

[19] From 2007 through 2011, Wing was a resident of Toronto, Ontario and the

president, chief executive officer and director of Fort House Inc. (“Fort House”),

an investment dealer registered with the Commission from January 2005 to

January 2012. Previously, Wing worked at First Marathon beginning in 1981. He

later became the Chief Compliance Officer (“CCO”) for First Marathon’s

international operations and held that position for over 15 years. Subsequently,

he became the Chairman of First Marathon International; a position he held for

approximately 20 years. Wing was registered with the Commission as of at least

January 2005, in various categories, but such registrations ended on January 31,

2012 further to Fort House’s suspension that day. Wing also wrote and passed

the CCO Qualifying Exam in 2009 and is a Fellow of the Canadian Securities

Institute. Wing and Agueci had worked at First Marathon prior to 2002, were

friends for some time and during the relevant period had an on-and-off romantic

relationship.

[20] Pollen is a company incorporated in the British Virgin Islands (“BVI”) in 2003,

which is wholly-owned by The Honey Trust, a trust that was settled by Wing in

the BVI. The assets of The Honey Trust include shares of Pollen and Pollen’s

assets included a trading account in Switzerland (the “Pollen SG Account”) at

Societe Generale Private Banking (Suisse) SA (“SG Private”), formerly

Companie Bancaire Geneve (“CBG”), that was opened by Wing in 2003. During

the 2007-2008 period, the Pollen SG Account traded through sub-accounts,

including an account at Fort House (the “SG Fort House Account”). Wing had

sole signing authority over the Pollen SG Account. Therefore, notwithstanding

that Pollen was owned by The Honey Trust, whose beneficiaries are Wing’s two

sons, in 2007 and 2008, Wing had sole authority over all activity in the Pollen SG

Account, including trading.

[21] From 2007 through 2011, Iacono was a resident of Toronto, Ontario. Iacono is

Agueci’s brother-in-law and Serpa’s business partner in S.I.R. Investment Inc.

(“S.I.R. Investment”), a food and beverage distribution company.

12

[22] From 2007 through 2011, Serpa was a resident of Toronto, Ontario. Serpa is

Iacono’s business partner in S.I.R. Investment.

[23] From 2007 through 2011, Raponi was a resident of Toronto, Ontario and a high

school teacher who taught French, English as a second language and Italian.

Raponi is Agueci’s first cousin.

[24] From 2007 through 2011, Stephany was a resident of Ontario. During that time

she worked as a trading assistant at Fort House until November 2007 and then

at Brant Securities Limited from December 2007 to August 2012. Stephany first

became registered in the securities industry in 1981 as a salesperson for

Richardson Greenshields, as it then was. Stephany and Agueci became close

friends after having worked together at First Marathon in the late 1990’s. In May

2004, when she began working at Fort House, Stephany became registered with

the Commission as a dealing representative of an investment dealer. Stephany

continued to hold these registrations in 2007 and 2008 and was registered with

the Commission until August 15, 2012.

[25] From 2007 through 2011, Fiorillo was a resident of Ontario. In 2007 and 2008 he

was the president of Research Management Group, which was a firm that

provided market research and consumer behaviour study services, among other

things. Fiorillo has been registered with the Commission in various capacities

including as a director, officer and dealing representative at an exempt market

dealer/limited market dealer between August 2004 and April 2010. Fiorillo and

Agueci were friends who have known each other for over 20 years.

[26] From 2007 through 2011, Fiorini was a resident of Toronto, Ontario. During that

time, from January 2007 to March 2008, he was a senior employee in investment

banking at Desjardins Securities (“Desjardins”) and was tasked with building its

mining business. Fiorini met Agueci prior to 2007 when he was working at TD

Securities Inc. and they became friends.

[27] From 2007 through 2011, Gornitzki was a resident of Toronto, Ontario. In 2007,

he was an advisor to various corporations seeking financing or engaging in other

corporate transactions, including Nu. At that time, Gornitzki used a boardroom in

the offices of GMP to carry out certain business activities. Gornitzki met Agueci in

the summer of 2006 through Eugene McBurney, the Chairman of GMP, and they

became friends.

II.

PRELIMINARY ISSUES

A. The Standard Of Proof

[28] Staff must prove its allegations on the balance of probabilities, the civil standard

of proof, and the evidence must be sufficiently clear, convincing and cogent (F.H.

v. McDougall, [2008] 3 S.C.R. 41 (“F.H. v. McDougall”) at paras. 46 and 49).

The Panel must scrutinize the evidence with care and determine whether it is

more likely than not that the allegations occurred (ibid at para. 49).

B.

Evidence

[29] At the Merits Hearing, Staff tendered into evidence over 1160 exhibits and called

the following witnesses:



Christine George (“George”), Senior Staff Investigator and Forensic

Accountant who investigated this matter since January 2011;

13



AnthonyFrizelle (“Frizelle”), Chief Executive Officer (“CEO”) and

President of Nu Energy in 2007;

Pasquale (Pat) DiCapo (“DiCapo”), Managing Director at Power One

Capital Markets Limited (“Power One”) in 2007 – involved in the

Nu/Mega Uranium Ltd. transaction;



Richard Patricio (“Patricio”), Executive Vice-President, Corporate and

Legal Affairs at Mega Uranium Ltd. in 2007;



Eugene McBurney (“McBurney”), Chairman of GMP in 2007-2008;

Mark Wellings (“Wellings”), Manager of Investment Banking and Co-

Head of the mining team at GMP in 2007-2008;



Kevin Reid (“Reid”), Senior Vice-President of Investment Banking at GMP

in 2007-2008;

Leo Ciccone (“Ciccone”), Chief Compliance Officer at GMP in 2007-2008;

and

Ron Aiello (“Aiello”), member of the institutional trading group at

Haywood Securities (“Haywood”) and investment advisor to Fiorillo in

2007-2008.

[30] On consent, Staff and the Respondents together submitted the affidavit of

Agueci’s mother sworn November 12, 2013, whose health prevented her from

testifying in person.

[31] Gornitzki, Fiorillo, Stephany and Wing testified on their own behalf. Wing

tendered seven exhibits, Fiorillo tendered five exhibits, Gornitzki tendered six

exhibits and Stephany tendered three exhibits in the course of their direct

evidence.

1.

Hearsay Evidence

[32] Hearsay evidence is admissible in administrative hearings before the

Commission, pursuant to subsection 15(1) of the SPPA, which states:

Subject to subsections (2) and (3), a tribunal may admit as

evidence at a hearing, whether or not given or proven under

oath or affirmation or admissible as evidence in a court,

(a) any oral testimony; and

(b) any document or other thing,

relevant to the subject-matter of the proceeding and may

act on such evidence, but the tribunal may exclude anything

unduly repetitious.

[33] The weight to be accorded to hearsay evidence is determined by the panel, with

care “to avoid placing undue reliance on uncorroborated evidence that lacks

sufficient indicia of reliability” (Sunwide Finance Inc. (2009), 32 O.S.C.B. 4671 at

para. 22, citing Starson v. Swayze, [2003] 1 S.C.R. 722 at para. 115).

2.

Compelled Evidence

[34] We considered the use of compelled evidence in our motion decision issued on

December 13, 2013 (Re Agueci et al (2013), 36 O.S.C.B. 12133 (“Agueci” or

“Compelled Evidence Motion”)). The panel determined that Staff could tender

14

into evidence selected excerpts from transcripts of compelled examinations of

the Respondents who did not undertake to testify in person at the hearing

(Agueci, supra at para. 139). In addition, for the Respondents who chose to

testify at the hearing, Staff was permitted to use the compelled examinations for

the purposeof cross-examinations (Agueci, supra at para. 139). Finally, Staff

was permitted to use excerpts from compelled examinations to provide evidence

regarding the allegations of misleading statements made during the compelled

testimony (Agueci, supra at para. 140).

[35] We remain mindful of evidence law considerations relating to hearsay and the

use of one respondent’s statements against another (Agueci, supra at para.

133). The weight to be afforded to such evidence is to be determined by the

Panel.

3.

Circumstantial Evidence and Inferences

[36] The parties have made a number of submissions on the use of circumstantial

evidence and the drawing of inferences. The parties agree that an inference is

properly drawn if it flows reasonably and logically from proven facts. Their

submissions differ in that Staff refers the Panel to a number of cases in which

they submit that proper inferences were drawn, whereas the Respondents argue

that the inferences that Staff submits the Panel should draw are not reasonably

drawn from the circumstantial evidence in this matter for various reasons.

(a)

Staff’s Submissions

[37] Staff relies on the Commission’s decision in Suman to support its submission that

where there is a civil standard of proof, circumstantial evidence should be

treated as any other kind of evidence and the weight is dependent upon the

strength of the inference that can be drawn from it (Re Suman (2012), 35

O.S.C.B. 2809 (“Suman”) at para. 288). Staff submits that allegations of

improper trading activity, more often than not, turn on circumstantial evidence,

and that the Panel must consider whether it is reasonable to infer the requisite

knowledge exists from certain facts proven by circumstantial evidence (Re

Podorieszach, [2004] A.S.C.D. No. 360 (“Podorieszach”) at paras. 76-77). Staff

cites Landen as an example of a case in which the Court relied upon

circumstantial evidence to draw the inference that Landen possessed and traded

upon material information and convicted him of insider trading (R. v. Landen,

2008 ONCJ 561 (“Landen”) at para. 109).

[38] Staff submits that the Alberta Securities Commission summarised the law on

inference in the following manner in Holtby:

when drawing an inference from circumstantial evidence, we

must ensure that the inference is grounded on proved, not

hypothetical or assumed, facts and is a reasonable one --

one drawn using common sense, human experience and

logic having considered the totality of the evidence and any

competing inferences.

(Re Holtby 2013 ABASC 45 (“Holtby”) at para. 463, rev’d

on other grounds Walton, supra; note principle affirmed in

Walton, supra at para. 27)

[39] It is Staff’s position that the panel in Suman determined that Staff does not have

to bring direct evidence and may prove knowledge based on an opportunityto

15

acquire the information combined with evidence of well-timed, uncharacteristic,

risky and highly profitable trades (Suman, supra at para. 307).

[40] Further, Staff submits that the inferences Staff invites the Panel to draw do not

have to be the only inferences that can be drawn from the evidence and that

“reasonable” inferences are not necessarily the most obvious or the most easily

drawn (Suman, supra at para. 308, citing R. v. Munoz (2006), 86 OR (3d) 134,

[2006] OJ No 446 at para. 31).

[41] Staff cited a number of insider trading cases in which there were inferences of

knowledge based on circumstantial evidence, including some decided in the

United States (“U.S.”) and the United Kingdom (“U.K.”). In Suman, Staff

submits, the Commission considered evidence of Suman’s opportunity to access

material information and the respondents’ well-timed, highly uncharacteristic,

risky and highly profitable purchases of securities together with evidence

suggesting that Suman had learned of the material information, and evidence of

consciousness of guilt to draw an inference of knowledge of the material fact

(Suman, supra at paras. 344-345). Staff submits that in Larrabee, in applying

the criminal standard of proof, the U.S. Court of Appeal looked at the

circumstances surrounding the alleged insider tip, including:

1.

2.

3.

4.

5.

6.

access to information

relationship between the tipper and the tippee;

timing of contact between the tipper and the tippee;

timing of the trades;

pattern of the trades; and

attempts to conceal either the trades or the relationship between the

tipper and the tippee.

(United States v. Larrabee, 240 F.3d 18 (1st Cir Ct App 2001) (“Larrabee”) at

21)

[42] Staff submits that in Musella, a U.S. court relied on the most likely inference that

could be drawn from the evidence and stated that “any innocent explanation

incorporating the proof offered is less plausible than an inference of wrongdoing”

(Securities and Exchange Commission v. Musella, 578 F Supp. 425 at 441 (SDNY

1984) (“Musella”)). Staff argues that the same analysis was applied by the

United Kingdom Financial Services Authority (the “FSA”) Regulatory Decisions

Committee in its decision in respect of an insider trading case. In that matter,

Staff submits that the FSA concluded that the respondent had the “opportunity

and ability” to log into the executives’ email accounts and that the circumstantial

evidence relating to the uncharacteristic, substantial, exceedingly risky trade was

strong enough to infer that he did so (UK Financial Services Authority(“FSA”)

Final Notice to Mr. John Shevlin (July 1, 2008) (“Shevlin”) at paras 11.1-11.2).

[43] Staff submits that in Eng, a U.S. Securities and Exchange Commission (“SEC”)

case, there was a “startling pattern of trading” by the insider’s friends and family

while merger negotiations were underway, which supported the inference that

the insider was tipping his friends and family (Re Eng, 53 SEC 709 (1998)

(“Eng”) at 716).

[44] Staff argues that in Downe, in denying a motion to overturn the jury’s finding of

insider trading, the U.S. District Court considered the close friendship between

16

the alleged tipper and the tippee and the pattern of contact and proximate

trading:

the evidence showed that Downe was a close friend of

Sullivan and was a Director of Kidde, had contact with

Sullivan at crucial times during the takeover period, and

purchased large amounts of warrants at considerable

expense and risk to himself either immediately or soon after

his contact with Sullivan. This evidence permitted the jury to

conclude that Downe possessed inside information.

(Securities and Exchange Commission v Downe, 969 F Supp

149 (“Downe”) at 154 (SDNY 1997), 1997 US Dist LEXIS

8629, aff’d Securities and Exchange Commission v Warde,

151 F.3d 42 (2d Cir Ct App 1998), 1998 US App LEXIS

15991 (“Warde”))

[45] Staff submits that, on appeal to the U.S. Court of Appeals, the Court considered

and rejected the argument that any conversations with the insider were based

on public knowledge and determined that circumstantial evidence demonstrated

a pattern in which Downe received nonpublic information, then communicated

with Warde, and then both Warde and Downe purchased warrants, such that the

parallel trading of tipper and tippee supported the inference (Warde, supra at

58).

[46] Further, Staff cites Musella, a U.S. District Court request for a preliminary

injunction to freeze profits from allegedly illegal insider trades. In granting the

injunction, Staff argues, the Court emphasized the “remarkable overlap and

seeming orchestration” of two defendants’ trading. The U.S. District Court

decided:

during the entire period at issue [...] the Covellos purchased

only securities of companies involved in matters for which

Sullivan & Cromwell had been retained to provide legal

services[...these] were purchases related to as yet

undisclosed merger or acquisition transactions which in

some way involved Alan Ihne’s law firm.

[...]

The evidence offered, like pieces to a puzzle, takes on

significance only when one attempts to arrange the

individual proof into some coherent, larger picture.

(Musella, supra at 440-41)

[47] Staff submits that in S.E.C. v. Maio the court noted that, although the tippee

testified at trial that she had been following the subject stock for many months,

the trading by the defendant only began after the contact with the tipper

(Securities and Exchange Commission v. Maio, 1993 US Dist LEXIS 21379 at

para 48).

[48] Finally, Staff submits that attempts to conceal and mislead investigators can be

considered as circumstantial evidence supporting an inference of wrongdoing. In

Suman, Staff submits, the panel determined that “a person’s conduct after

committing an alleged offence can show a consciousness of guilt that will support

17

an inference that the person committed the relevant offence” (Suman, supra at

para. 340). Staff argues that in the case of Downe, Downe’s attempts to conceal

his purchases from the SEC supported the inference that Downe was in

possession of inside information when he made these trades (Downe, supra at

153).

(b)

The Respondents’ Submissions

[49] Wing and Agueci’s counsel respectively rely upon John v. R. for the submission

that in considering the superiority of direct versus circumstantial evidence, direct

evidence contains the error of unreliability of human testimony, whereas

circumstantial evidence suffers from the same error in addition to the difficulty of

drawing a correct inference (John v. R., [1971] S.C.R. 781 at 788 “John v. R.”).

Counsel for Agueci argues that the direct evidence of the Respondents, at most,

suggests Agueci recommended that they purchase a security or advised that she

was purchasing a security, but not that she provided material non-public

information.

[50] Fiorillo’s counsel submits that direct evidence, if believed, resolves one or more

of the matters in issue and that because Fiorillo’s testimony is credible, it

therefore resolves this proceeding (R. v. Cinous, [2002] SCJ No. 28 at para. 88).

In any event, counsel argues that in considering circumstantial evidence, the

Panel must first determine what primary facts are proven and then determine

what rational, non-speculative inferences flow from the primary facts (R. v.

Humphrey, [2011] O.J. No. 2412 at para. 148).

[51] Fiorillo and Gornitzki submit that an inference is properly drawn if it flows

reasonably and logically from a fact or group of facts, established by clear,

cogent and compelling evidence and must be more than mere conjecture or

speculation (R. v. Morissey, [1995] O.J. No. 639 at para. 52 (“Morissey”);

Suman, supra at paras. 293-295). Similarly, counsel for each of Wing, Agueci

and Raponi, respectively, submits that only inferences that are “logically and

reasonably drawn” from established evidence are permitted (Morissey, supra at

para. 52). Therefore, Fiorillo, Wing and Agueci argue, inferences are improper

where (i) they are based on assumed facts which have not been proven; and (ii)

the primary facts are not sufficiently linked to the inferences drawn, such that

they are not reasonably and logically drawn from established facts (Suman,

supra at para. 296-300; R. v. Munoz, 2006 3269 (Ont SCJ) (“Munoz”) at

paras. 25-26 and 28).

[52] Counsel for Agueci submits that the inferences, which Staff invites the

Commission to draw, are unsupportable and constituteimpermissible

speculation. Agueci made submissions with respect to Nu, EMC, Northern Orion

and HudBay, which, she argues, are examples of instances in which Staff’s

written submissions invite the Panel to draw improper inferences.

[53] Counsel for Fiorillo takes the position that in cases where allegations of insider

trading are supported only by circumstantial evidence, the evidence must

establish both the opportunity to have received material non-public information

and “well-timed, highly uncharacteristic, risky and highly profitable trades”

(Suman, supra at para. 307). As a result, he submits that the Panel must take

into account the entire factual matrix in which trades are made, including

Fiorillo’s character, reputation, that trades are not deviations from Fiorillo’s

18

standard practices, and are not riskier or more profitable than other trades in the

context of his net worth and risk appetite.

[54] Counsel for Wing submits that the Commission has identified a particular set of

circumstances that could lead to the inference that a respondent engaged in

insider trading, which is referred to throughout Wing’s submissions as the

“Suman Factors”, including that:

1.

2.

the respondent had “access” to the material undisclosed information;

the respondent’s trades were well-timed in connection with when he/she

gained access to the material information and when the material

information became publicly disclosed;

3.

4.

there was a fundamental shift in the respondent’s trading pattern;

the respondent demonstrated suspicious after-the-fact conduct or a

consciousness of guilt; and

5.

the respondent’s alternative explanation is implausible.

[55] Wing’s counsel submits that, with respect to the first factor, the evidence

supports that Wing and Agueci were having a relationship in April through

August of 2007. In relation to the second, Wing argues that trades can be well-

timed in two ways: by taking place shortly after a respondent had contact with

the alleged tipper or shortly before material information is publicly disclosed. The

former, Wing’s counsel submits, in previous cases has been within minutes to a

day of contact (Suman, supra at para. 105 and 1259; Re Hu, 2011 BCSECCOMM

355 (“Hu”) at para. 176; Larrabee supra at 1 and 3; Re Donald (2012), 35

O.S.C.B. 7383 at paras. 6-7; Downe, supra at para. 3) and the latter, in previous

cases, has been found to be between minutes to five days of general disclosure

(Suman, supra at para.4; Larabee, supra at 2; Warde, supra at 1; and Donman

v. BCSC, (1998) 6551 at paras. 13-14).

[56] Wing’s counsel submits that to support a finding of insider trading, the third

factor requires an aberrational or fundamental shift in the respondent’s trading

pattern, including consideration of the amount of purchases, a history of

purchasing large quantities, the respondent’s holdings and if trades were

uncharacteristic, risky and highly profitable (SEC v. Moran, 922 F Supp 867 at 32

and 34; Suman, supra at paras. 204 and 207; Re Keith, 2012 ABASC 382

(“Keith”) at para. 100; Landen, supra at para. 146; etc.). With respect to the

fourth factor, Wing submits that a respondent’s conduct after committing an

alleged offence can demonstrate a “consciousness of guilt” that supports an

inference of misconduct, such as wiping computer data, concealing the

relationship between respondents, and purchasing securities in someone else’s

name (Suman, supra at para. 340; Larabee, supra at 4-5; Warde, supra).

Finally, Wing’s counsel submits, as does Agueci’s and Gornitzki’s, that if a

respondent puts forth an equally plausible alternative explanation, it would be

improper for the Panel to infer improper intent (Podorieszach, supra at para. 78).

[57] Counsel for Gornitzki concurs that past cases involving insider trading provide

guidance as to when an inference of misconduct may be properly drawn,

including from established evidence of: a) access and opportunityto acquire the

material information; b) after-the-fact consciousness of guilt; and c) well-timed,

uncharacteristic, highly risky and profitable trades (Suman, supra at paras. 301-

302). Gornitzki made submissions in respect of each. First, Gornitzki submits

19

that an inference may be supported when the tipper and tippee are close, such

as: married (Suman), friends for at least ten years (Downe, Warde, Maio,

Landen, supra), familial (Eng), vacationing together (Larrabee, Musella, Maio)

and/or financial connections (Larrabee, Maio, Eng, Landen). Gornitzki submits he

and Agueci are not close, but rather “friendly” acquaintances.

[58] Second, counsel for Gornitzki submits that an inference of misconduct may be

drawn when evidence establishes a “consciousness of guilt”, such as attempts to

conceal the trading or evidence thereof (Suman, supra at para. 340). In respect

of that factor, Gornitzki submits his conduct after speaking about Nu is

consistent with innocence, not guilt. In furtherance of that submission, he argues

that Agueci openly emailed him from a compliance-monitored setting, telling him

she bought Nu on April 17, 2007, expressing thanks and the email exchange that

followed was open, casual and joking.

[59] Fiorini’s counsel submits that Staff has mischaracterized unproven assumptions

as circumstantial evidence. Specifically, he submits that telephone calls received

by Fiorini from an unidentified source cannot establish that these were contact

between Agueci and Fiorini. Fiorini submits that, if he and Agueci discussed the

securities at issue, it is more likely than not that she merely provided investment

advice.

[60] Raponi’s counsel submits that the direct evidence of Raponi and Agueci is that

material non-public information was not disclosed and she adopts submissions of

other respondents with respect to the difference between circumstantial evidence

and speculative inferences. Raponi submits that if an equally plausible

alternative explanation has been provided for the trading, Staff has not met their

onus. In this case, Raponi’s counsel submits, the circumstantial evidence relied

upon by Staff is primarily grounded in the relationship between Agueci and

Raponi, the type of trading and timing of trading. Counsel argues that the

inferences Staff seek to have drawn are speculation, conjecture, and/or the facts

are not sufficiently linked to the inferences because Staff has failed to properly

consider the totality of the evidence and the competing inferences that are

consistent with the direct evidence – namely, that Agueci recommended that

Raponi buy the stock. Further, Raponi submits that her conduct after the alleged

breaches is consistent with her honest belief that she had done nothing wrong

and, by admission, bought and sold on the basis of generic stock

recommendations.

[61] Counsel for Stephany submits that with circumstantial evidence, there is an

inferential gap between the evidence and the matter to be established and if the

gap is too large in that additional unproven facts must be assumed to bridge it,

the inference cannot be made because it is simply conjecture (R. v. Arcuri,

[2001] 2 S.C.R. 828 at para. 23; Morrissey, supra at para. 52). Counsel for

Stephany submits that the British Columbia Securities Commission has observed

that “sequence does not prove causation” and therefore, the mere fact that one

event chronologically follows another is insufficient to conclude that the first is

related to the second (Re Canaco Resources Inc. 2013 BCSECCOM 310 at para.

115).

[62] Serpa’s counsel adopts and relies on arguments of general application made by

other Respondents, to the extent that they apply to Serpa. Serpa submits that

there is no evidence that material time-sensitive information was ever

communicated to him.

20

[63] Iacono’s counsel submits that Staff relies upon tenuous circumstantial evidence,

from which they draw inappropriate inferences. For example, he argues that

Iacono’s placement of a stop loss on his position in EMC to limit potential loss is

inconsistent with Staff’s inference that Iacono’s purchase was extraordinarily

risky. He submits that the more plausible explanation is that Agueci

recommended stocks to Iacono and not that material non-public information was

conveyed by Agueci.

(c)

Legal Analysis and Conclusions

[64] The Ontario Court of Appeal in Morrissey stated that:

the trier of fact may draw factual inferences from the

evidence. The inferences must, however, be ones which can

be reasonably and logically drawn from a fact or group of

facts established by the evidence. An inference which does

not flow logically and reasonably from established facts

cannot be made and is condemned as conjecture and

speculation.

(Morrissey, supra at para. 52)

[65] The Commission has previously considered the use of circumstantial evidence

and the inferences that may be properly drawn from that evidence. We agree

with the Commission’s determination in Suman that the panel can properly draw

inferences “that are reasonably and logically drawn from the facts established by

the evidence” (Suman, supra at para. 306). Such inferences must be established

by clear, cogent and compelling evidence and must be more than mere

conjecture or speculation (Suman, supra at paras. 293-295, citing Morissey,

supra at para. 52 and Watt’s Manual of Criminal Evidence, 2006, section 9.01, at

p. 42).

[66] In Suman, the panel noted that “[i]n cases where there is a civil standard of

proof, circumstantial evidence is treated just as any other kind of evidence and

the weight accorded to it depends on the strength of the inference that can be

drawn from it” (Suman, supra at para. 288, citing Alan W. Bryant, Sidney N.

Lederman and Michelle K. Fuerst, Sopinka, Lederman & Bryant: The Law of

Evidence in Canada, 2d ed (Markham: LexisNexis Canada, 1999) at 41).

[67] We concur with the Commission’s decision that findings of whether it is more

likely than not that a respondent has knowledge of a material fact can be based

on inferences reasonably and logically drawn from the combined weight of the

evidence (Suman, supra at para. 309). As noted in Holtby, “[p]ieces of evidence,

each by itself insufficient, may . . . when combined, justify the inference that the

facts exist.” (Holtby, supra at para. 463; rev’d on other grounds Walton, supra).

We agree with Fiorillo’s submission that we must take into account the entire

factual matrix before us in determining whether it is more likely than not that a

respondent traded with knowledge of a material fact that was not generally

disclosed, while in a special relationship with the issuer.

[68] We note that the panel in Suman determined, in the circumstances of that case,

that:

Knowledge of an undisclosed material fact may be properly

inferred based on circumstantial evidence that includes proof

of the ability and opportunity to acquire the information

21

combined with evidence of well-timed, highly

uncharacteristic, risky and highly profitable

trades.[emphasis added]

(Suman, supra at para. 307)

In our view, the panel in Suman identified a non-exhaustive list of potential

circumstantial evidence which could support a reasonable inference of knowledge of an

undisclosed material fact by a respondent. Each case must be considered in light of the

circumstances and the facts proven therein. Therefore, we do not accept that trades

must be proven to be “highly uncharacteristic, risky and highly profitable trades” in

every case. In this matter, we considered trades made by certain experienced and

sophisticated investors who had large and varied portfolios, such that potentially

improper trades may not necessarily appear uncharacteristic or risky for such an

investor. As stated by the Alberta Court of Appeal in Walton, to determine if a trading

pattern is anomalous one should consider other events and news concerning the

business and the personal financial circumstances of the particular investor (Walton,

supra at para. 29). We also note that in this matter we consider allegations relating to

transactions which did not ultimately crystallize, such that passing of material facts

could have occurred but would not result in highly profitable trades. In our view,

circumstantial evidence of opportunity to acquire knowledge of a material undisclosed

fact, combined with evidence of well-timed and profitable trades, which are based on

proven facts that are sufficiently linked to the inferences, can lead to a reasonably and

logically drawn inference of knowledge.

[69] We found certain of the U.S. cases that Staff and/or the Respondents referred us

to be relevant in the circumstances. While those cases are not binding on the

Commission, we find them helpful in discussing the circumstances in which one

can properly infer knowledge of material non-public information. For instance, in

Larabee the court noted that “opportunityalone does not constituteproof of

possession, opportunityin combination with circumstantial evidence of a well-

timed and well-orchestrated series of events, culminating with successful stock

trades, creates a compelling inference of possession by the tipper” (Larrabee,

supra at 21, citing Warde, supra at 46-49, SEC v. Singer, 786 F.Supp.1158,

1164 (S.D.N.Y. 1992) and Musella, supra at 440-441).

[70] Our approach to circumstantial evidence in this case shall be that we can draw

inferences from the evidence submitted to us, provided those inferences arise

reasonably and logically from the facts established by the evidence. We reviewed

the cases submitted to us by the parties concerning principles applied in other

insider trading matters, but ultimately our decision is based upon the unique

facts and circumstances of this case. Our conclusions in this matter shall be

based upon the combined weight of clear, convincing and cogent evidence and

the findings we have made, on a balance of probabilities (Suman, supra at para.

309; F.H. v. McDougall, supra at paras. 46 and 49).

4.

Similar Fact Evidence

[71] Staff submitted that the Panel is entitled to consider and rely on the “similar

fact” evidence and findings in one allegation to support the inference that Agueci

tipped the other respective Respondents as to the alleged material facts in other

allegations. Staff’s secondary argument is that similar fact evidence may also be

considered between or among various Respondents for one particular

transaction.

22

[72] The parties have made a number of submissions on the use of similar fact

evidence and the inferences that may or may not be drawn therefrom.

[73] The parties agree that the law on the use of similar fact evidence has been

stated by the Supreme Court of Canada, as follows:

Similar fact evidence is thus presumptively inadmissible. The

onus is on the prosecution to satisfy the trial judge on a

balance of probabilities that in the context of the particular

case the probative value of the evidence in relation to a

particular issue outweighs its potential prejudice and thereby

justifies its reception.

(R v. Handy, [2002] 2 S.C.R. 908 at para. 55)

[74] The Panel has considered the submissions of the parties in respect of similar fact

evidence, all of which were drawn from cases involving criminal or quasi-criminal

prosecutions and none of which was in respect of an administrative tribunal

hearing. In the view of the Panel, in the circumstances of this matter, the

question of the use of similar fact evidence and the inferences that may or may

not be drawn therefrom does not assist the Panel in its consideration of the

allegations of tipping and insider trading.

[75] In light of our determination above, we will not consider the proposed similar

fact evidence in this matter. We will consider the evidence tendered to us by the

parties with respect to each allegation, and for each of the Respondents,

separately. This finding is not intended to detract from our ability to make

findings upon considering the combined weight of the relevant evidence tendered

for each allegation in respect of each Respondent.

5.

Credibility

(a) Staff’s Submissions

[76] Staff submits that the Respondents’ denial that they had knowledge of

undisclosed material facts concerning the relevant reporting issuers makes

credibility a crucial issue (Suman, supra at para 314). Staff submits that

credibility assessments should be based on both demeanour of the witness in

testimony and whether the testimony is in harmony with the facts and

circumstances of the case.

[77] Staff submits that assessing the credibility of a party witness was examined in

the case of Springer v. Aird & Berlis LLP, which cited with approval the statement

of the British Columbia Court of Appeal:

[t]he Judge is not given a divine insight into the hearts and

minds of the witnesses appearing before him. Justice does

not descend automatically upon the best actor in the witness

box. The most satisfactory judicial test of truth lies in its

harmony with the preponderance of probabilities disclosed

by the facts and circumstances in the conditions of the

particular case.

(Springer v. Aird & Berlis LLP (2009), 96 OR (3d) 325 at

para. 14, citing R. v. Pressley, [1948] B.C.J. No. 63, 94

C.C.C. 29 (C.A.) at para. 12)

23

[78] In Suman, Staff submits, the Commission relied on the above passage and

carefully considered whether the evidence put forward by the respondents was

“in harmony with the preponderance of probabilities disclosed by the facts and

circumstances” of that case. In a number of instances, the Commission rejected

the respondents’ testimony or evidence or found it evasive, not consistent with

the weight of the evidence or not believable. In particular, Staff relies on the

Commission’s rejection of the respondents’ evidence in Suman that their

impugned purchases of securities were based on analysis of publicly available

information, stating that their explanation: “was most likely an after-the-fact

attempt to provide an innocent explanation for the Respondents’ purchases of

the Molecular Securities.” (Suman, supra at para. 316(c)).

[79] Staff argues that a witness’ demeanour may also inform the trier of fact’s

assessment of credibility. The Ontario Superior Court of Justice dealt with this

type of analysis in R. v. Anderson and noted that the trial judge had relied upon

her observations that under cross-examination the accused was “anticipatory

and arrogant and at times argumentative. She went on to indicate 'the words

themselves fail to adequately reflect the tone and timing and nature of the

immediate, clipped times [sic] confrontational responses.’”(R. v. Anderson,

[2007] O.J. No. 2622 at para. 19).

[80] However, Staff submits that while it is a crucial issue, credibility findings cannot

be the sole basis for a finding of a fact in issue (F.H. v. McDougall, supra at para.

95, cited in Suman, supra at para. 318).

[81] Staff submits that the Commission had the opportunityto make observations of

the testimony of Wing, Fiorillo, Gornitzki and Stephany and to assess whether

their evidence was “in harmony with the preponderance of probabilities disclosed

by the facts and circumstances”. Staff makes submissions with respect to the

credibility of each of the respondents who testified and argues that the direct

evidence of each did not accord with the preponderance of the evidence. Citing

examples, Staff submits Wing’s explanations were unbelievable, Fiorillo and

Gornitzki were argumentative, evasive and not credible and Stephany was

argumentative, unbelievable and generally unable to provide plausible

explanations for purchasing impugned shares.

[82] Certain of the Respondents argue that it is not open to Staff to suggest that a

respondent ought not to be believed on a point if Staff did not posethat question

to the respondent, in accordance with the principle in Browne v. Dunn ((1894), 6

R. 67 (H.L.) (“Browne v. Dunn”)). In responseto thosesubmissions, Staff

argues that the principle in Browne v. Dunn is designed to provide fairness to

witnesses and parties by requiring counsel to give notice to witnesses whom the

cross-examiner intends later to impeach (R. v. Sadikov, [2014] O.J. No. 376

(CA) (“Sadikov”) at para. 49). Staff relies on the Court of Appeal’s decision

that:

While counsel’s failure to follow the Browne v. Dunn rule

may resonate in a trial judge’s findings of fact at the end of

the trial, neither the rule nor any analogy to it prohibits

findings of fact adverse to a witness’ credibility absent

compliance with Browne v. Dunn.

(Sadikov, supra at para. 50)

24

[83] Staff also submits that the principle in Browne v. Dunn is “a rule of fairness that

prevents the “ambush” of a witness by not giving him an opportunityto state his

position with respect to later evidence which contradicts him on an essential

matter” but is not, an absolute rule (R. v. Verney, [1993] O.J No. 2632 (CA)).

[84] Furthermore, certain of the Respondents argue that it was improper for Staff to

attempt to discredit Agueci’s compelled testimony, which states that she did not

give material non-public information to anyone. Certain of the Respondents take

the position that Agueci is to be considered Staff’s own witness by virtue of the

fact that Staff tendered excerpts of her compelled testimony into evidence at the

Merits Hearing. They rely on the decision in Walker which states: “Crown counsel

is not entitled to call his own witness a liar and invite the jury to believe the very

oppositeof what the witness said.” (R. v. Walker, [1994] O.J. No. 827 at para.

31 (“Walker”)). In responseto those submissions, Staff argues that Staff did

not tender into evidence the part of Agueci’s compelled testimony that contained

the denial referred to by the Respondents. Rather, counsel for Wing filed that

portion of the compelled testimony (Exhibit 1132-B at p. 237, Q. 1088). Staff

also submits that the Walker decision addressed a criminal matter and may not

be applicable in the circumstances of this administrative proceeding. Lastly, Staff

submits that Walker can be distinguished from this case, where there is ample

circumstantial evidence in this matter from which the Panel can draw the

reasonable and logical conclusion that a tip was given in many instances and,

therefore, there is a sufficient basis in the evidence to disbelieve Ms. Agueci’s

denial.

(b)

The Respondents’ Submissions

[85] Fiorillo’s counsel submits that Fiorillo was straightforward and credible and that

his direct evidence was completely consistent with the preponderance of all of

the relevant evidence. Any suggestion that a witness’ memory would have been

better closer to the event, he submits, makes sense in a civil proceeding where

there have been pleadings, production of documents and refreshing of memory.

However, in the context of a compelled examination, which was closer in time to

the alleged misconduct, there were no pleadings, production of documents or

review before attendance. This should be contrasted, Fiorillo argues, with

evidence at the hearing for which there are known allegations and the witness

has the ability to refresh his or her recollection.

[86] Furthermore, Fiorillo’s counsel submits that while Fiorillo disagreed with the

measuring yardstick proposed by Staff, which is of marginal, if any, relevance,

his answers were honest and unremarkable. Fiorillo also takes issue with Staff’s

submission that he refused to admit topics such as phone calls with Agueci. He

argues that he made hundreds of trades a year in his portfolio and his contacts

with Agueci were part of the normal course of his daily life. Witnesses are

legitimately open to criticism if, Fiorillo submits, they “over-egg the soufflé” in

this manner and purport to deliver detailed, self-serving accounts of what would

have been normal daily events. Therefore, he argues it is not fair or legitimate to

criticize him for not having an actual recollection of everyday events and not

purporting to embellish with a reconstructed version. On the contrary, Fiorillo

submits, he testified that if Agueci had purported to give him illicit inside

information he would have gone to his friend McBurney, which is cogent and

credible, and that evidence makes eminent sense because it would have been

outside the range of normal.

25

[87] Fiorillo’s counsel submits that as a matter of fairness, if Staff wanted to assail his

credibility, Staff ought to have put matters squarely to him with respect to each

transaction, whether Agueci told him the material facts that they allege to have

been disclosed. In oral closing submissions, Fiorillo’s counsel submits that four

questions ought to have been put to Fiorillo, for example: “I put it to you that

Ms. Agueci told you about Pala’s bid coming for Coalcorp. What do you say?”

Fiorillo’s counsel acknowledges that Staff is not obliged to do that, but submits

that it is a principle of fairness that if Staff does not pose the question, Staff

cannot later suggest that he ought not to be believed on the point.

[88] As stated above, counsel for Fiorillo also takes the position that it was improper

for Staff to attempt to discredit Agueci’s compelled testimony, in which she

stated that she did not give material non-public information to anyone. He relies

on the Walker decision to support the proposition that Staff is not entitled to call

Agueci, its own witness, a liar and invite the Panel to believe the very oppositeof

what she said (Walker, supra at para. 31).

[89] Stephany’s counsel submits that Stephany was a credible witness who was under

no compulsion to testify, but did testify, even after she left the securities

industry. Stephany takes the position that she gave explanations for her trading

in EMC and HudBay, which were plausible and corroborated by evidence, and

that she candidly acknowledged she had no specific recollection with respect to

Coalcorp, but the record of public filings rebuts Staff’s conclusions and provides

context. Stephany’s counsel also argues that she was candid in her

acknowledgement of frequent contact with Agueci and suggests that the Panel

consider that there have been no allegations of misleading Staff, nor has Staff

contended that she made statements or exhibited conduct reflecting a

consciousness of guilt.

[90] Agueci’s counsel submits that if Staff is found to have made out the necessary

elements of section 16 of the Act against Agueci, it will have done so on the

basis of the evidence of respondents whose testimony it seeks to discredit in

relation to other allegations. Counsel for Agueci submits that Staff’s arguments

in respect of the credibility of the Respondents who traded are not persuasive

and the fact that the Respondents simply disagree with Staff’s version of events

is not a sufficient basis on which to discount the direct evidence of those

Respondents where the alternative explanation is entirely reasonable and

supported by the evidence, particularly where Staff relies upon the evidence of

these same Respondents for other purposes.

[91] Counsel for Gornitzki submits that, as the Panel noted in its motion decision, oral

evidence of the Respondents is the best evidence of their conduct (Re Eda Marie

Agueci (2013), 36 O.S.C.B. 12133 at paras. 9, 131 and 139). Gornitzki takes the

position that his testimony was clear, cogent and convincing and that

circumstantial evidence, read reasonably and fairly, corroborates his testimony.

Counsel for Gornitzki agrees with Staff that a witness’ testimony is to be

assessed by considering the witness’ demeanour in testimony and consistency of

that testimony with other evidence and circumstances of the proceeding

(Suman, supra at paras. 315-316). Gornitzki’s counsel submits that his

testimony was honest, forthcoming and in harmony with the preponderance of

the evidence. Specifically, Gornitzki submits that he acknowledged the limitation

of his memory where he was unable to recall details of some events. However,

he argues that where his evidence conflicts with that of others, his evidence

26

should be preferred. For example, he submits that his evidence ought to be

preferred over Frizelle’s, because of the weaknesses in Frizelle’s memory.

(c)

Legal Analysis and Conclusions

[92] We have considered all submissions on the issue of credibility and note that in

weighing conflicting testimony of the witnesses in this matter, we have

considered whether the evidence is in harmony with the preponderance of

probabilities disclosed by the proven facts and circumstances in this case

(Suman, supra at para. 316).

[93] We are mindful of the rule in Browne v. Dunn and have considered the totality of

the evidence in coming to our conclusions.

[94] With respect to the parties’ submissions on the Walker decision, that it would be

improper for Staff to attempt to discredit Agueci’s denial of tipping in her

compelled testimony, we find that Staff did not file that part of the transcript

that the Respondents stateis pertinent, namely Agueci’s denial. Therefore, that

statement by Agueci was not part of Staff’s evidence.

[95] In any event, we are not persuaded that the principle articulated in Walker

applies in the administrative tribunal context where a respondent chooses not to

testify and Staff tenders into evidence their compelled examination as a

substitute.

III. THE ISSUES

[96] There are ten respondents in this matter and each is alleged to have engaged in

certain conduct contrary to the Act and/ or the public interest. The issues, as

considered for each of the Respondents include:

1.

Did Gornitzki, while in a special relationship with Nu, inform Agueci of

material facts that were not generally disclosed, contrary to subsection

76(2) of the Act and act contrary to the public interest?

2.

Did Agueci:

(a)

(b)

(c)

(d)

(e)

while in a special relationship with Nu, purchase or sell securities of

Nu with the knowledge of material facts that were not generally

disclosed, contrary to subsection 76(1) of the Act and act contrary

to the public interest?

while in a special relationship with Nu, inform Iacono, Raponi,

Wing, Fiorini and/or Fiorillo of material facts relating to Nu that

were not generally disclosed, contrary to subsection 76(2) of the

Act and act contrary to the public interest?

while in a special relationship with EMC, inform Iacono, Raponi,

Stephany, Wing, Pollen, Fiorini and/or Fiorillo of material facts

relating to EMC that were not generally disclosed, contrary to

subsection 76(2) of the Act and act contrary to the public interest?

while in a special relationship with Northern Orion and/or Meridian,

inform Pollen and Fiorini of material facts relating to Northern Orion

and/or Meridian that were not generally disclosed, contrary to

subsection 76(2) of the Act and act contrary to the public interest?

while in a special relationship with HudBay, inform Iacono, Raponi,

Stephany, Wing, Pollen, Fiorini and/or Fiorillo of material facts

27

relating to HudBay that were not generally disclosed, contrary to

subsection 76(2) of the Act and act contrary to the public interest?

(f)

while in a special relationship with Coalcorp, inform Raponi,

Stephany, Fiorini and/or Fiorillo of material facts relating to

Coalcorp that were not generally disclosed, contrary to subsection

76(2) of the Act and act contrary to the public interest?

(g)

(h)

mislead Staff contrary to subsection 122(1)(a) of the Act and act

contrary to the public interest?

divulge the nature and content of her compelled examinations to

others, contrary section 16 of the Act and act contrary to the public

interest?

3.

Did Iacono:

(a)

while in a special relationship with Nu, inform Serpa of material

facts that were not generally disclosed, contrary to subsection

76(2) of the Act and act contrary to the public interest?

(b)

while in a special relationship with Nu, purchase or sell securities of

Nu with the knowledge of material facts that were not generally

disclosed, contrary to subsection 76(1) of the Act and act contrary

to the public interest?

(c)

while in a special relationship with EMC, inform Serpa of material

facts that were not generally disclosed, contrary to subsection

76(2) of the Act and act contrary to the public interest?

(d)

while in a special relationship with EMC, purchase or sell securities

of EMC with the knowledge of material facts that were not

generally disclosed, contrary to subsection 76(1) of the Act and act

contrary to the public interest?

(e)

(f)

while in a special relationship with HudBay, inform Serpa of

material facts that were not generally disclosed, contrary to

subsection 76(2) of the Act and act contrary to the public interest?

while in a special relationship with HudBay, purchase or sell

securities of HudBay with the knowledge of material facts that were

not generally disclosed, contrary to subsection 76(1) of the Act and

act contrary to the public interest?

(g)

engage in conduct relating to the Second Secret Account that was

contrary to the public interest?

4.

Did Serpa:

(a)

while in a special relationship with Nu, purchase or sell securities of

Nu with the knowledge of material facts that were not generally

disclosed, contrary to subsection 76(1) of the Act and act contrary

to the public interest?

(b)

while in a special relationship with EMC, purchase or sell securities

of EMC with the knowledge of material facts that were not

generally disclosed, contrary to subsection 76(1) of the Act and act

contrary to the public interest?

28

(c)

while in a special relationship with HudBay, purchase or sell

securities of HudBay with the knowledge of material facts that were

not generally disclosed, contrary to subsection 76(1) of the Act and

act contrary to the public interest?

5.

Did Raponi:

(a)

(b)

(c)

(d)

while in a special relationship with Nu, purchase or sell securities of

Nu with the knowledge of material facts that were not generally

disclosed, contrary to subsection 76(1) of the Act and act contrary

to the public interest?

while in a special relationship with EMC, purchase or sell securities

of EMC with the knowledge of material facts that were not

generally disclosed, contrary to subsection 76(1) of the Act and act

contrary to the public interest?

while in a special relationship with HudBay, purchase or sell

securities of HudBay with the knowledge of material facts that were

not generally disclosed, contrary to subsection 76(1) of the Act and

act contrary to the public interest?

while in a special relationship with Coalcorp, purchase or sell

securities of Coalcorp with the knowledge of material facts that

were not generally disclosed, contrary to subsection 76(1) of the

Act and act contrary to the public interest?

6.

Did Stephany:

(a)

(b)

(c)

while in a special relationship with EMC, purchase or sell securities

of EMC with the knowledge of material facts that were not

generally disclosed, contrary to subsection 76(1) of the Act and act

contrary to the public interest?

while in a special relationship with HudBay, purchase or sell

securities of HudBay with the knowledge of material facts that were

not generally disclosed, contrary to subsection 76(1) of the Act and

act contrary to the public interest?

while in a special relationship with Coalcorp, purchase or sell

securities of Coalcorp with the knowledge of material facts that

were not generally disclosed, contrary to subsection 76(1) of the

Act and act contrary to the public interest?

7.

Did Wing:

(a)

(b)

(c)

while in a special relationship with Nu, purchase or sell securities of

Nu with the knowledge of material facts that were not generally

disclosed, contrary to subsection 76(1) of the Act and act contrary

to the public interest?

while in a special relationship with EMC, purchase or sell securities

of EMC with the knowledge of material facts that were not

generally disclosed, contrary to subsection 76(1) of the Act and act

contrary to the public interest?

through Pollen, while in a special relationship with Northern Orion

and/or Meridian, purchase or sell securities of Northern Orion

29

and/or Meridian with the knowledge of material facts that were not

generally disclosed, contrary to subsection 76(1) of the Act and act

contrary to the public interest?

(d)

(e)

(f)

while in a special relationship with HudBay, purchase or sell

securities of HudBay with the knowledge of material facts that were

not generally disclosed, contrary to subsection 76(1) of the Act and

act contrary to the public interest?

authorize permit or acquiesce in Pollen’s non-compliance with

Ontario securities law, such that Wing is deemed to also have not

complied with Ontario securities law, pursuant to section 129.2 of

the Act?

mislead Staff contrary to subsection 122(1)(a) of the Act and act

contrary to the public interest?

8.

Did Pollen:

(a)

while in a special relationship with EMC, purchase or sell securities

of EMC with the knowledge of material facts that were not

generally disclosed, contrary to subsection 76(1) of the Act and act

contrary to the public interest?

(b)

while in a special relationship with Northern Orion and/or Meridian,

purchase or sell securities of Northern Orion and/or Meridian with

the knowledge of material facts that were not generally disclosed,

contrary to subsection 76(1) of the Act and act contrary to the

public interest?

(c)

while in a special relationship with HudBay, purchase or sell

securities of HudBay with the knowledge of material facts that were

not generally disclosed, contrary to subsection 76(1) of the Act and

act contrary to the public interest?

9.

Did Fiorini:

(a)

(b)

(c)

while in a special relationship with Nu, purchase or sell securities of

Nu with the knowledge of material facts that were not generally

disclosed, contrary to subsection 76(1) of the Act and act contrary

to the public interest?

while in a special relationship with EMC, purchase or sell securities

of EMC with the knowledge of material facts that were not

generally disclosed, contrary to subsection 76(1) of the Act and act

contrary to the public interest?

while in a special relationship with Northern Orion and/or Meridian,

purchase or sell securities of Northern Orion and/or Meridian with

the knowledge of material facts that were not generally disclosed,

contrary to subsection 76(1) of the Act and act contrary to the

public interest?

(d)

while in a special relationship with HudBay, purchase or sell

securities of HudBay with the knowledge of material facts that were

not generally disclosed, contrary to subsection 76(1) of the Act and

act contrary to the public interest?

30

(e)

while in a special relationship with Coalcorp, purchase or sell

securities of Coalcorp with the knowledge of material facts that

were not generally disclosed, contrary to subsection 76(1) of the

Act and act contrary to the public interest?

10.

Did Fiorillo:

(a)

(b)

(c)

(d)

while in a special relationship with Nu, purchase or sell securities of

Nu with the knowledge of material facts that were not generally

disclosed, contrary to subsection 76(1) of the Act and act contrary

to the public interest?

while in a special relationship with EMC, purchase or sell securities

of EMC with the knowledge of material facts that were not

generally disclosed, contrary to subsection 76(1) of the Act and act

contrary to the public interest?

while in a special relationship with HudBay, purchase or sell

securities of HudBay with the knowledge of material facts that were

not generally disclosed, contrary to subsection 76(1) of the Act and

act contrary to the public interest?

while in a special relationship with Coalcorp, purchase or sell

securities of Coalcorp with the knowledge of material facts that

were not generally disclosed, contrary to subsection 76(1) of the

Act and act contrary to the public interest?

[97] We have considered the evidence tendered, submissions and legal authorities

cited to us by the parties with respect to each allegation, and for each of the

Respondents, separately. However, for ease of reference, we provide our

analysis and findings with respect to allegations relating to: (i) insider trading;

(ii) tipping; (iii) authorizing, permitting and acquiescing in non-compliance with

the Act; and (iv) conduct contrary to the public interest, under a separate

section for each transaction relating to the relevant reporting issuer. The

relevant law, our analysis and our findings pertaining to allegations relating to

misleading Staff and breach of confidentiality are articulated in two separate

sections below.

IV.

RELEVANT LAW ON INSIDER TRADING, TIPPING, AUTHORIZING,

PERMITTING OR ACQUIESCINGIN THE NON-COMPLIANCE WITH THE

ACT AND CONDUCT CONTRARY TO THE PUBLIC INTEREST

A.

INSIDER TRADING AND TIPPING

[98] Subsection 76(1) of the Act prohibits the purchase or sale of securities of a

reporting issuer by persons or companies in a special relationship with that

issuer, who have knowledge of undisclosed material facts. Subsection 76(1) of

the Act provides:

No person or company in a special relationship with a

reporting issuer shall purchase or sell securities of the

reporting issuer with the knowledge of a material fact or

material change with respect to the reporting issuer that has

not been generally disclosed.

31

[99] Subsection 76(2) of the Act prohibits thosein a special relationship with a

reporting issuer from informing others of undisclosed material facts with respect

to the reporting issuer. Subsection 76(2) of the Act provides:

No reporting issuer and no person or company in a special

relationship with a reporting issuer shall inform, other than

in the necessary course of business, another person or

company of a material fact or material change with respect

to the reporting issuer that has not been generally disclosed.

1.

Special Relationship to the Issuer

[100] The Act expressly defines “person or company in a special relationship with a

reporting issuer” in subsection 76(5) of the Act. Staff relies on three of those

definitions at subsection 76(5)(b), (c) and (e) of the Act. At the relevant time,

subsection 76(5) of the Act provided:

“person or company in a special relationship with a

reporting issuer” means,

(a)

a person or company that is an insider, affiliate or

associate of,

(i)

the reporting issuer,

(ii)

a person or company that is proposing to make

a take-over bid, as defined in Part XX, for the

securities of the reporting issuer, or

(iii)

a person or company that is proposing to

become a party to a reorganization,

amalgamation, merger or arrangement or

similar business combination with the reporting

issuer or to acquire a substantial portion of its

property;

(b)

a person or company that is engaging in or

proposes to engage in any business or

professional activity with or on behalf of the

reporting issuer or with or on behalf of a person or

company described in subclause (a)(ii) or (iii);

(c)

(e)

a person who is a director, officer or employee of the

reporting issuer or of a person or company described

in subclause (a)(ii) or (iii) or clause (b);

[...]

a person or company that learns of a material fact or

material change with respect to the issuer from any

other person or company described in this subsection,

including a person or company described in this

clause, and knows or ought reasonably to have

known that the other person or company is a person

or company in such a relationship. [emphasis added]

2.

Material Fact and Assessment of Materiality

[101] The term “material fact” is defined in subsection 1(1) of the Act as follows:

32

“material fact”, where used in relation to securities issued or

proposed to be issued, means a fact that would reasonably

be expected to have a significant effect on the market price

or value of the securities

[102] A “fact”, the Commission has determined, is information from an identifiable

source that may reasonably be expected to have such information and is

obtained in circumstances which would support the accuracy and reliability of it

(Re YBM Magnex International Inc. (2003), 26 O.S.C.B. 5285 (“YBM”) at para.

86).

[103] The test to be applied in determining whether a fact is a material fact is the

objective market impact test set out in subsection 1(1) of the Act in the

definition of “material fact”. The question is whether the alleged material facts

would be reasonably expected to significantly affect the market price or value of

the securities at issue? As stated by the Commission in YBM:

The test for materiality in the Act is objective and is one of

market impact. An investor wants to know facts that would

reasonably be expected to significantly affect the market

price or value of the securities. The investor is an economic

being and materiality must be viewed from the perspective

of the trading markets, that is, the buying, selling or holding

of securities. Price in an open market normally reflects all

available information.

(YBM supra at para. 91)

[104] The Commission has recognized that a “material fact” is a fact-specific concept

that varies in the particular circumstances of each case, including the size and

nature of the issuer and its business operations and the type of information

relative to the company (Donald, supra at paras. 196-199, citing Re Donnini

(2002), 25 O.S.C.B. 6225 (“Donnini”) at para. 135, aff’d Donnini, Re [2005]

O.J. No. 240, 194 O.A.C. 29 (Ont. C.A.). 76 O.R. (3d) 43; Re Biovail (2010), 33

O.S.C.B. 8914 at paras. 65, 69 and 81 and YBM, supra at para. 90). Therefore,

materiality is contextual and the objective market impact test is conducted with

regard to the context of an issuer’s industry and the market (Cornish v. Ontario

(Securities Commission), 2013 ONSC 1310 at para. 51).

[105] National Policy 51-201 – DisclosureStandards (2002), 25 O.S.C.B. 4492 (“NP

51-201”) provides guidance as to what may be considered material. The policy

states at section 4.2:

In making materiality judgments it is necessary to take into

account a number of factors that cannot be captured in a

simple bright-line standard or test. These include the nature

of the information itself, the volatility of the company’s

securities and prevailing market conditions. The materiality

of a particular event or piece of information may vary

between companies according to their size, the nature of

their operations and many other factors. An event that is

“significant” or “major” for a smaller company may not be

material to a larger company. Companies should avoid

taking an overly technical approach to determining

materiality. ...

33

[106] NP 51-201 also includes a list of examples of potentially material information at

section 4.3. They include:



changes in share ownership that may affect control of the company;

major reorganizations, amalgamations, or mergers;

take-over bids, issuer bids, or insider bids; and

significant acquisitions or dispositions of assets, property or joint venture

interests.

[107] The Commission determined that a proposal to acquire all of the shares of an

issuer at a significant premium to the market price of those shares was a fact

that would reasonably be expected to have a significant effect on the market

price or value of the issuer’s shares and options (Suman, supra at para. 11). The

Alberta Securities Commission has likewise noted that “news of a publicly-traded

company’s acquisition by way of take-over, merger or otherwise would always be

a material fact.” (Holtby, supra at para. 511; rev’d on other grounds Walton,

supra).

[108] The Commission has previously decided that a number of facts may be material

when considered collectively:

Materiality is a question of mixed law and fact, i.e. do the

facts satisfy the legal test? Some facts are material on their

own. When one or more facts do not appear to be material

on their own, materiality must also be considered in light of

all the facts available to the persons responsible for the

assessment.

(YBM, supra at para. 94)

[109] For example, in Donald, the panel found that the respondent learned three facts:

confidential discussions relating to a potential acquisition, there was an ongoing

interest by the acquiror and the then-current share price of the target issuer was

undervalued (Donald, supra at para. 252). In that case, the panel determined

that three facts “taken together, would, if generally disclosed on the day

following the [date the respondent learned of the three facts...], reasonably be

expected to have significantly affected the market price or value of Certicom’s

securities, and would therefore be a material fact.” (Donald, supra at para. 271).

[110] Another factor in determining whether information was material at the relevant

time is the importance attached to the information by those who knew about it

(Donnini, supra at para. 152, citing Securities and Exchange Commission v.

Mayhew, 121 F.344 (2d Cir. 1997); Donald, supra at paras. 256-257 and 260,

citing Securities & Exchange Commission v. Texas Gulf Sulphur Co. (1968), 401

F.2d 833 (U.S. 2nd Cir. N.Y.) (“Texas Gulf”) at 851).

[111] In assessing materiality, the American probability/magnitude test has been

referred to by the Commission (Donnini, supra; Donald, supra). In Donnini, the

panel quoted Texas Gulf in considering that in each case with contingent or

speculative developments, whether facts are material will depend “at any given

time upon a balancing of both the indicated probability that the event will occur

and the anticipated magnitude of the event in light of the totality of the company

activity.” (Donnini, supra at para. 130, citing Texas Gulf, supra at 849).

34

Specifically, the Commission considered the U.S. Supreme Court’s adoption of

the probability/magnitude test stating that:

Generally, in order to assess the probability that the event

will occur, a factfinder will need to look to indicia of interest

in the transaction at the highest corporate levels. Without

attempting to catalog all such possible factors, we note by

way of example that board resolutions, instructions to

investment bankers, and actual negotiations between

principals or their intermediaries may serve as indicia of

interest... No particular event or factor short of closing the

transaction need be either necessary or sufficient by itself to

render merger discussions material.

(Donnini, supra at para. 133, citing Basic Inc. v. Levinson,

485 U.S. 224 (U.S. Ohio 1988))

[112] While we are not bound by American case law, we agree that in assessing

materiality in this case it is important to consider indicia of interest in certain

transactions at issue, particularly in instances where there were contingent or

speculative developments in potential transactions. However, we are mindful of

the dangers of hindsight and recognize that materiality of negotiations turns

upon facts known at the time (Re AiT Advanced Information TechnologyCorp.

(2008), 31 O.S.C.B. 712 at para. 228).

3.

Generally Disclosed Information

[113] The Commission has considered the meaning of the terms “generally disclosed”.

NP 51-201 provides guidance as to what may be considered “generally disclosed”

material information, including if it has been disseminated in a manner to

effectively reach the marketplace and that public investors have had a

reasonable amount of time to consider the information (NP 51-201 Disclosure

Standards, Schedule “B” and Re Rowan (2008), 31 O.S.C.B. 6515 at para. 183).

[114] Subsection 3.5(4) of NP 51-201 suggests that companies may satisfy the

“generally disclosed” requirement by using one or a combination of the following

disclosure methods:

1.

News releases distributed through a widely circulated

news or wire service; and/or

2.

Announcements made through press conferences or

conference calls that interested members of the

public may attend or listen to either in person, by

telephone, or by other electronic transmission

(including the Internet).

[115] In our view, completing either of the above is indicative of the information

therein being generally disclosed.

4.

Informing Others of an Undisclosed Material Fact

[116] As noted above, subsection 76(2) of the Act prohibits those in special

relationship to a reporting issuer from informing others, other than in the

necessary course of business, of an undisclosed material fact. Therefore, in order

to “inform” of a material fact, the alleged tipper must provide an undisclosed

material fact in their possession to another. The Court explained in R. v. Landen:

35

[The Act] defines a person as an insider to include one who

“learns of a material fact or material change with respect to

the issuer...” The hearing panel in ATI stated that “That

definition does not include a person who has received advice

from an insider to trade shares...” By implication, the advice

from an insider to trade shares is not material information.

(Landen, supra at para. 97)

[117] By comparison, as noted by certain of the Respondents, theAlberta legislature

expressly prohibits thosein a special relationship with a reporting issuer with

knowledge of a material fact or change to recommend or encourage another

person or company to purchase, sell or enter into certain transactions involving

securities of the reporting issuer. Subsection 147(3.1) of the Alberta Securities

Act, R.S.A. 2000, c. S-4 (the “ASA”) provides:

147(3.1) No reporting issuer or person or company in a

special relationship with a reporting issuer with knowledge of

a material fact or material change with respect to the

reporting issuer that has not been generally disclosed shall

recommend or encourage another person or company to

(a)

purchase or sell a security of the reporting

issuer, or

(b)

enter into a transaction involving a security the

value of which is derived from or varies

materially with the market price or value of a

security of the reporting issuer.

[118] In our view, the current language of subsection 76(2) of the Act in Ontario does

not encompass recommendations or encouragement to purchase or sell

securities and, therefore, such communications do not constitute“informing” of a

material fact for the purposeof non-compliance with subsection 76(2) of the Act.

B.

AUTHORIZING, PERMITTING OR ACQUIESCINGIN THE NON-

COMPLIANCE WITH THE ACT

[119] Section 129.2 of the Act provides as follows:

For the purposes of this Act, if a company or a person other

than an individual has not complied with Ontario securities

law, a director or officer of the company or person who

authorized, permitted or acquiesced in the non-compliance

shall be deemed to also have not complied with Ontario

securities law, whether or not any proceeding has been

commenced against the company or person under Ontario

securities law or any order has been made against the

company or person under section 127.

[120] In administrative proceedings, the Commission has relied upon section 129.2 of

the Act to ensure the persons or companies who authorized, permitted or

acquiesced in misconduct are held accountable and legally responsible for

breaches of Ontario securities law by attributing the person or company’s

knowledge to the corporation (Re Goldpoint Resources Corp. (2011), 34 O.S.C.B.

5478 (“Goldpoint”) at paras. 184 and 236).

36

C.

CONDUCT CONTRARY TO PUBLIC INTEREST

[121] The Commission’s public interest jurisdiction permits it to consider whether the

conduct of a respondent warrants a finding that such conduct was contrary to

the public interest, even in the absence of a technical breach of the Act (Re The

Securities Act and Morton, [1946] O.R. 492 (C.A.) at para. 5). The Commission

has exercised that jurisdiction in the context of an insider trading case in Donald,

where the panel noted:

Although a Panel may not find a technical breach of the

provisions of the Act, it may still consider whether the

conduct of a respondent warrants a finding that such

conduct was contrary to the public interest. The Commission

has stated in Canadian Tire, supra at 28 (QL):

Equally clearly in our view, the Commission should

act to restrain a transaction that is clearly abusive of

investors and of the capital markets, whether or not

that transaction constitutes a breach of the Act,

regulations or a policy statement.

(Donald, supra at para 305, citing Re Canadian Tire Corp.

(1987) 10 O.S.C.B. 857 (“Canadian Tire”)).

[122] The Supreme Court of Canada considered the nature and scope of the

Commission’s public interest jurisdiction in Asbestos. In that case, the Supreme

Court determined that:

pursuant to s. 127(1), the OSC has the jurisdiction and a

broad discretion to intervene in Ontario capital markets if it

is in the public interest to do so. However, the discretion to

act in the public interest is not unlimited. In exercising its

discretion, the OSC should consider the protection of

investors and the efficiency of, and public confidence in,

capital markets generally.

(Committeefor the Equal Treatment of Asbestos Minority

Shareholders v. Ontario (Securities Commission) 2001 SCC

37 (“Asbestos”) paras. 45)

[123] The Supreme Court in Asbestos, found that the nature and scope of the

Commission’s public interest jurisdiction should be considered in context, having

regard to the purposes of the Act, described at section 1.1, and recognizing that

the purposeof the public interest jurisdiction is not remedial or punitive, but

protective and preventative (Asbestos, supra at paras. 41 and 42). Therefore, in

determining whether to exercise its public interest powers, the Commission

should consider whether conduct has engaged the fundamental principles of

securities regulation and the purposes of the Act as set out in sections 1.1 and

2.1 of the Act. Section 1.1 sets out the purposes of the Act as follows:

a) to provide protection to investors from unfair, improper or

fraudulent practices; and

b) to foster fair and efficient capital markets and confidence

in capital markets.

37

[124] Subsection 2.1 of the Act provides fundamental principles for the Commission to

consider in pursuing the purposes of the Act, including:

i. requirements for timely, accurate and efficient disclosure

of information,

ii. restrictions on fraudulent and unfair market practices and

procedures, and

iii. requirements for the maintenance of high standards of

fitness and business conduct to ensure honest and

responsible conduct by market participants.

[125] In Donald, the Commission found that there was no special relationship when

Donald purchased securities with knowledge of undisclosed material facts gained

from his role as an officer of a reporting issuer and, therefore, there could be no

liability for insider trading under subsection 76(1) of the Act (Donald, supra at

paras. 286-288). However, the Commission concluded that Donald’s conduct

amounted to conduct contrary to the public interest and stated as follows:

Although we do not find any technical breach of subsection

76(1) of the Act, we find that Donald’s purchases of

Certicom shares directly engage the fundamental principles

of securities regulation and the purposes of the Act. The

unusual circumstances of this matter warrant a finding that

Donald’s conduct was contrary to the public interest.

We find that Donald’s purchases of Certicom shares in

August and September 2008, while he was in possession of

undisclosed material facts regarding RIM’s interest in

Certicom, constituted conduct contrary to the public interest.

We find that Donald’s conduct was abusive of the capital

markets and to confidence in the capital markets.

(Donald, supra at paras. 323-324)

[126] In Danuke, the Commission also held that the respondents’ trading while in

possession of undisclosed material facts was contrary to the public interest (Re

Danuke (1981), 2 O.S.C.B. 31c (“Danuke”) at 43c). In that matter, the

Commission stated:

It is also fundamental to the registration process that

persons granted registration be honest and of good

reputation. It is the concept of honesty and integrity, of fair

dealing as between classes of investors, which is the issue

here. It is in the public interest that registrants conduct

themselves in accordance with these precepts and not take

advantage of inside information.

It is the Commission’s view that all registrants ought to

understand that they have a duty not to attempt to profit,

directly or indirectly, through the use of insider information

that they believe is confidential and know or should know

came from a person having a special relationship with the

source of the information.

(Danuke, supra at 40c)

38

[127] Some of the Respondents made policy arguments with respect to the application

of the Commission’s public interest mandate in this case. For example, Gornitzki

argued that finding a recommendation to be contrary to the public interest would

lead to significant capital market inefficiencies that would flow from prohibiting

corporate representatives from speaking positively about their companies and

encouraging investor participation. Fiorini similarly submitted that the

Commission’s use of its public interest jurisdiction to seek to prohibit

communications with insiders would exert a chill factor (ie. corporate

representatives would not be able to attend conferences or meetings hosted by

dealers to introduce them to institutional investors if a material corporate

transaction is pending).

[128] Counsel for Fiorini and Fiorillo submitted that absent a breach or policy

statement, the Commission ought to proceed with caution and act only where

abuse to investors or the capital markets is readily apparent. Fiorini argued that

the Commission should exercise caution where intervention in the public interest

would amount to an amendment to existing policies (cited Re Financial Models

Inc. (2005) O.S.C.B. 2184 at para. 54, citing Canadian Tire, supra at para. 128).

[129] Further, it was submitted that it is not open to the Commission to simply treat a

finding of conduct contrary to the public interest as Staff’s consolation prize in

cases where Staff fails to prove a breach of the Act or as an automatic back-up

or basket clause when Staff have failed to prove breaches. The Panel was asked

to consider that Ontario has not prohibited insiders from making

recommendations to purchase or sell a security so long as that recommendation

does not involve the passing of material non-public information. Further, they

argued that, had the legislature wished to address or prohibit generic stock

recommendations in the context of insider trading laws, it could have done so

(as is the case in Alberta) and that, therefore, Staff is proposing an unjustified

extension of the law in general as it relates to non-industryparticipants in the

context of insider trading allegations. In other words, it was submitted that the

purposeof s.127 is not to simply override the legislative choices made in respect

of the constituent elements of offences of illegal insider trading and tipping.

[130] We have remained mindful of these submissions in considering the allegations

before us. In our view, our decision is not the appropriate forum to create law,

especially in the absence of legislative intention, however we are cognizant that

it is the Commission’s mandate to protect investors and to foster confidence in

the capital markets.

V.

NU ENERGY - ANALYSIS AND FINDINGS ON ALLEGATIONS OF INSIDER

TRADING, TIPPING AND CONDUCT CONTRARY TO THE PUBLIC INTEREST

A.

Overview of the Nu Energy Transaction

[131] During the relevant period, March 1, 2007 to June 30, 2007, Nu was a reporting

issuer in Ontario and was a publicly traded company. On April 12, 2007, Nu’s

shares became listed on the TSX Venture Exchange (“TSX-V”).

[132] Tony Frizelle, President and CEO of Nu, had a background in developing resource

companies around the world. Frizelle’s business model was to identify resource

opportunities and to develop them to the point where they became attractive as

a takeover target. In early 2006, he acquired licenses for two uranium projects

in Cameroon, the Kitongo and Lolodorf properties, which were then put into Nu.

During 2006, Frizzelle backed Nu into Canadian Resources Limited, a public

39

company traded on an over-the counter exchange, and began raising financing

(the company’s name was later changed in January 2007 to Nu Energy Uranium

Corporation). In the first half of 2006, Gornitzki was retained by Frizelle to assist

the company in seeking financing and other potential corporate transactions. In

his testimony before the Commission, Frizelle stated that in terms of overall

strategy for Nu, Mega Uranium Ltd. (“Mega”) was one potential candidate

(Merits Hearing Transcript of October 30, 2013 at p. 108). Gornitzki confirmed in

his testimony that during the relevant period, there were several potential

strategic partners for Nu and that the ultimate goal would be to sell the

company.

[133] In early 2007, Nu’s management became acquainted with Mega through

Gornitzki, who acted as an intermediary, and the companies discussed the

potential of a joint venture to develop properties in Africa. In early March 2007,

Frizelle was in Toronto attending the Prospectors and Developers Association

Conference (“PDAC”) and Nu hosted a dinner at Il Posto restaurant on the

evening of March 4, which was attended by Sheldon Inwentash, CEO of Mega,

Pat DiCapo, Managing Director of PowerOne (a company that had assisted with

an earlier financing for Nu), and Gornitzki. During the dinner, no serious

discussions were held between Mega and Nu, but Frizelle made an off-hand

comment that Nu could be a candidate for acquisition for a price of $5 or more

per share. In his testimony at the Merits Hearing, Frizelle indicated that this was

meant as a humorous remark since Nu’s shares were trading at approximately

$3 or lower in March 2007.

[134] A second meeting was held later in the same week as PDAC in the offices of

Mega and was attended by Frizelle, Inwentash, Gornitzki and DiCapo, among

others. The purpose of the second meeting, according to Frizelle, was to discuss

the potential joint venture for other properties in Africa and to outline for Mega

and Power One the value of the assets held by Nu and what its development plan

was; in Frizelle’s words, this second purposewas to “give Mega and Power One a

better appreciation as to the nature of our assets and what our work programme

was” (Merits Hearing Transcript of October 30, 2013 at p. 91).

[135] Internal correspondence of Mega executives of March 24, 2007 supportsthat, by

that date, Mega wished to purchase Nu rather than do a joint venture and that

they had asked Gornitzki to act as a go-between in discussing a potential deal

with Tony Frizelle.

[136] Frizelle returned to Toronto on Sunday, April 22, 2007 and had dinner the

following evening, Monday April 23, 2007, with Gornitzki, DiCapo and others at

Sotto Sotto restaurant (the “April 23 Dinner”). At the April 23 Dinner, Mega’s

potential acquisition of Nu was discussed in some detail, and it would appear that

terms of the deal were being finalized. On the following day, April 24, 2007,

Patricio, Mega’s VP Corporate and Legal Affairs, advised Mega’s Board of

Directors by email that they were in negotiations with Nu and that the basic

terms of the acquisition were two shares of Mega for every three shares of Nu.

Later that same day, Frizelle emailed Inwentash at 4:28 p.m., stating that he

understood that Mega was working on a term sheet that would reflect the basic

terms outlined by DiCapo at dinner the previous evening. He also stated that “we

are ready to move quickly” and wished to have the term sheet so that he might

follow up with his Board. It is clear that at this point the deal was coming

together quickly (Exhibit 133).

40

[137] On April 26, 2007, Gornitzki contacted McBurney to retain GMP’s services to

prepare a fairness opinion and provide financial advice to Nu. Mega and Nu were

added to GMP’s grey list on that same day.

[138] On April 27, 2007, prior to market opening, Mega and Nu jointly issued a press

release announcing that they had entered into a “binding letter of intent”

whereby Mega would acquire all of the outstanding shares of Nu. Nu’s share

price jumped 38% that day.

B.

Were there Material Facts Relating to Nu that were Not Generally

Disclosed?

[139] The question that the Panel must answer is whether any of the alleged material

facts relating to Nu, or some or all of them taken together, were material facts

that would reasonably be expected to have a significant effect on the market

price or value of Nu securities, on the dates on which Staff allege that Gornitzki

tipped Agueci, that Agueci tipped others, that Iacono tipped Serpa and that

Agueci, Wing, Iacono, Raponi, Fiorillo, Fiorini and Serpa purchased Nu shares.

[140] Staff alleges that Gornitzki advised Agueci, other than in the ordinary course of

business, of material facts related to the proposed acquisition of Nu prior to that

information being generally disclosed. Staff submits that as of April 16, 2007,

the following were material facts with respect to Nu that were not generally

disclosed:

(a)

(b)

(c)

Mega and Nu discussed the acquisition of Nu by Mega;

Mega wanted to buy Nu, and had for some time;

Frizelle, Nu’s CEO, had a value expectation for the sale of Nu of $5 or

more per Nu share;

(d)

(e)

The end goal of Nu’s discussions with Mega was to sell Nu to Mega at an

attractive price; and

Frizelle would be coming to Toronto on Sunday April 22, 2007 and there

would be an opportunityto convince him that his value expectations could

be achieved.

[141] Gornitzki submits the fifth alleged Nu Fact does not exist, namely that Frizelle

was coming to Toronto to speak to Mega, and that the others do not rise to the

level of accuracy or reliability required to constitute a fact. In any event,

Gornitzki submits that if they are facts, there is an absence of indicia that the

negotiations or contemplation of a transaction were actual and serious internally

at Mega or Nu, which means the “facts” are not material.

[142] Wing also submits there was no material non-public information regarding Nu, as

alleged. Wing argues that between April 16, 2007 and April 24, 2007 Pinetree

Resources Partnership (“Pinetree”), whose parent company has the same chief

executive officer as Mega, purchased shares in Nu. Wing takes the position that

the Commission would have issued a Notice of Hearing to Pinetree if Staff

believed that material non-public information existed on thosedates. This matter

does not involve allegations against Pinetree and, in our view, the conduct of

that company is not determinative of whether undisclosed material facts existed

at the time that the Respondents purchased Nu shares in this matter.

[143] First, we considered whether Mega and Nu discussed the acquisition of Nu by

Mega on or before April 16, 2007. In our view, it is clear from the evidence that

41

Mega had an interest in Nu as a potential acquisition target and that Mega had

been acquiring junior uranium companies and paying substantial premiums on

thoseacquisitions during the relevant period. Staff argues that Mega’s interest in

acquiring Nu began as early as February 2007 and that, at that time, they had

discussions with Frizelle about Mega’s interest in Nu’s Cameroon assets and a

potential joint venture.

[144] We accept Patricio’s testimony that in February 2007, Frizelle did not want to

give up control of the Cameroon assets and was more interested in doing a Joint

Venture and working with Mega to find projects in other parts of Africa. Frizelle

testified that, at that time, Nu was not interested in diluting its interest in

properties, but rather wanted to develop properties in association with others

who had stronger financial and technical resources.

[145] We also accept that, at the Il Posto dinner on March 4, 2007, the question was

asked whether Nu would be a candidate for acquisition and Frizelle responded

that, provided the price started with $5, Nu could be interested. Frizelle testified

that this was a jocular remark made in passing; the evening was a social event

and there was no serious discussion of an acquisition. In addition, when Mega

and Nu representatives met later that week, according to Frizelle, the discussions

concerned a potential joint venture and were an opportunityfor Nu to outline its

plan for developing the Cameroon properties, not a discussion of a Mega

acquisition.

[146] On March 22, 2007 Gornitzki forwarded a document entitled “Fundamentals of

the Newco JV [Joint Venture] for Africa between Mega Uranium Ltd and Nu

Energy Uranium Corporation” to Patricio for Mega’s consideration (Exhibit 79).

On April 11, 2007, Frizelle emailed a member of Mega’s Board of Directors to

follow up on finalising the proposed Joint Venture with Mega and to advise that

Gornitzki had been trying to get a draft proposalto them. In the written

chronology of the events provided by Mega to Staff, Mega stated that as of April

11, 2007, there were no discussions with Nu about an acquisition, that Frizelle

was only interested in doing a Joint Venture with Mega and that on or about April

17, 2007, internal discussions began at Mega about making an offer for Nu.

[147] In our view, it is not clear from the evidence presented that there had been

serious discussions between Mega and Nu concerning the proposed acquisition

on or prior to April 16, 2007. As stated above, to be a fact, the information

should be from an identifiable source that may reasonably be expected to have

such information and is obtained in circumstances which would support the

accuracy and reliability of it (YBM, supra at para. 86). Neither of the principals of

Nu or Mega provided evidence that discussions between the two issuers,

concerning the potential acquisition, occurred on or prior to April 16, 2007. In

fact, an internal email dated April 11, 2007 indicates that Mega would keep

Frizelle going on the idea of the Joint Venture even though the ultimate intention

was to buy Nu. Therefore, while there were internal discussions at Mega prior to

April 16, 2007 concerning a potential acquisition of Nu, the evidence is not

sufficiently clear that the parties discussed the deal on or prior to that date.

Accordingly, the panel does not find that discussions between Mega and Nu

concerning the proposed acquisition was a material fact as of April 16, 2007.

[148] The second alleged material fact that we considered was whether Mega wanted

to buy Nu. We find that Mega had a strong interest in acquiring Nu, which was

outlined in Mega’s written chronology and also confirmed in several internal

42

emails circulated among Mega’s senior management. In an email dated March

24, 2007, Patricio wrote to Inwentash and Stewart Taylor (“Taylor”), Mega’s

President, that Mega had asked Gornitzki to “talk Tony F[rizelle] into actual

acquisition by Mega...Not JV” and “We should just buy them. Jacob agrees and is

working on Tony F” (Exhibit 81). On April 11, 2007, Patricio wrote to Taylor

expressing that Gornitzki thought Frizelle would be surprised at how Nu’s shares

would not perform to Frizelle’s expectations when moved to the TSX-V and

stated that “We [Mega] want to buy them, but do not want to do this JV deal.”

(Exhibit 89). Gornitzki acknowledged in his testimony that on or about March 24,

2007 he reported to Frizelle that Mega wanted to buy Nu. Therefore, the Panel

finds that it was a fact, on or before April 16, 2007, that Mega wanted to buy Nu

(“Nu Fact One”). Our analysis of materiality of that fact follows below.

[149] Third, we considered whether Frizelle, Nu’s CEO, had a value expectation of $5

or more per Nu share. We found Frizelle’s testimony to be credible with respect

to his strategy for Nu and that he had discussed his strategy with Gornitzki.

Frizelle stated that his business model was to make the company as attractive as

possible for a potential takeover at some stage, whether that meant making

progress on the individual projects, or looking at other projects using the extra

resources of partners. He further testified that his value expectation for Nu was

approximately $5 per share, a value he had discussed with Gornitzki from time

to time and which he had mentioned, albeit facetiously, at the Il Posto dinner.

Therefore, the Panel finds that it was a fact, on or before April 16, 2007, that

Frizelle, Nu’s CEO, had a value expectation of $5 or more per Nu share (“Nu

Fact Two”). Our analysis of materiality of that fact follows below.

[150] The fourth alleged material fact that we considered was whether the end goal of

Nu’s discussions with Mega was to sell Nu to Mega at an attractive price. We find

that in early March 2007, managements of Nu and Mega and Gornitzki met to

discuss a potential joint venture between the companies with respect to

development of properties in Africa. We are also satisfied that Frizelle’s intention

was to make Nu as attractive as possible for a potential takeover at some stage

and that his goal for pursuing Mega as a strategic investor was ultimately “to sell

the company [Nu] at an attractive price.” (Merits Hearing Transcript of October

30, 2013 at p. 107). Therefore, the Panel finds that it was a fact, on or before

April 16, 2007, that the end goal of Nu’s discussions with Mega was to sell Nu to

Mega at an attractive price (“Nu Fact Three”). Our analysis of materiality of

that fact follows below.

[151] Fifth, we considered whether Frizelle would be coming to Toronto on Sunday

April 22, 2007 and that there would be an opportunityto discuss strategic

initiatives between Nu and Mega. The evidence indicates that Frizelle’s flight was

booked on April 19, 2007 (Exhibit 128). Evidence tendered with respect to the

purposeof that trip supports that Haywood had coordinated a marketing

schedule for Frizelle to meet with investors on April 24 and 25, 2007 and that

schedule was sent to Frizelle on April 23, 2007 (Exhibit 131). While it is likely

that this marketing schedule would have been organized before April 23, there is

no evidence that established when it was known that Frizelle would be in Toronto

for the week of April 23. Further, we are not satisfied that there is clear evidence

that Frizelle’s trip had been planned prior to April 16, 2007 or that as of April 16,

2007, the trip was for any purpose other than the Haywood marketing meetings.

Accordingly, the panel does not find that it was a material fact as of April 16,

43

2007 that Frizelle was coming to Toronto on Sunday April 22, 2007 to, among

other things, discuss strategic initiatives between Nu and Mega.

[152] In light of the foregoing conclusions, we turn to the assessment of the

materiality of the three facts as of April 16, 2007. In applying the objective

market impact test of materiality, we consider whether Nu Fact One, Nu Fact

Two and/or Nu Fact Three would be reasonably expected to significantly affect

the market price or value of Nu’s securities (subsection 1(1) of the Act). We find

that Nu Fact One, Mega’s interest in an acquisition of Nu, which was discussed

by senior management at Mega, expressed to Gornitzki and reported to Frizelle

in March 2007, and considered in context with Mega’s history of acquiring junior

uranium companies, would be reasonably expected to have a significant effect on

the market price of Nu’s securities.

[153] The Panel does not agree with Gornitzki’s submission that any expression of

interest by Mega in an acquisition prior to April 24 or 25, 2007 was mere

“passing comment”, rejected by Nu, and not accompanied by any acts by Mega

internally or externally – to advance that interest. First, we find that Mega had

been an active acquirer of other junior uranium companies in early 2007, that

they had conveyed to Gornitzki an interest in acquiring Nu and had discussed a

takeover internally, which meant that the deal had serious potential to occur,

whether or not the final agreement had been reached by April 16, 2007. We

agree that news of the real potential for a publicly-traded company’s acquisition

by way of take-over, merger or otherwise, whether or not specifying the

potential acquisition price, would typically be a material fact (Holtby, supra at

para. 511; rev’d on other grounds Walton, supra). Second, on March 24, 2007,

in an internal email to Mega management regarding the potential acquisition,

Patricio stated “Jacob agrees and is working on Tony F” (Exhibit 81). We find

that at the time of that email, Gornitzki was aware of Mega’s interest in an

acquisition. In fact, he admittedly reported the interest to Frizelle. Finally, after

the April 23 Dinner, the deal came together immediately, which supports a

reasonable inference that there had been more than a passing interest in the

deal prior to that day. Further, the day after the April 23 Dinner, Frizelle followed

up on the discussion that had taken place the previous evening. It is clear from

the evidence that the terms of the deal had been discussed at the April 23

Dinner and that, by this time, Frizelle was in favour of moving forward with the

proposed acquisition of Nu, which supports a reasonable inference that Nu’s CEO

had prior awareness of Mega’s position.

[154] We find that Nu Fact Two and Nu Fact Three, considered collectively with Nu Fact

One were also material facts on April 16, 2007. While some facts are material on

their own, multiple facts that may not appear to be material in isolation,

considered in light of all the facts available and taken together, can be found to

be material facts (YBM, supra at para. 94; Donald, supra at para. 271). In this

case, we find that on April 16, 2007 Gornitzki knew three facts: (i) there was an

ongoing interest by Mega to acquire Nu; (ii) Nu’s CEO had a value expectation of

$5 per share for the sale of Nu; and (iii) the end goal of Nu’s discussions with

Mega was to sell Nu to Mega at an attractive price (the “Nu Material Facts”).

[155] We conclude that the Nu Material Facts were not generally disclosed on or before

April 16, 2007 as contemplated by subsection 3.5(2) of NP 51-201 or otherwise.

C.

Gornitzki

44

[156] Staff submits that Gornitzki engaged in conduct contrary to subsection 76(2) of

the Act by providing material undisclosed facts relating to Nu to Agueci by

telephone on April 16, 2007. Gornitzki submits that there were no material facts

on that date and that, in any event, he merely gave Agueci his opinion that Nu

was “a good company”.

1.

Was Gornitzki in a Special Relationship with Nu?

[157] Staff submits that Gornitzki was in a special relationship with Nu by virtue of

subsection 76(5)(b) of the Act due to his involvement in business or professional

activity with Nu. Staff’s evidence included documentation of a Non-Disclosure

Agreement signed between Gornitzki and Frizelle on May 30, 2006. Gornitzki

acknowledges in his written closing submissions that he was in a special

relationship with Nu.

[158] We find that Gornitzki was in a special relationship with Nu during the relevant

period, pursuant to subsection 76(5)(b) of the Act.

2.

Did Gornitzki have Knowledge of the Nu Material Facts on

April 16, 2007?

[159] Based on the evidence, we find that, as of April 16, 2007, Gornitzki had

knowledge of the Nu Material Facts as follows:

(a)

Nu Fact One - Mega wanted to buy Nu, and had for some time. We are

satisfied that “in March 2007, through Jacob Gornitzki, Mega approached

Nu about a possible acquisition by Mega” as stated in Mega’s chronology

of events (Exhibit 64). We also accept that the March 24, 2007 email from

Patricio to Inwentash and Taylor described Gornitzki’s involvement stating

“We should just buy them. Jacob agrees and is working on Tony F.”

(Exhibit 81). Further, Gornitzki acknowledged in his testimony that on or

about March 24, 2007 he reported to Frizelle that Mega wanted to buy Nu.

(b)

Nu Fact Two - Frizelle, Nu’s CEO, had a value expectation for the sale of

Nu of $5 or more per Nu share. Gornitzki testified that he did not recall

Frizelle mentioning the $5 amount at the Il Posto dinner. We find Frizelle’s

testimony that he had discussed this specific price expectation with

Gornitzki on several occasions to be credible. Frizelle testified that he and

Gornitzki would have had discussions from time to time as to what

Frizelle’s expectations were and that they were consistent with the $5

figure quoted at the Il Posto dinner. We find that his expectation was

conveyed to Gornitzki prior to April 16, 2007.

(c)

Nu Fact Three - The end goal of Nu’s discussions with Mega was to sell Nu

to Mega at an attractive price. Frizelle testified that Gornitzki knew the

end goal was to sell Nu to Mega and that was why they were pursuing

Mega as a strategic investor. Gornitzki confirmed that Frizelle had

identified Mega as a strategic partner for a Joint Venture, but that the end

goal was for Mega to buy Nu. During cross-examination, this question was

put to Gornitzki:

Q. And there was an end goal in mind, right? And Mr.

Frizelle’s end goal was to sell to Mega at an attractive price?

A. At the end of the day, yes....

(Merits Hearing Transcript of February 4, 2013 at pp.53-54).

45

[160] We conclude that Gornitzki had knowledge of the undisclosed Nu Material Facts

on or before April 16, 2007.

3.

Did Gornitzki Inform Agueci of the Nu Material Facts?

[161] Gornitzki submits that, even if he knew some or all of the alleged Nu Material

Facts, he did not impart such facts to Agueci and his opinion that Nu was “a good

company” does not meet the standard of “informing” required by subsection

76(2) of the Act.

[162] During the relevant period, Gornitzki frequently used the offices of GMP when he

was in downtown Toronto between meetings. On such occasions, he was in

contact with Agueci to coordinate boardroom availability for his use or to ask

Agueci to make copies of documents, etc. Although Gornitzki and Agueci had

frequent contact during this period, their relationship was only casually friendly.

As multiple witnesses have testified, Agueci was a chatterbox and loved to talk

about stocks with everyone she met.

[163] It is not disputed that on April 16, 2007, Gornitzki called McBurney’s line at GMP,

Agueci answered, and that they spoke for approximately eight minutes at 6:25

p.m. Staff alleges that Agueci learned of the Nu Material Facts from Gornitzki

during this phone call. In her compelled testimony, Agueci stated that all of the

information that she had about Nu came from Gornitzki. Gornitzki’s best

recollection of the call was that he asked Agueci for McBurney’s whereabouts and

if she asked him about Nu at that time, he would have told Agueci that Nu was a

“good company and she should buy it” (Merits Hearing Transcript of February 3,

2013 at p. 166).

[164] We find that Agueci made no efforts to hide her interest in Nu, sending emails to

other GMP staff, asking others outside GMP what they thought of the stock, and

even telling McBurney that Jacob had told her to buy Nu and asking what he

thought. McBurney testified that in responseto Agueci’s inquiry, he stated

something to the effect that 'Jacob is not a stupid man’. We find that Agueci

communicated openly about Nu in emails from April 16 to April 23, 2007.

[165] While it is possible that Gornitzki may have told Agueci the Nu Material Facts on

that call, we find it equally plausible that he did not tell Agueci anything more

than that Nu was a good stock; i.e. that he recommended the stock to her. We

also find it plausible that Gornitzki may have discussed the potential deal with

one or more of the investment banking professionals at GMP, in the context of

their potential mandate with Nu. It is possible that, in the course of day to day

business at GMP, Agueci may have overheard speculation among others at GMP

about Nu and Gornitzki’s role with the company. No direct evidence was

presented that would indicate that Gornitzki informed her of any of the specifics

of the Nu Material Facts known to him. Nor was the circumstantial evidence

sufficient to satisfy us that the inference that Gornitzki informed Agueci of the Nu

Material Facts should be drawn in this instance.

[166] We are cognizant that if a respondent puts forth an equally plausible alternative

explanation, it would be improper for the Panel to infer improper intent

(Podorieszach, supra at para. 78). Therefore, we are not satisfied on a balance of

probabilities that there is clear, convincing and cogent evidence that Gornitzki

informed Agueci of the Nu Material Facts on April 16, 2007.

D.

Agueci

46

[167] Having found that there was not sufficient evidence to satisfy us on a balance of

probabilities that Agueci learned of the Nu Material Facts on the date alleged by

Staff, we make no further analysis or findings with respect to allegations that

Agueci informed others or traded with knowledge of the Nu Material Facts,

contrary to subsections 76(1) and 76(2) of the Act.

E.

Wing, Iacono, Raponi, Fiorillo, Fiorini and Serpa

[168] Having found that there was not sufficient evidence to satisfy us on balance of

probabilities that Gornitzki informed Agueci of the Nu Material Facts, we make no

further analysis or findings with respect to allegations that Iacono informed

Serpa of the Nu Material Facts, contrary to subsection 76(2) of the Act or that

Wing, Iacono, Raponi, Fiorillo, Fiorini and Serpa traded with knowledge of the Nu

Material Facts, contrary to subsection 76(1) of the Act.

F.

Did Gornitzki, Agueci, Wing, Iacono, Raponi, Fiorillo, Fiorini

and/or Serpa Engage in Conduct Contrary to the Public Interest?

1.

Gornitzki

[169] Staff submits that, even if the Panel does not find that Gornitzki tipped Agueci,

Gornitzki acted contrary to the public interest by recommending the purchase of

Nu shares while in a special relationship with Nu and by discussing Nu’s

prospects with Agueci while subject to a duty of confidentiality to Nu. Staff refers

the Panel to the Donald decision.

[170] Gornitzki submits these arguments should be rejected because: (a) Gornitzki did

not discuss Nu’s prospects with Agueci; (b) even if expressing a positive opinion

could be said to be a recommendation, the law in Ontario does not prohibit

recommending a stock; and (c) in any event, Staff’s argument is inconsistent

with the purposes and scope of the public interest powers of the Commission

and, if accepted would have negative effects on the market.

[171] We find that, during the relevant period, Gornitzki was an experienced market

participant who had many years of experience in merchant banking and advising

corporations on financing and other corporate transactions. We are persuaded

that it is possible that Gornitzki told Agueci that Nu was a good stock and

recommended that she purchase it. We also find that the circumstances in this

case are somewhat different from Donald since, in that case, Donald was an

officer of a reporting issuer (and the acquiring firm) and after learning of the

potential acquisition, he purchased stock in the target company. While it is true

that Gornitzki was in a special relationship with Nu and that he owed them a

duty of confidentiality, we are not convinced that his conduct was contrary to the

public interest if he merely informed Agueci that Nu was a good company. At

most, we would agree with Staff that his remarks were indiscreet given his

relationship with the two companies involved, but we do not find that there is a

basis to conclude his conduct was contrary to the public interest or abusive of

the capital markets.

2.

Agueci

[172] Staff submits that Agueci’s conduct in illegal tipping, illegal trading and in

relation to the First Secret Account was contrary to the public interest. We make

no findings regarding the allegations of illegal tipping and trading since we are

not satisfied that Gornitzki informed Agueci of the Nu Material Facts. In respect

of the allegation as to the First Secret Account, Staff submits that Agueci was not

47

allowed to have any undisclosed association with a securities account given her

employment at GMP and that her impersonation of her mother when placing

orders for Nu shares in the First Secret Account was deceptive and fell below the

standard of behaviour expected of employees of registrants.

[173] Agueci submits that it is not open to the Commission simply to treat a finding of

conduct contrary to the public interest as Staff’s consolation prize in cases where

Staff fails to prove a breach of the Act. Further, Agueci asks that the Panel

consider that Ontario has not prohibited insiders from making recommendations

to purchase or sell a security so long as that recommendation does not involve

the passing of material non-public information. Agueci cites Asbestos for the

submission that the Commission’s public interest jurisdiction is not unlimited

(Asbestos, supra at para. 41). Further, Agueci argues that the purpose of section

127 of the Act is not to simply override the legislative choices made in respect of

the constituent elements of offences of illegal insider trading and tipping.

[174] As an employee of a registrant, Agueci was fully aware that she was not allowed

to have an interest in undisclosed accounts and that she was required to report

all trading activity to GMP. We heard evidence that Agueci was required each

year to attest to her understanding of GMP’s compliance policies and procedures.

We also heard recordings of brokerage calls in which Agueci can be heard placing

orders for the First Secret Account while stating that she is her mother. The

voice on these recordings was confirmed by witnesses familiar with Agueci’s

voice, including McBurney and Staff who interviewed her. We find that not only

did Agueci open the First Secret Account in her mother’s name, Agueci also

impersonated her mother when placing orders for the First Secret Account.

[175] Although Agueci was not a registrant, as an employee of a registrant, she ought

to be held to a higher standard of conduct and her conduct fell far below the high

standard expected of her. The integrity of the regulatory framework for

registrant firms depends upon the adherence of member firms to appropriate

compliance structures. For Agueci to circumvent the compliance structureof GMP

is not simply an employment matter. Her conduct engaged fundamental

principles that the Commission considers in pursuing the purposes of the Act and

in particular “requirements for the maintenance of high standards of fitness and

business conduct to ensure honest and responsible conduct by market

participants” (section 2.1 of the Act). We consider her conduct in impersonating

her mother in order to acquire securities to be abusive of the capital markets

and, therefore, find that Agueci’s conduct was conduct contrary to the public

interest.

3.

Wing, Iacono, Raponi, Fiorillo, Fiorini and Serpa

[176] We do not find that Wing, Iacono, Raponi, Fiorillo, Fiorini or Serpa’s conduct in

respect of Nu was contrary to the public interest.

G.

Conclusions

[177] With respect to allegations relating to Nu, the Panel is not satisfied that on or

before April 16, 2007 Gornitzki advised Agueci of the Nu Material Facts, contrary

to subsection 76(2) of the Act or the public interest. Accordingly, the Panel does

not find that Agueci informed any of the other Respondents of the Nu Material

Facts, as alleged, or that Iacono informed Serpa of thosefacts contrary to

subsection 76(2) of the Act or the public interest. Similarly, the Panel makes no

finding that Agueci, Wing, Iacono, Raponi, Fiorillo, Fiorini or Serpa traded with

48

knowledge of the Nu Material Facts, contrary to subsection 76(1) of the Act or

the public interest.

[178] Furthermore, the Panel is not satisfied that Gornitzki’s possible recommendation

of Nu as a good stock represents conduct contrary to the public interest.

[179] However, the Panel does find that Agueci’s conduct and involvement with the

First Secret Account, her lack of disclosure of that account to her employer and

her impersonation of her mother when placing trades in that account constitute

conduct contrary to the public interest.

VI.

EMC - ANALYSIS AND FINDINGS ON ALLEGATIONS OF INSIDER

TRADING, TIPPING AND CONDUCT CONTRARY TO THE PUBLIC INTEREST

A.

Overview of the EMC Transaction

[180] During the relevant period, May and June 2007, EMC was a reporting issuer in

Ontario. Staff submits that in early 2007, SXR Uranium One (“SXR”) and EMC

began negotiations relating to a transaction whereby SXR would purchase all

outstanding EMC shares at a premium. Both companies were in the uranium

extraction business, but at different stages of development. EMC’s market

capitalization was $1.3 billion and SXR’s was $6.3 billion. By January 11, 2007,

SXR and EMC had executed a Confidentiality and Non-Disclosure Agreement in

furtherance of assessing the feasibility of entering into a possible business

transaction.

[181] On May 4, 2007, Paul Matysek (“Matysek”), the President and CEO of EMC,

announced a trading blackout on insiders due to a pending material transaction.

On May 5, 2007, Jean Nortier (“Nortier”), SXR’s Executive Vice President

Corporate Affairs, advised SXR’s directors that negotiations to acquire EMC had

concluded and that the parties wished “to bring the transaction to an

announceable stage as soon as possible” (Exhibit 315). Nortier’s email attached

a document entitled “Project Grizzly: Summary of Business Points” which

included details and terms of the transaction, including a proposed exchange

ratio of 1.05 SXR shares for every EMC share.

[182] On May 7, 2007, Matysek approached Kevin Reid, Senior Vice President of

Investment Banking at GMP, to ask whether GMP would provide financial advice

to EMC’s special committee in connection with SXR’s proposal. Reid then sought

GMP approval to proceed with the mandate, added both issuers to GMP’s grey

list, as he reasonably expected GMP to participate and come into possession of

material undisclosed information, and sent EMC a draft engagement letter, which

noted that the engagement was to assist EMC in a transaction that would involve

the acquisition of EMC by a third party.

[183] On May 10, 2007, the EMC board of directors met to appoint a special committee

to continue negotiations with SXR. EMC and SXR exchanged a draft business

combination agreement on the same day. SXR had previously performed

extensive analysis, including a tour of EMC properties, reserve and resource

analysis and financial modelling to arrive at an exchange ratio of 1.15 SXR per

EMC share, which was previously 1.05 as noted above. Reid testified that the

transaction information would have been shared with GMP by May 10, 2007 so

that GMP could determine if the share exchange ratio was fair. GMP, having

received formal approval for the engagement from EMC’s Board of Directors,

commenced preparation of a fairness opinion and board presentation that day.

49

[184] GMP delivered a draft fairness opinion to the EMC special committee on May 15,

2007, indicating that, in GMP’s opinion, the transaction was fair from a financial

point of view, which was then presented to the EMC board of directors the next

day.

[185] On May 18, 2007, Market Regulation Services contacted EMC to inquire about

irregular trading activity in its shares. As a result, EMC issued a press release

after the market close that day, indicating that it was “in exclusive negotiations

with respect to a potential sale of the company” but that “[n]o assurance can be

given that the negotiations will be successful” (Exhibit 412; the “1^stEMC

Announcement”). The following trading day, EMC’s stock price jumped 10.6%.

Further activity occurred over the next few weeks, in furtherance of the

transaction.

[186] On June 4, 2007 at 8:18 a.m. EST, EMC and SXR issued a joint press release

declaring that they had signed a definitive agreement whereby SXR would

acquire all the shares of EMC at a ratio of 1.15 SXR shares for each share of

EMC, representing a value of $19.12 per EMC share based on SXR’s closing price

on June 1, 2007 or a 28% premium to the 20 day volume weighted average

trading price for the period ending May 17, 2007 (Exhibit 471, the “2^ndEMC

Announcement”).

B.

Were there Material Facts Relating to EMC that were Not Generally

Disclosed?

[187] The question that the Panel must answer is whether any of the alleged material

facts relating to EMC, or some or all of them taken together, were material facts

that would reasonably be expected to have a significant effect on the market

price or value of EMC securities, on the dates on which Staff allege that Agueci

tipped others and that Wing, Pollen, Fiorillo, Stephany, Fiorini, Raponi, Iacono

and Serpa purchased EMC shares.

[188] Staff submits that the following were material facts with respect to EMC that

were not generally disclosed at the relevant time: (a) SXR proposed to acquire

EMC; (b) the negotiations between SXR and EMC had effectively concluded and

that the parties were working to bring the transaction to “an announceable

stage”; (c) the terms of the proposal were that it was to be an acquisition of

100% of the outstanding common shares of EMC; (d) the acquisition was by way

of a share exchange ratio, initially proposed in early May 2007 at 1.05:1 and by

May 10, 2007 at 1.15 SXR share for each EMC share; and (e) the ratio

represented a significant premium to EMC’s share price.

[189] First, we considered whether (a) SXR proposed to acquire EMC and (b)

negotiations between SXR and EMC had effectively concluded such that the

parties were working to bring the transaction to “an announceable stage”. The

evidence indicates that on Saturday, May 5, 2007 the SXR board was informed

by Nortier that negotiations were concluded with regard to the acquisition of EMC

and that the parties were moving the deal to an “announceable stage”. We find

that as of May 5, 2007, SXR had proposed to acquire EMC (“EMC Fact One”)

and negotiations between SXR and EMC had effectively concluded.

[190] We also considered whether: (c) the offer terms included an acquisition of 100%

of the outstanding common shares of EMC, (d) the offer was by way of share

exchange ratio of 1.15 SXR share for each EMC share, and (e) the consideration

represented a significant premium to EMC’s share price. We note that in the May

50

5, 2007 email from Nortier to the SXR board the attachment indicated the share

ratio of 1.05 SXR shares for every EMC share. On May 10, 2007, the SXR board

received a presentation with extensive analysis on the deal with a share

exchange ratio of 1.15 SXR per EMC share. We find that as of May 10, 2007,

SXR’s proposal included an acquisition of all outstanding common shares of EMC,

by way of a share exchange of 1.15 SXR share per EMC share, which

represented a significant premium (together with EMC Fact One, the “EMC

Facts”).

[191] In light of the foregoing conclusions, we turn to the assessment of the

materiality of the EMC Facts. In applying the objective market impact test of

materiality we consider whether the EMC Facts would be reasonably expected to

significantly affect the market price or value of EMC’s securities (subsection 1(1)

of the Act).

[192] The EMC Facts above must be considered in context, including that: EMC was a

smaller company than SXR in terms of market capitalization ($1.3 billion versus

$6.3 billion); SXR and EMC executed a confidentiality agreement in January

2007; on May 4, 2007, EMC implemented a blackout period on insiders; and by

May 5, 2007, the SXR board was aware that negotiations with EMC had

concluded and that they were working towards an “announceable stage” with a

proposed share exchange ratio. These are indicative of the advanced stage of the

transaction and support a finding that the EMC Facts were material. In our view,

the deal had progressed sufficiently to place a value on the target company and

to engage financial advisors, further supporting that the transaction was

probable. In the past, the Commission has found that a proposal to acquire all of

the shares of an issuer at a significant premium to the market price of those

shares was a fact that would reasonably be expected to have a significant effect

on the market price or value of the issuer’s shares (Suman, supra at para. 11).

We concur.

[193] We find that EMC Fact One, SXR’s proposal to acquire EMC, would be reasonably

expected to have a significant effect on the market price of EMC’s securities and,

therefore, was a material fact as of May 8, 2007. We also find that the EMC

Facts, considered collectively, were material facts (YBM, supra at para. 94;

Donald, supra at para. 271). We find that during the relevant period, the EMC

Facts would be reasonably expected to have a significant effect on the market

price of EMC’s securities (collectively, the “EMC Material Facts”).

[194] We also considered whether the EMC Material Facts were generally disclosed

during the relevant period. We accept the testimony of Ciccone, Chief

Compliance Officer at GMP in 2007-2008, that issuers were placed on the GMP

grey list when GMP obtained material non-public information about the issuer. As

noted above, both EMC and SXR were placed on the GMP grey list on May 7,

2007. We also conclude that the 1^stEMC Announcement of May 18, 2007 was

triggered by the Market Regulation Services inquiry into irregular market activity

and that this press release was the first indication to the public that EMC was in

exclusive negotiations with respect to a potential sale of the company. The

identity of the acquirer, SXR, and terms of the proposal were not publicly

announced until the 2^ndEMC Announcement on June 4, 2007. We also accept the

testimony of George that, prior to the aforementioned announcements, the SXR

proposal to acquire EMC had not been disclosed to the market. For these

reasons, in our view the EMC Material Facts were not generally disclosed until

51

the 1^stEMC Announcement of May 18, 2007 and the 2^ndEMC Announcement of

June 4, 2007, as contemplated by subsection 3.5(2) of NP 51-201 or otherwise.

C.

Agueci

[195] Staff submits Agueci engaged in conduct contrary to subsection 76(2) of the Act

by providing undisclosed material facts relating to EMC to Wing, Pollen, Fiorini,

Fiorillo, Stephany, Raponi and Iacono.

1.

Was Agueci in a Special Relationship with EMC?

[196] The Panel finds that Agueci was in a special relationship with EMC pursuant to

subsection 76(5)(c) of the Act as of May 7, 2007. On May 7, 2007, upon being

approached by Matysek to act for EMC, Reid requested that EMC and SXR be

placed on GMP’s grey list at 3:36 p.m. and emailed McBurney, Chairman of GMP,

and Harris Fricker, Vice-Chairman of GMP for approval to act on behalf of EMC at

7:17 p.m. As a result of their mandate between at least May 7, 2007 and June 4,

2007, GMP was in a special relationship with EMC pursuant to subsection

76(5)(b) of the Act because GMP was engaged in a business or professional

activity with or on behalf of the reporting issuer, EMC. Accordingly, Agueci was in

a special relationship with EMC pursuant to subsection 76(5)(c) of the Act during

the relevant time because she was an employee of GMP, which we found to be a

company described in subsection 76(5)(b) of the Act.

2.

Did Agueci have Knowledge of the EMC Material Facts

Beginning on May 8, 2007?

[197] The testimony of multiple GMP executives supports that in May 2007 Agueci sat

in close proximity to the GMP deal team, including McBurney and Reid, and that

she would have overheard conversations in their open concept office layout.

Certain emails pertaining to SXR’s proposed acquisition of EMC were either sent

directly to her or were accessible by her, as Agueci had access to McBurney’s

emails and to the GMP corporate directory. Agueci knew a corporate mergers

and acquisitions (“M&A”) file was being opened for EMC on May 8, 2007 and she

also booked travel arrangements on May 11, 2007 for the GMP team to deliver

the fairness opinion to EMC.

[198] Based on the evidence, we are satisfied that Agueci had knowledge of the

following facts:

1.

on or before May 8, 2007, Agueci knew that SXR proposed to acquire

EMC. On May 7, 2007, Reid emailed Fricker and McBurney for GMP’s

approval to act on behalf of EMC (the “Approval Email”). Also on May 7,

2007, both EMC and SXR are placed on the GMP grey list. On May 8,

2007, Agueci was copied on an email, which included the Approval Email

and which indicated that EMC may receive a share exchange offer from

SXR. Agueci received copies of the GMP’s grey lists and had access to

McBurney’s emails;

2.

at the latest by May 11, 2007, Agueci knew that the terms of SXR’s

proposal included (i) an acquisition of all outstanding common shares of

EMC; (ii) a share exchange of 1.15 SXR share for each EMC share; and

(iii) a significant premium. On May 10, 2007, Reid emailed Jason Yeung, a

vice-president at GMP, to start working on a fairness opinion. Reid

testified that by May 10, 2007, he would have had the share exchange

ratio in order to determine if the offer was fair. Agueci sat in close

52

proximity to the GMP deal team and had access to the corporate

directory, which contained the fairness opinion.

[199] However, we were not satisfied that Agueci had personal knowledge of the stage

of negotiations between EMC and SXR, as alleged by Staff.

[200] We conclude that Agueci had knowledge of the EMC Material Facts beginning on

or before May 8, 2007 and at the latest by May 11, 2007, which were not

generally disclosed at the time that she learned of them.

D.

Did Agueci Inform, and did Wing, Pollen, Fiorillo, Stephany,

Fiorini, Raponi, Iacono and/or Serpa Purchase, EMC Securities,

with Knowledge of the EMC Material Facts?

[201] Agueci takes the position that the direct evidence, which should be preferred

over inferences drawn from circumstantial evidence, at most supports that she

recommended to other Respondents that they purchase a security or advised

them that she was purchasing a particular security. She relies upon ATI and

Landen in support of her submission that in Ontario, unlike in Alberta, advice

from an insider to trade is not material information (Re ATI TechnologiesInc.

(2005), 28 O.S.C.B. 8558 (“ATI”) at paras. 63-64; Landen, supra at para. 97).

Agueci submits that Staff has failed to establish on a balance of probabilities that

any of the Respondents who traded in the impugned securities received material

non-public information from her. Agueci notes that she had no reason or motive

to pass such information and received no benefit from the alleged tipping.

1.

Wing and Pollen

[202] On Sunday, May 13, 2007, Wing called Agueci at 2:42 p.m. for three minutes

and at 8:58 p.m. for four minutes. Approximately one hour later, at 10:16 p.m.

Toronto time, Wing emailed his contact, Blaise Friedli (“Friedli”), at SG Private

in Switzerland under the subject “EMC” stating: “Blaise, your client would like to

buy 20,000 shares with a $16 limit. I think the name is Energy Metals. Call my

cell before opening but he wants the order placed by the opening. I think it is

TSE listed. Thanks. Dennis” (Exhibit 346). The order was filled at the opening of

the market on May 14, 2007 for the Pollen SG Account. On the same day at

10:06 a.m., Wing directed the purchase of an additional 20,000 shares of EMC

for the Pollen SG Account, which was executed through RBC Dominion Securities.

Later that day, Wing called Agueci at 2:39 p.m. for two minutes, following which

he placed an order to purchase a further 20,000 EMC shares in his Fort House

account at 3:40 p.m. On May 15, 2007, Wing directed a purchase of a further

40,000 EMC shares in the Pollen SG Account, for a total of 100,000 EMC shares

held collectively by Wing and Pollen, purchased within a two-day span, from May

14 to 15, 2007, and immediately following contact with Agueci.

[203] On June 4, 2007, following the 2^ndEMC Announcement, Wing sold the entirety of

EMC positions held in the Pollen SG Account and his personal Fort House

account.

[204] We find that the aggregate of Wing’s and Pollen’s purchases of EMC shares in the

amount of $1,561,986 to be significant (Exhibit 1020). Wing submits that he

placed a National Bank purchase of $497,365 in November 2007, which was a

bigger purchase than the EMC purchase in his personal account. In fact, on

November 26, 2007 his account statement records a short sale of 10,000 shares

of National Bank and on November 28, 2007 it records a purchase of 10,000

53

shares of National Bank to cover the short sale. That was the nature of the

transaction, which was covering a short position and not a true purchase.

[205] The fact that Wing and Pollen had not bought EMC before May 14, 2007 is

noteworthy, but not conclusive. We agree with Wing that the impugned trades

were not necessarily uncharacteristic or unusually risky for Wing and/or Pollen.

Wing and Pollen both held commodity stocks and Wing was purchasing junior

resource stocks at the time. The trades were, however, highly profitable – 16%

for Pollen and 23% for Wing in a 21-day holding period, which we find to be a

short timeframe for the size of the profit. We also note that, while Wing did place

a limit order of $16 for the first order in the Pollen SG Account, the price at

which he placed the limit exceeded the high of $15.97 that day and the closing

price of $15.10 on the prior trading day for EMC shares and is, therefore,

somewhat more akin to a market order and indicative of his interest in making a

quick purchase of EMC shares. Wing’s rush to fill his order of EMC shares by

placing a limit at that price supports theinference that Agueci informed Wing of

the EMC Material Facts.

[206] Furthermore, Wing shorted SXR stock in the Pollen SG Account on May 30 and

June 1, 2007, prior to the 2^ndEMC announcement. As stated above, the 1^stEMC

announcement advised of a potential acquisition of EMC, but was silent on the

identity of the acquirer. While there are no allegations against Wing or Pollen

with respect to thosespecific transactions, we find Wing’s conduct in shorting the

acquirer, SXR, and purchasing the target company, EMC, prior to the public

announcements, is corroborative of an inference that he had been informed of

the EMC Material Facts.

[207] Wing testified that he relied upon an article dated May 10, 2007, which indicated

that SXR might make a bid for EMC and that EMC was a takeover target. Yet,

Wing did not sell the stock short until May 30. We heard evidence from multiple

witnesses that the uranium market was “hot” in the spring of 2007. Wing’s

evidence was that he relied on reports, but the document he relies upon shows

recommendations of EMC as a top pick as early as June 2005. We note that Wing

was aggressively buying EMC stock – four orders within 2 days in two accounts.

We do not find it credible that either the article of May 10, 2007 or reports

spurred his persistent trading activity days later. Wing also did not explain why

he preferred EMC over other uranium companies mentioned in the articles to

which he referred us.

[208] Wing also testified that Friedli of SG Private was an experienced portfolio

manager and provided him with investment advice. However, the evidence

supports that Wing instructed SG Private to purchase EMC on behalf of Pollen.

Further, Wing admitted that he directed 99% of the trades in the Canadian sub-

account of the Pollen SG Account. Furthermore, Wing could not recall if Friedli

advised him about the stocks at issue in this proceeding.

[209] Despite their personal relationship, we also do not find Wing’s testimony credible

that he and Agueci never spoke about stocks because a review of the evidence

provided by others and Agueci’s email history indicates that she discussed stocks

with just about everyone. Agueci stated, and Respondents and witnesses

confirmed, that she told everyone, including taxi drivers, about her stocks.

[210] We also found Wing to be less than forthcoming and selective in his responses at

the Merits Hearing with respect to the involvement of SG Private and Friedli in

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Pollen’s trades. When initially questioned about Pollen’s connection to a Fort

House account, Wing stated that the SG account at Fort House does not indicate

for each trade the specific client or account to which it is related. The next

hearing day, Wing stated that the SG account at Fort House looked at in this

proceeding was just for trades on behalf of Pollen and he could not recall other

accounts SG may have traded in at Fort House. Furthermore, in the Institutional

Account Application Form for the SG Private account at Fort House, Wing

checked a box which indicated that the Investment Advisor (“IA”), who in this

case was Wing himself, had no direct or indirect interest in the account. In his

testimony, Wing admitted that he incorrectly filled out the form with respect to

the IA’s interest in the account, which should have stated that there was a

relationship, through Pollen, between the IA (ie. Wing) and the SG account at

Fort House.

[211] Wing submits that there was a seven-day delay between the time Staff alleges

Agueci learned of the EMC Material Facts and when she allegedly informed him of

them. We do not accept this characterization. We are persuaded that Agueci

learned of SXR’s proposal to acquire EMC beginning on May 8, 2007, continued

to obtain further EMC Material Facts by May 11, 2007 and booked travel for GMP

executives to deliver their ultimate fairness opinion to the EMC board on May 11,

2007. In our view, a tipper need not alert a tippee to material undisclosed facts

immediately after receiving them. Between May 7 and May 11, 2007, GMP

became increasingly involved in its mandate for EMC and details of the SXR’s

proposed acquisition were becoming firmer. By May 13, 2007, when Agueci

spoke to Wing, she knew that the likelihood of the transaction occurring had

increased.

[212] Wing also submits that he and Agueci spoke every day and, therefore, trades

were bound to be in proximity to communications. We are not persuaded that it

was coincidental that he placed orders for purchases of EMC shares on May 13

and 14, 2007. We are satisfied that the timing of Wing’s and Agueci’s

communications to the placement of the orders and the rush to fill by the

opening support the inference that Agueci informed Wing of the EMC Material

Facts.

[213] Wing takes the position that he did not try to hide the EMC purchases because

he purchased them in his personal account. In our view, hiding trades in another

account is not by itself determinative of whether someone is trading on inside

information, but it is a relevant consideration. Wing’s purchase of 20,000 EMC

shares in his personal account alone would not necessarily demonstrate a

significant exposure to the stock, whereas the total purchases, including Pollen’s,

for a combined amount of over $1.5 million, is substantial. Moreover, a Canadian

regulator would not necessarily have access to trades in the Pollen SG Account

and, thus, would not be aware of the cumulative amount Wing and Pollen had

purchased. Therefore, we find that Wing was hiding his exposureto EMC, which

supports an inference that he had knowledge of the EMC Material Facts.

[214] Although Wing takes the position that he did not try to hide the EMC purchases,

the Panel notes that when Wing instructed Friedli to purchase EMC shares in the

Pollen SG Account, he did so by referring to a fictional client in the third person:

“Blaise, your client would like to buy 20,000 shares...he wants the order placed

by the opening...Thanks. Dennis” (Exhibit 346). In his testimony, Wing admitted

that the “he” referred to in the email cited is actually Wing himself. We find that

55

Wing was trying to obscure his involvement in the Pollen SG Account, an account

that traded in the impugned securities, which further supports an inference that

he had knowledge of the EMC Material Facts.

[215] Wing also submits that he did not demonstrate a consciousness of guilt because

he did not sell after the 1^stEMC Announcement. In our view, it is more likely in

the circumstances that he did not sell after the 1^stEMC Announcement because

he had been informed of the EMC Material Facts, which supported that the deal

would likely close.

[216] Wing further submits that he purchased EMC because he read research reports

that recommended EMC and because the uranium market was “hot”. However

the Brendan Kyne report that Wing referred us to was not produced and not

made an exhibit at the Merits Hearing. Rather, a Stockchase webpage listing that

report, among others, was produced and made an exhibit. We were also not

provided with an explanation as to why Wing chose EMC among the numerous

uranium companies recommended in other reports upon which Wing testified he

relied. Finally, EMC was recommended in various research reports and news

articles as early as 2005 and 2006; Wing did not provide a reason why he

bought EMC in May 2007, just when Agueci learned of the EMC Material Facts.

[217] We acknowledge that there is no evidence that Wing has ever been implicated in

Commission enforcement proceedings over the course of his 35 year career, and

he was aware of the consequences of insider trading in another matter.

However, exposure to insider trading investigations in the past does not assist us

in determining whether Wing had been informed of the EMC Material Facts in the

circumstances of this case. While Wing’s motivation for his impugned conduct is

not clear to us, motive is not a prerequisite to a finding of insider trading.

[218] Agueci submits that, at most, the evidence would support that she

recommended stocks to the other Respondents. We are not satisfied that Wing,

an experienced and knowledgeable market participant, would have purchased a

stock based on a simple recommendation from Agueci.

[219] We infer, based on the combined weight of the evidence, that Agueci informed

Wing of the EMC Material Facts. We find that Agueci learned of the EMC Material

Facts on or before May 8, 2007 and at the latest by May 11, 2007. Wing and

Agueci spoke on Sunday, May 13, 2007, in the afternoon and again in the

evening. Approximately one hour later, Wing emailed Friedli to place an order to

buy EMC shares. Wing continued to purchase EMC in both the Pollen SG Account

and his personal account over the following two days, May 14 and 15, 2007, for

a total purchase of 100,000 shares. The purchases were very proximate to

phone calls with Agueci, which supports that Wing had the ability and

opportunityto acquire knowledge of the EMC Material Facts and that he executed

well-timed purchases of EMC shares. Furthermore, the aggregate purchase

amount of $1,561,986, was significant even for Wing and Pollen. Finally, the

trades were highly profitable – at a 16% return for Pollen and at a 23% return

for Wing over a short 21-day holding period.

[220] We are satisfied that there is clear and cogent evidence supporting a reasonable

inference that Agueci informed Wing of the EMC Material Facts on May 13, 2007

and, therefore, that Wing purchased, and directed purchases for Pollen of, EMC

shares on May 14 and 15, 2007 with knowledge of the EMC Material Facts while

they were not generally disclosed.

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2.

Fiorini

[221] Staff submits that Agueci was one of five unidentified callers on Fiorini’s phone

record on May 14, 2007 and that during that contact, she informed Fiorini of the

EMC Material Facts. Counsel for Agueci and Fiorini, respectively, submit that an

inference that calls from an unknown caller to Fiorini came from Agueci is not

sufficiently linked to the established primary facts.

[222] In her evidence-in-chief, George explained that GMP`s phone records do not

track calls by employee extension number. Therefore, Staff was only able to

obtain cell phone records that track calls being made from a cell phone to a

particular GMP extension, but was not able to obtain records of specific GMP

extensions to track outgoing calls.

[223] On May 14, 2007, Fiorini purchased 2,000 shares of EMC and on May 17, 2007

Fiorini purchased a further 2,500 shares of EMC. On May 22, 2007, the first

trading day in Canada after the 1^stEMC Announcement, Fiorini sold his entire

position in EMC.

[224] Fiorini’s total purchase amount of $68,055 was significant relative to his then-

annual salary, which Fiorini estimated to be approximately $200,000 in 2007

(Exhibit 1020). His profit of 23% was significant over a short time frame of eight

days.

[225] Fiorini testified in his compelled examination that he would meet Agueci on a

regular basis for coffee during the work day and stated that Agueci was a good

source of information about the mining sector in the market – rumours, gossip

and innuendo – and she would discuss such information in their meetings over

coffee, which would give Fiorini a sense of the lay of the land as he tried to build

up the mining business at Desjardins. Fiorini testified that he and Agueci would

communicate occasionally by phone, using their respective office phone lines and

not their cell phones, and sometimes by email, but regularly would meet over

coffee to chat about the markets and people.

[226] The Panel places no weight on unidentified calls. In our view, it would be

speculation or conjecture to accept that an unidentified call to Fiorini on May 14,

2007 was a call from Agueci.

[227] While we acknowledge that Fiorini’s purchases of EMC shares were well-timed

relative to the 1^stEMC Announcement, we are not satisfied that Staff provided

clear, convincing and cogent evidence that Agueci informed Fiorini of the EMC

Material Facts and, therefore, we cannot find that Fiorini’s conduct in connection

with EMC constituted insider trading contrary to subsection 76(1) of the Act.

3.

Fiorillo

[228] On Saturday, May 12, 2007, Agueci called Fiorillo for one minute. We note that a

one minute call may indicate no response, the call went to voice mail, or the call

was of a short duration. On Sunday, May 13, 2007 at 12:23 p.m., Fiorillo called

Agueci for 13 minutes. The following day, phone records show two calls from

Agueci to Fiorillo for one minute each at 8:43 p.m. and 8:56 p.m. On May 15,

2007 at 8:51 a.m., Fiorillo called Agueci for nine to 10 minutes. Forty minutes

later, Fiorillo placed an order for 5,000 EMC shares and then another 5,000 EMC

shares. On Wednesday, May 16, 2007, Agueci called Fiorillo at 8:17 a.m. for two

minutes and Fiorillo called Agueci at 8:30 a.m. for five to six minutes. On May

17, 2007, Fiorillo placed three orders for EMC shares in amounts of 5,000, 5,000

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and 15,000, respectively. On Friday, May 18, 2007, Fiorillo placed a final order

for 5,000 EMC shares at 12:55 p.m. At 2:32 p.m. that same day, less than 2

hours after his last order, EMC’s stock was halted. Later that day EMC issued the

1^stEMC Announcement. On Thursday, May 24, 2007, Fiorillo sold 5,000 shares.

On June 4, 2007, EMC and SXR issued the 2^ndEMC Announcement and Fiorillo

sold his remaining position.

[229] In his examination-in-chief, Fiorillo attempted to downplay the extent of his

relationship with Agueci, saying she was a chatter-box. In cross-examination, it

became apparent that they were friends, who met for drinks, dinners, and

Fiorillo invited her to social gatherings on his boat. Fiorillo says that Agueci

“would almost get to the point of pestering me at times” (Merits Hearing

Transcript of January 20, 2014 at p. 63). We find it inconsistent that Fiorillo

regarded Agueci as a pest, but then would return Agueci’s calls on a Sunday

afternoon if he wasn’t interested in what Agueci had to say at the time.

[230] Furthermore, we do not find Fiorillo’s testimony credible that it was not possible

he spoke to Agueci about EMC. When Fiorillo was confronted with his compelled

examination, he reversed his position and stated that it is possible he and Agueci

spoke about EMC after all. We note that Fiorillo bought EMC shares forty minutes

after speaking with Agueci on May 15, 2007. GMP delivered a draft fairness

opinion to the EMC special committee on May 15, 2007, which was then

presented to the EMC board of directors by GMP employees whose travel had

been arranged by Agueci.

[231] Fiorillo submits that he traded so frequently that it is quite likely that calls with

Agueci could have been in close proximity to trades he made. In fact Fiorillo lists

approximately 28 trades that he did between May 12 and May 29, 2007, which

were also in close proximity to calls with Agueci. We accept that Fiorillo was a

frequent trader and it is more than likely that he made trades in stocks other

than the impugned trades that occurred in close proximity to calls with Agueci.

[232] We find that Fiorillo’s purchases of EMC shares for a collective amount of

$613,469, which was among the largest dollar value stock purchases in a 14

month period, were not insignificant (Exhibit 1020). Fiorillo submits that the

impugned trades were a small percentage of his income and net worth. As

Fiorillo implied in his testimony and in his closing submissions, his net worth was

between $33 million and $100 million, it would follow that most, if not all, his

purchases likely would be a small percentage of his net worth. Also, his

percentage return of 18% for EMC shares was substantial over the 20-day

holding period, which we find to be a very short timeframe for the size of the

profit.

[233] We agree with Fiorillo that his trades in EMC shares were not necessarily

uncharacteristic or unusually risky for Fiorillo, in that he frequently invested in

other resource stocks in gold, silver, oil and gas, coal, uranium and base metals

during the relevant time. We accept that Fiorillo was a prolific trader, who

implemented various strategies in his trading. For example, he sold some EMC

stock on May 24, 2007, after the 1^stEMC Announcement, to crystallize a profit of

20%. Fiorillo stated in cross-examination that if EMC suddenly shot up, he would

not have been buying the stock. Yet he began purchasing stock on May 15, 2007

at $14.95 and continued buying it on May 18, 2007, just prior to the 1^stEMC

Announcement, at $16.35, an increase of $1.40 or 9.4%. In our view, his

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conduct in this regard supports the inference that Agueci informed Fiorillo of the

EMC Material Facts.

[234] We accept the testimony of Aiello, Fiorillo’s investment advisor in 2007-2008,

that Fiorillo’s purchases of EMC shares in 2007 were not solicited, which indicates

that Fiorillo directed the purchases. We note that Fiorillo testified that it is “very

highly probable” he read an article as early as March 14, 2007 about EMC’s

target price being boosted by an analyst, yet he did not buy the stock until

shortly after his conversation with Agueci in mid-May.

[235] Fiorillo also testified that at the time of his purchases of EMC shares, the

uranium sector was “hot”. This characterization of the uranium sector does not

assist us in our analysis, because it is not unusual for takeovers to occur when

markets are “hot” in that specific sector.

[236] Fiorillo testified that he read extensively: newspapers, newsletters, research

reports, blogs and watched financial news, such as the Business News Network

(“BNN”), in addition to speaking with many individuals in the investment

industry. Fiorillo presented a Sprott Securities research report dated February

14, 2007 that listed over 20 uranium stocks that Sprott recommended. Yet, the

only two uranium companies that Fiorillo bought were EMC and Cameco prior to

May 15, 2007. Fiorillo acknowledged that he saw articles as early as March 2007

that recommended EMC, yet he did not purchase any EMC shares until after his

conversations with Agueci on May 12, 13 and 15, 2007.

[237] We also heard evidence and considered submissions concerning Fiorillo’s good

character and concern for his reputation. We do not doubt McBurney’s testimony

that in his dealings with Fiorillo, Fiorillo’s integrity was at the “top end of the

scale” (Merits Hearing Transcript of December 10, 2013 at p. 46). However, we

are not persuaded that McBurney knew all aspects of Fiorillo’s trading activities.

Therefore, McBurney’s character reference is not of great assistance to the Panel

in the circumstances. We are also not persuaded by Fiorillo’s evidence that if he

received material non-public information from Agueci, he would caution Agueci

and tell McBurney. While we agree that a good reputation is important in

business, it does not assist the Panel with these deliberations. As stated above

with respect to Wing, while Fiorillo’s motivation for his impugned conduct is not

clear to us, motive is not a prerequisite to a finding of insider trading.

[238] Fiorillo provided the Panel with an extensive list of individuals with whom he

discussed markets, investments and trading ideas, including several well-known

and recognized market experts. He was clearly a sophisticated and well-

connected market participant.

[239] Agueci submits that, at most, the evidence would support that she

recommended stocks to the other Respondents. We are not satisfied that Fiorillo,

an experienced and knowledgeable market participant, would have purchased a

stock based on a simple recommendation from Agueci.

[240] While we accept Fiorillo’s evidence that he traded frequently, watched the

market avidly and spoke to many people about stocks, we do not find Fiorillo’s

explanations of why he bought EMC shares to be in accord with the

preponderance of the evidence. They do not sufficiently explain the timing of his

contact with Agueci and the proximity to his trading.

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[241] We infer, based on the combined weight of the evidence, that Agueci informed

Fiorillo of the EMC Material Facts. We find that Agueci learned of the EMC

Material Facts on or before May 8, 2007 and at the latest by May 11, 2007.

Fiorillo and Agueci communicated over the May 12 and 13, 2007 weekend.

Within days of Agueci learning of SXR’s bid to acquire EMC and after her

communication with Fiorillo, Fiorillo purchased 40,000 shares of EMC worth

$613,469, a significant amount, even for someone of Fiorillo’s substantial net

worth and it was among the largest dollar value purchases by Fiorillo over the

relevant period. The purchases were proximate to contact with Agueci, which

supports that Fiorillo had the ability and opportunity to acquire knowledge of the

EMC Material Facts and that he executed well-timed purchases of EMC shares.

Furthermore, the trades were highly profitable at an 18% return over a short

holding period of 20 days.

[242] We are satisfied that there is clear and cogent evidence supporting a reasonable

inference that Agueci informed Fiorillo of the EMC Material Facts on or before

May 15, 2007 prior to the opening of markets that day and, therefore, that

Fiorillo purchased EMC shares on May 15, 17 and 18, 2007 with knowledge of

the EMC Material Facts while they were not generally disclosed.

4.

Stephany

[243] On Friday, May 11, 2007, Stephany and Agueci played tennis together in the

evening. The following day, Agueci called Stephany for one minute, Stephany

called Agueci back for one minute and at 7:48 p.m. Agueci called Stephany for

three minutes. We note that a one minute call may indicate no response, the call

went to voice mail, or the call was of a short duration. On Sunday, May 13,

2007, Agueci called Stephany for one minute at 10:31 a.m., 24 minutes later

Stephany called Agueci for one minute and at 11:04 a.m. Agueci called Stephany

for eight minutes. Later that day, Stephany called Agueci twice, at 3:58 p.m. for

six minutes and again at 4:12 p.m. for 10 minutes. On Monday, May 14, 2007,

Stephany called Agueci for one minute at 9:03 a.m. and Agueci called her back

at 9:04 a.m. for five minutes. Approximately 33 minutes later, Stephany bought

1,000 EMC shares. That same day Stephany called Agueci at 11:23 a.m. for one

minute and purchased 500 EMC shares at 1:20 p.m. That evening at 8:44 p.m.,

Agueci called Stephany for 12 minutes. On May 16, 2007, Stephany bought a

further 1,000 EMC shares.

[244] On May 18, 2007, EMC issued the 1^stEMC Announcement that it had entered

into exclusive negotiations concerning a potential sale of the company. Monday,

May 21, 2007, was the Victoria Day holiday in Canada. On May 22, 2007, the

first trading day in Canada after the 1^stEMC Announcement, Stephany sold 500

shares in her personal account. Approximately 28 minutes later Stephany

emailed Agueci suggesting they meet for coffee that day. On May 23, 2007,

Agueci called Stephany at 9:14 a.m. for one minute. On May 24, 2007, Stephany

sold 2,000 EMC shares at 9:42 a.m. for $17.77 per share and then bought 1,000

EMC shares at 11:02 a.m. for $18.25 per share. On June 4, 2007 the definitive

agreement was announced in the 2^ndEMC Announcement and Stephany placed

the order to sell the balance of her EMC shares at 8:46 a.m.

[245] In the course of her testimony, Stephany acknowledged she did not do research

on stocks, but rather relied on information from others when making investment

decisions. The thrust of her evidence was that she could not recall specific events

in the relevant period. Her testimony was that she thought EMC was in the

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uranium industry and at the time EMC was the “news of the day”. Stephany also

thought she heard about EMC from many people. Overall, Stephany’s testimony

was of little assistance to the Panel.

[246] We also found Stephany’s testimony to be inconsistent in certain respects. In her

examination-in-chief, Stephany testified that she did not know about one of

Agueci’s personal relationships with someone who had bought Agueci a condo.

However, in cross-examination, Stephany admitted that she and Agueci spoke

about everything. Stephany also testified that she and Agueci communicated by

phone and email regularly. They had been friends for 12 years.

[247] In our view, Stephany’s aggregate cost of purchase of EMC prior to May 24

(when she sold and then immediately bought back half the number of shares) in

the amount of $38,679 is significant, as it was approximately 38% of her annual

salary at the time (Exhibit 1020). On our review of the evidence, Stephany’s

purchases of EMC shares prior to May 24, 2007 are the second largest dollar

value holdings relative to her stock purchases in 2007. We also note that prior to

the 2^ndEMC Announcement, Stephany purchased an additional 1,000 EMC shares

on May 24, 2007 for $18.25, having sold 2000 shares just 80 minutes earlier at

$17.77.

[248] We find that these purchases were significantly large and risky relative to her

income and particularly since the purchases were made on margin. Although the

purchases of EMC shares were not out of character by comparison to other junior

resource stocks Stephany purchased, they were risky relative to the potential

loss of money invested. In her own words, Stephany acknowledged that her

investment in EMC was significant by comparison to her salary and that at the

time she remortgaged her houseto invest in the stock market. We are not

persuaded that Stephany did not recall details of an admittedly significant

purchase at a time when she remortgaged her house to make investments in the

market and bought on margin.

[249] Stephany’s purchases were also highly profitable. She earned a 16% return in a

seven to nine day holding period, which we find to be a very short timeframe for

the size of the profit.

[250] We do not find Stephany’s explanation that she would not have sold her entire

position before June 4, 2007 if she had had material non-public information to be

persuasive. Stephany took her profit after the 1^stEMC Announcement. Her

explanation does not accord with the preponderance of the evidence because if

Agueci informed her of the EMC Material Facts, including that a formal proposal

had been made, the 1^stEMC Announcement provided an opportunetime for her

to sell. Furthermore, Stephany repurchased 1000 shares prior to the 2^ndEMC

Announcement at a price higher than her last sale.

[251] Stephany submits that there was a 10-day delay between Agueci allegedly

obtaining knowledge of the EMC Material Facts and the date Staff alleges she

informed Stephany of thosefacts. We do not accept this characterization. As

stated above, we are persuaded that Agueci learned the EMC Material Facts

beginning on or before May 8, 2007, learned of further EMC Material Facts at the

latest by May 10, 2007 and even booked travel for delivery of the fairness

opinion on May 11, 2007. In our view, a tipper need not alert a tippee to

material facts immediately upon receiving them. Between May 7 and May 10,

2007, GMP became increasingly involved in its mandate for EMC and details of

61

the SXR’s proposed acquisition were becoming firmer. By May 12 to 14, 2007,

when Agueci spoke to Stephany, and prior to Stephany’s first purchase of EMC

shares, she knew that the likelihood of the transaction occurring had increased.

[252] Again, Agueci submits that, at most, the evidence would support that she

recommended stocks to the other Respondents. We are not satisfied that

Stephany, an experienced market participant, would have purchased a stock

based on a simple recommendation from Agueci.

[253] We infer, based on the combined weight of the evidence, that Agueci informed

Stephany of the EMC Material Facts. We find that Agueci learned of the EMC

Material Facts on or before May 8, 2007 and at the latest by May 11, 2007.

Stephany and Agueci played tennis on the evening of May 11, 2007; over the

weekend May 12 and 13, 2007 there were four phone calls longer than 1 minute,

in addition to four phone calls of one minute each between them. They also

spoke on the morning of May 14, 2007 and approximately half an hour later,

Stephany made her first purchase of EMC shares. Just four days later, EMC

issued the 1^stEMC Announcement. The purchases were proximate to contact

with Agueci, which supportsthat Stephany had the ability and opportunityto

acquire knowledge of the EMC Material Facts and that she executed well-timed

purchases of EMC shares. Furthermore, the trades were highly profitable at a

16% return over a very short holding period of seven to nine days. Also, as

stated above, we find that these purchases were significantly large and risky

relative to Stephany’s income, particularly since the purchases were made on

margin and because it occurred at a time when Stephany had remortgaged her

house in order to invest in the stock market.

[254] We are satisfied that there is clear and cogent evidence supporting a reasonable

inference that Agueci informed Stephany of the EMC Material Facts on or before

May 14, 2007 prior to the opening of markets that day and, therefore, that

Stephany purchased EMC shares on May 14 and 16, 2007 with knowledge of the

EMC Material Facts while they were not generally disclosed.

5.

Raponi

[255] On May 16, 2007, there were three calls between Raponi and Agueci for two

minutes, one minute and one minute, respectively. We note that a one minute

call may indicate no response, the call went to voice mail, or the call was of a

short duration. On May 17, 2007, Raponi bought 1,000 shares of EMC at 11:51

a.m. On Monday, May 21, 2007, following the 1^stEMC Announcement, Raponi

sold 1,000 shares of EMC at 12:10 p.m. on the NYSE Arca, as Canadian markets

were closed for the Victoria Day holiday.

[256] As Agueci’s cousin, Raponi and Agueci had frequent contact with each other,

often in person, but also by email, text and phone. Raponi is a high school

teacher of languages, had limited stock market experience and had not been

registered in the industry. We find that she was at the relevant time a novice

investor. In her compelled examination, when asked if she would research

stocks, Raponi stated “...if she [Agueci] bought it, it was good enough for me”

(Exhibit 1157 at p. 45) and “I want to buy what you [Agueci] buy” (Exhibit 1157

at p. 123). Raponi further stated that Agueci would not tell Raponi specifics, but

that Agueci would tell Raponi if she thought a stock recommendation was a good

one. Raponi admitted that Agueci told her to buy EMC shares.

62

[257] We find that Raponi’s purchase of $15,149 in EMC shares was somewhat risky

because Raponi used her line of credit to make the purchase (Exhibit 1020).

However, Raponi’s EMC purchase was not uncharacteristic relative to her other

trades in size and she was buying other resource stocks at the time. Raponi

testified that her salary was approximately $85,000 to $90,000. The EMC

purchase represented approximately 17% of her annual salary, which represents

a substantial proportion of her income and a relatively risky investment for her.

However, Raponi limited her risk by selling at the first opportunityof profit, and

realized a return of 13%.

[258] We do not accept Staff’s submission that Raponi sold quickly because she had

knowledge of the EMC Material Facts. In the circumstances, we consider her sale

of EMC shares to be a sign of a nervous and novice investor hoping to crystallize

some profit. Raponi explained she sold on May 21, 2007 on the NYSE Arca

because she was happy with the profit and “didn’t want to risk it going down or

losing out” (Exhibit 1157 at p. 166). Raponi explained that she specifically

recalled selling the EMC stock because she had to call TD Greenline Investor

Services to do so, rather than executing the sale online.

[259] Again, Agueci submits that, at most, the evidence would support that she

recommended stocks to the other Respondents. We are cognizant that if a

respondent puts forth an equally plausible alternative explanation, it would be

improper for the Panel to infer improper intent (Podorieszach, supra at para. 78).

In our view, it is equally plausible that Raponi, a non-registrant and novice

investor, would have purchased a stockbased on a simple recommendation from

Agueci. In her case, we are not persuaded that Agueci informed Raponi of the

EMC Material Facts in order for Raponi to purchase EMC shares.

[260] On a balance of probabilities, we are not satisfied that we have been provided

with clear and cogent evidence that Agueci informed Raponi of the EMC Material

Facts prior to Raponi’s purchase of EMC shares on May 17, 2007 and, therefore,

we cannot find that Raponi’s conduct in relation to EMC constituted insider

trading contrary to subsection 76(1) of the Act.

6.

Iacono and Serpa

[261] On Saturday, May 12, 2007, Iacono called Agueci at 8:51 p.m. for four minutes.

On Monday, May 14, 2007, Agueci called Iacono at 8:50 a.m. for two minutes,

following which at 9:33 a.m., Iacono bought 1,500 shares of EMC. At 10:42 a.m.

that same day, Iacono emailed Agueci: “You’re sure about this? I have a S.L. at

15 for mine.” and two minutes later Agueci responded: “YES!” (Exhibit 354). On

Friday, May 18, 2007, after the 1^stEMC Announcement that it has entered into

an exclusive agreement to negotiate a potential sale of the company, Iacono

called Agueci at 5:45 p.m. for five minutes. On Saturday, May 19, 2007, Agueci

called Iacono at 11:52 a.m. for one minute and at 1:36 p.m. for two minutes.

We note that a one minute call may indicate no response, the call went to voice

mail, or the call was of a short duration. Iacono called Agueci four minutes later

for a duration of four minutes. On Tuesday, May 22, 2007, the next day that

trading resumed in Canada, Iacono placed a stop loss on all his 1,500 EMC

shares of $17.50 at 9:50 a.m., which was filled on May 29, 2007.

[262] As Agueci’s brother-in-law, Iacono and Agueci had frequent contact, often in

person.

63

[263] In his compelled examination, Iacono explained his level of sophistication about

trading. Iacono admittedly became familiar with the stock market in 1987

working for a database company. Iacono stated that he moved from investing in

mutual funds to investing in equities in 2006. He watched BNN and did his own

market research online.

[264] Out of the 6 stocks Iacono purchased between September 2006 and September

2007 (with a range of $4,000 to $29,480), the EMC purchase of $23,876 was the

second largest (Exhibit 1020). We find that Iacono’s purchase of $23,876 in EMC

shares was uncharacteristically large and risky relative to Iacono’s income as it

was 80% of his salary. However, Iacono limited his risk somewhat by placing the

stop loss. He realized a profit of 8%.

[265] Iacono admitted that the idea of EMC may have come from Agueci. Iacono’s

evidence was that he placed a stop loss on his EMC shares because he was

unsure of whether Agueci’s recommendation was good. Iacono stated that

Agueci gave him “public” information and said “I never approached that

question” when asked if he had any concerns about Agueci having non-public

material information (Exhibit 1148 at pp. 125-126).

[266] Again, Agueci submits that, at most, the evidence would support that she

recommended stocks to the other Respondents. We remain cognizant that if a

respondent puts forth an equally plausible alternative explanation, it would be

improper for the Panel to infer improper intent (Podorieszach, supra at para. 78).

In our view, it is equally plausible that Iacono, who had never been a registrant

and was not a sophisticated investor, would have purchased a stock based on a

simple recommendation from Agueci. In his case, we are not persuaded that

Agueci informed Iacono of the EMC Material Facts in order for Iacono to purchase

EMC shares.

[267] On a balance of probabilities, we are not satisfied that we have been provided

with clear and cogent evidence that Agueci informed Iacono of the EMC Material

Facts prior to Iacono’s purchase of EMC shares on May 14, 2007 and, therefore,

we cannot find that Iacono’s conduct in relation to EMC constituted insider

trading contrary to subsection 76(1) of the Act.

[268] On May 14, 2007, Serpa bought 1,000 shares of EMC. In view of our finding that

we are not satisfied that Agueci informed Iacono of the EMC Material Facts, we

cannot conclude that Iacono informed Serpa of the EMC Material Facts prior to

Serpa’s purchase of EMC shares on May 14, 2007.

7.

Did Agueci Breach subsection 76(2) of the Act?

[269] In light of our findings above, we conclude that Agueci informed Wing, Pollen,

Fiorillo and Stephany of the EMC Material Facts, contrary to subsection 76(2) of

the Act and contrary to the public interest.

E.

Were Wing, Pollen, Fiorillo and/or Stephany in a Special

Relationship with EMC?

[270] Staff submits that each of Wing, Pollen, Fiorillo and Stephany knew or ought

reasonably to have known, pursuant to subsection 76(5)(e) of the Act, that

Agueci was a person in a special relationship with EMC.

[271] We have found above that EMC was a reporting issuer, that Agueci was in a

special relationship with EMC under subsection 76(5)(c) of the Act and that each

64

of Wing, Pollen, Fiorillo and Stephany learned from Agueci material facts with

respect to EMC that had not been generally disclosed.

1.

Wing and Pollen

[272] Wing knew Agueci was the executive assistant to McBurney, Chairman of GMP in

the investment banking department. Wing also knew that GMP’s business

included M&A.

[273] Although Wing acknowledged he knew Agueci’s position as executive assistant to

McBurney, we find that Wing was evasive, during his testimony at the Merits

Hearing, when asked about knowing whether Agueci would be in contact with

material non-public information, or the details of her role. For example:

Q.[Staff] So I put it to you, sir, that you knew in 2007 and

2008 that in the course of her employment Eda would be in

regular contact with material, non-public information.

A. [Wing] You know, it’s difficult for me to answer that

question because I don’t know of her specific role there. I

mean, I can understand her position there. I don’t know if

she was part of, you know, the committee that would do

investment banking deals or if she did other work for Eugene

McBurney that was outside that. I don’t know if she was part

of the inner sanctum of that. It might be logical that she

was, but I have no idea if she was, so it would be difficult for

me to say that accurately.

(Merits Hearing Transcript of January 17, 2014 at p. 27)

[274] As an experienced market participant, especially someone in the position of

Ultimate Designated Person and Chief Compliance Officer, Wing knew or ought

reasonably to have known that Agueci was in a special relationship with a

number of issuers, given her role in the investment banking department of GMP.

When Agueci informed him of the EMC Material Facts, Wing knew or ought

reasonably to have known Agueci was in a special relationship with EMC.

[275] Therefore, we find that Wing was a person in a special relationship with EMC in

accordance with subsection 76(5)(e) of the Act, by virtue of the fact that he

learned of the EMC Material Facts with respect to a reporting issuer, EMC, from a

person in a special relationship with the reporting issuer, Agueci, and he knew or

ought reasonably to have known that Agueci was in such a relationship.

[276] Wing was admittedly the directing mind of Pollen and directed purchases of EMC

shares in the Pollen SG Account. Wing had sole signing authority over the Pollen

SG Account and was the only person who could give instructions to trade in that

account or to make withdrawals and deposits. We concur that a directing mind’s

knowledge is attributable to the corporation (Goldpoint, supra at paras. 184 and

236). Therefore, since we have found that Wing knew or ought reasonably to

have known that Agueci was in a special relationship with EMC, we find that

Pollen knew or ought reasonably to have known that Agueci was in a special

relationship with EMC as well. Therefore, Pollen was in a special relationship with

EMC, pursuant to subsection 76(5)(e) of the Act at the relevant time.

2.

Fiorillo

65

[277] Fiorillo knew Agueci was executive assistant to McBurney, Chairman of GMP in

the investment banking department. Fiorillo also knew that GMP’s business

included M&A.

[278] Fiorillo was aware that Agueci was an executive assistant in the mining group at

GMP and that the group routinely worked on confidential mandates. We do not

find Fiorillo’s evidence credible that, although he knew Agueci’s role, he was not

aware Agueci would have exposure to material non-public information:

Q.[Staff] And you knew and expected that Eda had access to

material nonpublic information as part of her job?

A.[Fiorillo] I didn’t know that because what seemed to be a

large part of her job was managing travel plans and affairs

of Mr. McBurney. And I understood that she interacted with

clients, they liked her, that sort of thing. She looked at --

did family things for him, and things of that nature, his

travel and so forth. And I didn’t know -- I never ever asked

her -- she had been more of a social friend than, you know,

she is not a business friend in that sense.

(Merits Hearing Transcript of January 21, 2014 at p. 53)

[279] As an experienced and active market participant and a former registrant, Fiorillo

knew or ought reasonably to have known that Agueci was in a special

relationship with EMC when Agueci informed him of the EMC Material Facts.

[280] Therefore, we find that Fiorillo was a person in a special relationship with EMC in

accordance with subsection 76(5)(e) of the Act, by virtue of the fact that he

learned of the EMC Material Facts with respect to a reporting issuer, EMC, from a

person in a special relationship with the reporting issuer, Agueci, and he knew or

ought reasonably to have known that Agueci was in such a relationship.

3.

Stephany

[281] Stephany knew Agueci was executive assistant to McBurney, Chairman of GMP in

the investment banking department. Stephany also knew that GMP’s business

included M&A.

[282] Stephany acknowledged she was a former registrant. Stephany knew Agueci

worked at GMP as an executive assistant in the mining group, that the group did

work on mining deals and that Agueci had access to confidential information.

Stephany previously worked as an executive assistant herself to the head of the

corporate finance group at First Marathon. As an experienced market participant,

a registrant for various periods from 1981 to 2012, and a former executive

assistant, Stephany knew or ought reasonably to have known that Agueci was in

a special relationship with a number of issuers. Stephany knew or ought

reasonably to have known that Agueci was in a special relationship with EMC

when Agueci informed her of the EMC Material Facts.

[283] Therefore, we find that Stephany was a person in a special relationship with EMC

in accordance with subsection 76(5)(e) of the Act, by virtue of the fact that she

learned of the EMC Material Facts with respect to a reporting issuer, EMC, from a

person in a special relationship with the reporting issuer, Agueci, and she knew

or ought reasonably to have known that Agueci was in such a relationship.

66

F.

Did Wing, Pollen, Fiorini, Fiorillo, Stephany, Raponi, Iacono and/or

Serpa Breach subsection 76(1) of the Act?

[284] As stated above, we are satisfied that there is clear and cogent evidence

supporting a reasonable inference that Agueci informed Wing, Pollen, Fiorillo and

Stephany of the EMC Material Facts and that Wing, who directed purchases for

Pollen, and Fiorillo and Stephany purchased EMC shares with knowledge of the

EMC Material Facts while they were not generally disclosed. Having found that

Wing, Pollen, Fiorillo and Stephany were each in a special relationship with EMC

at the relevant time the purchases of EMC shares by each of Wing, Pollen, Fiorillo

and Stephany on the relevant dates constituted insider trading, contrary to

subsection 76(1) of the Act.

[285] Staff submits that Fiorini, Raponi, Iacono and Serpa engaged in conduct contrary

to subsection 76(1) of the Act. Having found that there was not sufficient

evidence to support a finding that Agueci informed Fiorini, Raponi or Iacono of

the EMC Material Facts, we cannot conclude that they breached subsection 76(1)

of the Act. Further, as we have not found that Agueci informed Iacono of the

EMC Material Facts, we cannot conclude that Iacono informed Serpa of the EMC

Material Facts, in breach of subsection 76(2) of the Act, and, therefore, cannot

conclude that Serpa violated subsection 76(1) of the Act.

G.

Did Wing Authorize, Permit or Acquiesce in Pollen’s Non-

Compliance with the Act?

[286] By his own admission, Wing was the directing mind of Pollen. Wing is a person

for the purposes of section 129.2 of the Act because he is an individual and

furthermore, as the “protector”, he was also a “legal representative” of The

Honey Trust, which, in turn, was the owner of Pollen.

[287] We find that Wing directed purchases and sales of EMC shares in the Pollen SG

Account with knowledge of the EMC Material Facts. Wing also had sole signing

authority over the Pollen SG Account and was the only person who could give

instructions to trade in the Pollen SG Account and to make deposits and

withdrawals from it. We conclude that Wing, who authorized, permitted or

acquiesced in Pollen’s non-compliance with Ontario securities law, should be held

accountable for breaches of Ontario securities law (Goldpoint, supra at paras.

184 and 236). Therefore, we find that Wing is deemed to also have not complied

with Ontario securities law, pursuant to section 129.2 of the Act.

H.

Did Agueci, Wing, Pollen, Fiorini, Fiorillo, Stephany, Raponi,

Iacono and/or Serpa Engage in Conduct Contrary to the Public

Interest?

[288] Staff submits that, even if the Panel does not find that technical breaches of

subsection 76(2) of the Act by Agueci and Iacono or of subsection 76(1) of the

Act by Wing, Pollen, Fiorini, Fiorillo, Stephany, Raponi, Iacono or Serpa, their

conduct in relation to EMC was contrary to the public interest. Staff also submits

that Stephany’s use of undisclosed information obtained from Agueci in relation

to EMC to make trades for her client, S.P. is conduct contrary to the public

interest. Finally, Staff submits that Agueci caused another friend, S.F., to

purchase shares of EMC in May 2007, contrary to the public interest. Staff refers

the Panel to the Donald decision.

1.

Agueci

67

[289] As stated above, Agueci’s position is that the Commission’s public interest

jurisdiction is not unlimited (Asbestos, supra at para. 41) and that the

Commission ought not to treat findings of conduct contrary to the public interest

as Staff’s consolation prize in cases where Staff fails to prove a breach of the

Act. Further, Agueci asks that the Panel consider that Ontario has not prohibited

insiders from making recommendations to purchase or sell a security so long as

that recommendation does not involve the passing of material non-public

information. Furthermore, Agueci submits that the purposeof section 127 of the

Act is not to override legislative choices made in respect of the elements of

illegal insider trading and tipping.

[290] Agueci’s friend, S.F., is not a respondent in this proceeding. On May 16, 2007,

Agueci called S.F. at 8:11, 8:25 and 9:41 p.m., each time for two minutes. On

May 17, 2007, Agueci called S.F. twice at 8:35 and 8:38 a.m., each time for one

minute and S.F. then bought 1,000 EMC shares. We did not receive evidence or

submissions with respect to S.F.’s trading activity generally. We are not satisfied

that Staff has provided sufficiently clear, convincing and cogent evidence to

support a determination that Agueci’s conduct caused S.F. to purchase EMC

shares contrary to the public interest.

[291] The Panel has also considered Agueci’s recommendations to Raponi and Iacono.

Agueci was an employee of a registrant, but was not registered in any capacity

with securities regulators. We agree with Staff that more is expected of those

with greater experience and defined roles within the securities regulatory

system, such as registrants. However, we are not satisfied that Staff has proven

on a balance of probabilities that Agueci’s conduct in making recommendations

to Raponi and Iacono engaged the purposes of securities regulation to provide

protection to investors from unfair, improper or fraudulent practices and to foster

fair and efficient capital markets and confidence in capital markets (section 1.1

of the Act) such that she acted contrary to the public interest.

[292] We find that Agueci’s violations of subsection 76(2) of the Act, by informing

Wing, Pollen, Fiorillo and Stephany of the EMC Material Facts, constituteconduct

contrary to the public interest.

2.

Stephany

[293] Stephany submits that the evidence does not support she was provided with or

acted upon undisclosed material facts in relation to securities of EMC and,

therefore, could not have made the allegedly improper recommendations to S.P.

Further, Stephany argues that, if Staff seriously believed that improper

recommendations were made, it was Staff’s obligation to question S.P. under

oath and call him as a witness to testify about the recommendations.

[294] On May 14, 16 and 17, 2007, Stephany placed purchase orders for a total of

3,000 shares of EMC for her client, S.P. On May 18, 2007, EMC issued the 1^st

EMC Announcement stating that it had entered into exclusive negotiations

concerning a potential sale of the company. On May 21, 2007, the first trading

day in the United States following this announcement, Stephany sold 3,000 EMC

shares for S.P. on the NYSE Arca.

[295] At the Merits Hearing, Stephany denied making recommendations to S.P., stating

“I didn’t make recommendations. I gave him information when I was buying or

selling stock. He made his own decision about whether or not he wanted to buy

or sell.” (Merits Hearing Transcript of February 7, 2014 at p. 175). Upon being

68

shown an excerpt from her compelled testimony, in which she stated “I have

made some recommendations to him for sure”, Stephany admitted that her

testimony was contradictory and asserted that what she meant was she did not

do market research. Stephany later admitted at the Merits Hearing that S.P.

likely bought EMC stock in May 2007 because of information she gave him.

[296] We find that Stephany’s conduct in recommending to her client, S.P., that he buy

EMC, and in executing orders to purchase those shares with knowledge of the

EMC Material Facts received from Agueci, was contrary to the public interest. We

note that Stephany’s circumstances are distinguishable from Agueci’s as

Stephany was registered as a dealing representative of an investment dealer

who had direct involvement in executing the impugned trades. Again, we agree

with Staff that more is expected of those with greater experience and defined

roles within the securities regulatory system, such as registrants.

[297] We are satisfied that Staff has proven on a balance of probabilities that

Stephany’s conduct engaged the purposes of securities regulation to provide

protection to investors from unfair, improper or fraudulent practices and to foster

fair and efficient capital markets and confidence in capital markets (section 1.1

of the Act) such that she acted contrary to the public interest. Such conduct is an

unfair market practice, abusive of the capital markets and below the high

standards of fitness and business conduct expected of market participants

(section 2.1 of the Act). Stephany was acting in her capacity as a registrant,

advising a client and executing trades. We agree with Wellings’ testimony that

investors do not want to see a bid premium eroded in the market due to unfair

trading by thosewith privileged access to certain information.

[298] In our view, it is fundamental that persons granted registration be honest and of

good reputation because it is the concept of fair dealing between classes of

investors, which is the issue and “[i]t is in the public interest that registrants

conduct themselves in accordance with these precepts and not take advantage of

inside information” (Danuke, supra at 40c).

[299] We find Stephany’s recommendation that S.P. purchase EMC stock during the

relevant period, while she was in possession of the EMC Material Facts, was an

unfair market practice and amounted to conduct contrary to the public interest.

3.

Wing, Pollen, Fiorillo, Fiorini, Stephany, Raponi, Iacono and

Serpa

[300] Having found that the purchases of EMC shares by Wing, Pollen, Fiorillo and

Stephany were made contrary to subsection 76(1) of the Act, we find that the

conduct of each of them in that respect constituted conduct contrary to the

public interest. However, we do not find the conduct of Fiorini, Raponi, Iacono or

Serpa in respect of EMC was contrary to the public interest.

I.

Conclusions

[301] We conclude that Agueci informed Wing, Pollen, Fiorillo and Stephany of the EMC

Material Facts, contrary to subsection 76(2) of the Act and contrary to the public

interest. We also find that Wing, Pollen, Fiorillo and Stephany purchased shares

of EMC, contrary to subsection 76(1) of the Act and contrary to the public

interest.

[302] Based on the evidence, we find that on May 8, 2007 through May 18, 2007:

69

1.

2.

EMC was a “reporting issuer” within the meaning of the Act;

as an employee of GMP, Agueci was a person in a special relationship with

EMC within the meaning of subsection 76(5) (c) of the Act;

3.

4.

5.

the EMC Material Facts were facts that would reasonably be expected to

have a significant effect on the market price or value of the EMC securities

and were therefore “material facts” with respect to EMC, within the

meaning of the Act;

Agueci informed Wing, Pollen, through Wing, Fiorillo and Stephany, other

than in the necessary course of business, of the EMC Material Facts before

they had been generally disclosed, contrary to subsection 76(2) of the Act

and contrary to the public interest;

Wing, Pollen, through Wing, Fiorillo and Stephany each learned of the EMC

Material Facts from Agueci, and knew or ought reasonably to have known

that Agueci was a person in a special relationship with EMC and, as a

result, were persons and a company in a special relationship with EMC

within the meaning of subsection 76(5)(e) of the Act;

6.

7.

based on the foregoing, Wing, Pollen, Fiorillo and Stephany each

purchased EMC securities with knowledge of the EMC Material Facts that

had not been generally disclosed, contrary to subsection 76(1) of the Act

and contrary to the public interest; and

Wing authorized, permitted or acquiesced in Pollen’s non-compliance with

Ontario securities law in respect of the purchases of EMC shares, such

that Wing is deemed to also have not complied with Ontario securities

law, pursuant to section 129.2 of the Act.

[303] We are not satisfied that Agueci informed Fiorini, Raponi or Iacono of the EMC

Material Facts or that Iacono informed Serpa of thosefacts, contrary to

subsection 76(2) of the Act or the public interest. Similarly, the Panel is not

satisfied that Fiorini, Raponi, Iacono or Serpa purchased EMC shares, contrary to

subsection 76(1) of the Act or the public interest.

VII. NORTHERN ORION - ANALYSIS AND FINDINGS ON ALLEGATIONS OF

INSIDER TRADING, TIPPING AND CONDUCT CONTRARY TO THE PUBLIC

INTEREST

A.

Overview of the Northern Orion Transaction

[304] During the relevant period, May and June 2007, Northern Orion and Meridian

were reporting issuers in Ontario. In May 2007, Northern Orion was a mid-tier

copper and gold producer with a market capitalization of approximately $1.4

billion, Meridian was a mid-tier gold producer with a market capitalization of

approximately $3.1 billion and Yamana was a gold producer with market

capitalization of approximately $5 billion. In the spring of 2007, Northern Orion

and Yamana had discussions concerning a potential three-way business

combination with Meridian.

[305] Yamana proposed to acquire 100% of the outstanding common shares of

Northern Orion in an all-share transaction and subsequently acquire all of the

outstanding common shares of Meridian in a cash and share offer. Yamana’s

original offer was a 25% premium for the shares of each of Northern Orion at $7

per share and Meridian at $34.15 per share, based on the 20-day volume

70

weighted average share price of each target. In this two-stagetransaction,

Yamana was proposing an all-share offer for Northern Orion shares, conditional

on the successful completion of the Meridian acquisition. The Northern Orion

acquisition was to be pre-agreed and announced at the time of the Meridian

offer, using a portion of Northern Orion’s cash to fund the Meridian offer. The

Meridian offer later became an offer of $33.84 per share for a 20% premium to

the spot price. The transaction was a 3-way amalgamation by way of a plan of

arrangement on a friendly basis.

[306] In late April to early May 2007, Yamana sought the views of Genuity Capital

Markets (“Genuity”), a financial advisor, with respect to the proposed

transaction. A potential three-way business combination was initially discussed

with Robert Cross (“Cross”), Chairman of Northern Orion and David Cohen

(“Cohen”), President and CEO of Northern Orion, through a Genuity

representative on May 8 and 10, 2007. On May 14, 2007 Cohen and Peter

Marrone (“Marrone”), Chairman and CEO of Yamana, discussed the potential

three-way transaction and on May 15, 2007, Genuity commenced evaluating the

potential transaction and representatives of each of Yamana, Northern Orion and

Genuity participated in a telephone conference call to discuss the matter.

[307] On May 18, 2007, a summary presentation was made by Genuity and Yamana to

Cohen regarding the proposed three-way business combination with an offer of

$7 per Northern Orion share at an assumed premium of approximately 25% and

$34.15 per Meridian share, which also represented a 25% premium from the

then-closing price of Meridian shares. Code names were used for the parties

involved in the transaction, including the code name “Cash” for Northern Orion,

“Kiki” for Meridian and “Tango” for Yamana. The transaction itself was also given

the code name “Project Tango” to be used in correspondence amongst the

parties and their advisors.

[308] On May 22, 2007, Yamana provided Northern Orion with two drafts, a Letter

Agreement and a confidentiality agreement in furtherance of the potential

transaction. On May 23, 2007, Genuity advised Marrone that they had spoken to

Cohen and Cross and noted that Northern Orion “clearly want to see a deal get

done – all discussions have been very positive and constructive.” (Exhibit 520).

Genuity also advised Marrone that “there are no issues that can’t be resolved –

all good” (Exhibit 520).

[309] On May 25, 2007, Northern Orion emailed a signed confidentiality agreement to

Yamana. Between May 25 and June 27, 2007, Yamana and Northern Orion each

conducted due diligence on the other party, as negotiations continued.

[310] Genuity made a presentation to the Yamana board of directors with respect to

the proposed three-way business combination on May 25, 2007 (the “May 25

Presentation”). On May 26, 2007, the May 25 Presentation to Yamana was sent

by Cohen to the Northern Orion board of directors, along with other background

documentation on Yamana and Meridian. Cohen reminded recipients of that

email that the information detailed in Yamana’s proposal was meant to be kept

confidential and that “[o]nce the documentation is in a more reasonable form,

we will ask our advisors (Endeavour and GMP) to make a presentation to the

board and the draft LOI will be circulated for review and comments” (Exhibit

525).

71

[311] On May 28, 2007, Cohen forwarded the May 25 Presentation, which provided

details of the proposed three-way business combination including a 25%

premium to be offered by Yamana for 100% of the shares of each of Northern

Orion and Meridian, to McBurney (the “Yamana Original Terms”). Agueci

personally received the May 28, 2007 email on the same day from McBurney,

who requested that she print three copies, including the May 25 Presentation

with the Yamana Original Terms.

[312] Northern Orion, Meridian and Yamana were added to GMP’s grey list on May 28,

2007. On that day, McBurney was copied on a draft Letter Agreement pertaining

to the potential transaction. As negotiations progressed from May 28 through

June 18, 2007, McBurney was copied on further drafts of a Letter Agreement and

presentations by Genuity with respect to the potential transaction, some of which

he forwarded to Agueci directly to request that she print copies.

[313] On June 11, 2007, Northern Orion requested that GMP deliver a verbal fairness

opinion by June 14, 2007. On June 12, 2007, GMP approved the mandate to act

as an advisor for Northern Orion on this matter and Agueci was asked to open

file folders. GMP’s engagement letter was not formally signed by Cohen until

June 27, 2007.

[314] On June 15, 2007, Yamana approached Meridian with respect to the proposed

three-way business combination. On June 17, 2007, Cohen emailed the Northern

Orion board of directors, McBurney and others with an update of his meeting

with the CEOs of Meridian and Yamana to discuss the proposed transaction.

Cohen reported that Edward Dowling, Meridian’s CEO, had given a positive

responseand “indicated that if he could attract a 24-26% premium, it was a

done deal” (Exhibit 592).

[315] On June 27, 2007 at 9:09 p.m. Yamana and Northern Orion jointly announced

that they had entered into a business combination agreement and a concurrent

proposal had been made to Meridian with respect to the combination of the three

companies. The expected terms as announced included: cash and share

consideration for Meridian, which represented a spot premium of approximately

23% over Meridian’s closing share price on June 27, 2007, and a share exchange

between Yamana and Northern Orion shares, a 21.3% premium over Northern

Orion’s closing share price on June 27, 2007.

B.

Were there Material Facts Relating to Northern Orion and/or

Meridian that were Not Generally Disclosed?

[316] The question that the Panel must answer is whether any of the alleged material

facts relating to Northern Orion and/or Meridian, or some or all of them taken

together, were material facts that would reasonably be expected to have a

significant effect on the market price or value of Northern Orion and/or Meridian

securities, on the dates on which Staff allege that Agueci tipped others and that

Wing, Pollen, and Fiorini purchased Northern Orion and/or Meridian shares.

[317] Staff submits that the following were material facts with respect to Northern

Orion and/or Meridian that were not generally disclosed at the relevant time: (a)

Yamana proposed to acquire Northern Orion and make a concurrent proposal to

Meridian to combine all three companies; (b) the terms of Yamana’s proposal

were that it was to be an acquisition of 100 percent of the outstanding common

shares of Northern Orion by Yamana (for $7.00 per Northern Orion share) and to

acquire 100 percent of the outstanding common shares of Meridian (for $34.15

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per Meridian share); and (c) both prices represented a 25% premium over the

closing price of each of Northern Orion and Meridian shares.

[318] First, we considered whether Yamana proposed to acquire Northern Orion and

make a concurrent proposal to Meridian to combine all three companies. As early

as May 8, 2007, Genuity discussed the potential three-way business combination

with representatives of Northern Orion and on May 18, 2007 a presentation was

made to Northern Orion. On May 28, 2007, Cohen emailed the May 25

Presentation, citing the websites for Yamana and Meridian, to McBurney. All

three stocks were added to the GMP grey list on May 28, 2007. Also on May 28,

2007, McBurney received a draft Letter Agreement between Yamana and

Northern Orion for review and comment. We find that on or before May 25,

2007, Yamana proposed to acquire Northern Orion and make a concurrent

proposal to Meridian to combine all three companies (“NNO Fact One”)

[319] The second alleged material fact that we considered was whether the terms of

Yamana’s proposal were that it was to be an acquisition of 100 percent of the

outstanding common shares of Northern Orion (for $7.00 per share) and

Meridian (for $34.15 per share). On May 18, 2007, a summary presentation was

made by Genuity to Northern Orion regarding the proposed three-way business

combination; it contained an offer of $7.00 per Northern Orion share and $34.15

per Meridian share. On June 8, 2007, Genuity forwarded to McBurney a draft

investor presentation and a draft presentation to Meridian on the proposed

three-way transaction, which included the $7.00 offer for Northern Orion on a

share exchange basis and a $33.84 offer for Meridian at a 20% spot premium.

On June 13, 2007, Genuity sent McBurney a subsequent version of the draft

presentation to Meridian, to be delivered on June 15, 2007, which McBurney

circulated to certain GMP staff and included the same offer figures of $7.00 for

Northern Orion and $33.84 for Meridian. We find that as of June 8, 2007,

Yamana proposed to acquire 100 percent of all outstanding shares of Northern

Orion for $7.00 per share and of Meridian for $33.84 per share (“NNO Fact

Two”).

[320] Third, we considered whether both prices to acquire Northern Orion and Meridian

represented a 25% premium over the closing price of each. The May 25

Presentation, forwarded to Agueci on May 28, 2007, included a 25% premium for

each of Northern Orion and Meridian.We note that the Genuity draft presentation

to Meridian sent to McBurney on June 8, 2007, contemplated an approximate

20% premium. On June 13, 2007, McBurney circulated a presentation to GMP

staff, which cited an approximate 20% premium for each of Meridian and

Northern Orion. However, we note that on June 14, 2007, GMP provided a

preliminary verbal fairness opinion to the Northern Orion board of directors

based upon Yamana’s offer of a 25% premium up to $7.00 for each share of

Northern Orion and determined that “GMP believes the Transaction has merit

and deserves further investigation” (Exhibit 557). We are not satisfied that the

25% premiums contemplated in the Yamana Original Terms were a fact. We find

that as of June 8, 2007 Yamana proposed to acquire Northern Orion and

Meridian for an approximate 20% premium (“NNO Fact Three”; together with

NNO Fact One and NNO Fact Two, the “Three NNO Facts”).

[321] We note that our findings with respect to NNO Fact Two and NNO Fact Three are

not directly in line with Staff’s submissions on values. However, we find that the

substance of thosesubmissions were supported by the evidence, specifically that

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Yamana proposed to acquire all the outstanding shares of each of Northern Orion

and Meridian and that the offer would be a significant premium for each. In light

of the foregoing conclusions, we turn to the assessment of the materiality of the

Three NNO Facts. In applying the objective market impact test of materiality we

consider whether the facts would be reasonably expected to significantly affect

the market price or value of Northern Orion’s securities and/or Meridian’s

securities (subsection 1(1) of the Act).

[322] The Three NNO Facts above must be considered in context, including that

Yamana and Northern Orion had been discussing the proposed three-way

business combination since early May, 2007 and both engaged financial advisors

and held board meetings to discuss it, which indicated that those involved, at the

highest corporate levels, attached importance to the proposal. Further, Yamana

had a market capitalization of approximately $5 billion, while Northern Orion’s

was approximately $1.4 billion, and Meridian’s was approximately $3.1 billion,

which made the three-way combination an attractive proposition to the two

targets. The evidence supportsthat the CEOs of both Northern Orion and

Meridian responded positively when first approached with the three-way business

combination. Also, an approximate 20% premium for each of Northern Orion’s

and Meridian’s share price was, in our view, significant. This is corroborated by

the fact that Northern Orion’s share price increased by eight percent and

Meridian’s by 17% on June 28, 2007, following the public announcement of the

proposed transaction. These factors are indicative of the advanced stage of the

transaction and support a finding that the Three NNO Facts were material.

[323] We find that NNO Fact One, Yamana’s proposal to acquire Northern Orion and

make a concurrent proposal to Meridian to combine all three companies, would

be reasonably expected to have a significant effect on the market price of each

of Northern Orion’s and Meridian’s securities and, therefore, was a material fact

as of May 28, 2007. We find that NNO Fact Two and NNO Fact Three collectively,

Yamana’s proposal to acquire 100 percent of the outstanding common shares of

Northern Orion (for $7.00 per share) and Meridian (for $33.84 per share), would

be reasonably expected to have a significant effect on the market price of each

of Northern Orion’s and Meridian’s securities because an approximate 20%

premium over the closing price of each was significant and, therefore, were

material facts as of June 8, 2007.

[324] We also find that the Three NNO Facts, considered collectively, were material

facts at the time (YBM, supra at para. 94; Donald, supra at para. 271). We find

that during the relevant period, beginning on May 28, 2007, as discussed below,

Agueci knew the Three NNO Facts, which would be reasonably expected to have

a significant effect on the market price of each of Northern Orion’s and Meridian’s

securities (the “NNO Material Facts”).

[325] We also considered whether the NNO Material Facts were generally disclosed

during the relevant period. We accept the testimony of Ciccone, Chief

Compliance Officer at GMP in 2007-2008, that issuers were placed on the GMP

grey list when GMP obtained material non-public information about the issuer. As

noted above, each of Yamana, Northern Orion and Meridian were placed on the

GMP grey list on May 28, 2007. We also conclude that the joint Yamana and

Northern Orion press release of June 27, 2007 was the first indication to the

public that a three-way business combination between them and Meridian was

proposed. For these reasons, in our view the NNO Material Facts were not

74

generally disclosed during the relevant period as contemplated by subsection

3.5(2) of NP 51-201 or otherwise.

C.

Agueci

[326] Staff submits Agueci engaged in conduct contrary to subsection 76(2) of the Act

by providing undisclosed material facts relating to Northern Orion/Meridian to

Pollen, through Wing, and Fiorini.

1.

Was Agueci in a Special Relationship with Northern Orion

and/or Meridian?

[327] The Panel finds that Agueci was in a special relationship with Northern Orion

pursuant to subsection 76(5)(c) of the Act as of May 28, 2007.

[328] On May 28, 2007, McBurney received a copy of the May 25 Presentation by

Genuity, which detailed the proposed three-way business combination. By that

date, Yamana and Northern Orion had discussed the proposed transaction and

signed a confidentiality agreement in furtherance of it. Also at that date,

management of Northern Orion expected to engage GMP as a financial advisor to

review the transaction and the Yamana Original Terms were sent to GMP for the

purposeof engaging GMP’s services in that respect. Upon receipt of the Yamana

Original Terms, Northern Orion, Meridian and Yamana were added to GMP’s grey

list. In our view, GMP was in a special relationship with Northern Orion pursuant

to subsection 76(5)(b) of the Act as of May 28, 2007 because GMP was a

company that was proposing to engage in a business or professional activity with

or on behalf of the reporting issuer, Northern Orion.

[329] We recognize that Cohen did not request the verbal fairness opinion until June

11, 2007, GMP approved the mandate to act as an advisor for Northern Orion on

June 12, 2007 and GMP’s formal engagement was not signed by Cohen until

June 27, 2007, but we are satisfied that the evidence supports GMP’s proposed

engagement as of May 28, 2007. Accordingly, we find that Agueci was in a

special relationship with Northern Orion pursuant to subsection 76(5)(c) of the

Act as of May 28, 2007, because she was an employee of GMP, which we found

to be a company described in subsection 76(5)(b) of the Act.

[330] We are satisfied that Agueci was in a special relationship with Meridian pursuant

to subsection 76(5)(c) of the Act. GMP was in a special relationship with

Northern Orion pursuant to subsection 76(5)(b) of the Act because GMP was a

company that was proposing to engage in a business or professional activity with

or on behalf of Northern Orion. In turn, pursuant to subsection 76(5)(a)(iii),

Northern Orion was a company that proposed to become a party to a business

combination with Meridian.

2.

Did Agueci have Knowledge of the NNO Material Facts

Beginning on May 28, 2007?

[331] The testimony of multiple GMP executives supports that in May 2007 Agueci sat

in close proximity to the GMP deal team, including McBurney, and that she would

have overheard conversations in their open concept office layout. Certain emails

pertaining to the proposed three-way proposed business combination between

Yamana, Northern Orion and Meridian were either sent directly to her or were

accessible by her, as Agueci had access to McBurney’s emails and to the GMP

corporate directory.

75

[332] On May 28, 2007, McBurney forwarded the May 25 Presentation, in an email

citing the websites for Yamana and Meridian, to Agueci for printing. The May 25

Presentation contained details of the proposed transaction. Yamana, Northern

Orion and Merdian were added to the GMP grey list, which Agueci would have

received, on the same day. Also on May 28, 2007, McBurney received a draft

Letter Agreement between Yamana and Northern Orion for review and comment.

[333] On June 8, 2007, Genuity forwarded to McBurney draft presentations, which

included Yamana’s $7.00 offer for Northern Orion on a share exchange basis and

a $33.84 offer for Meridian at an approximate 20% premium for each company.

On June 12, 2007, an associate at GMP, emailed Agueci asking her to open a

M&A file for NNO, the ticker symbol for Northern Orion. As negotiations

progressed between Yamana and Northern Orion, McBurney received further

drafts, presentations and other transactional documents, which he forwarded to

Agueci to print.

[334] Based on the evidence, we find that Agueci had knowledge of the following facts:

1.

as of May 28, 2007, Agueci knew NNO Fact One, as detailed in the May 25

Presentation, that Yamana proposed to acquire Northern Orion and make

a concurrent proposal to Meridian to combine all three companies;

2.

as of June 8, 2007, Agueci knew NNO Fact Two, that the terms of

Yamana’s proposal were to acquire 100 percent of the outstanding

common shares of Northern Orion (for $7.00 per share) and Meridian (for

$33.84 per share); and

3.

as of June 8, 2007, Agueci knew NNO Fact Three, that both prices

represented an approximate 20% premium over the closing price of each

of Northern Orion and Meridian shares.

[335] We conclude that Agueci had knowledge of the NNO Material Facts beginning on

May 28, 2007, which were not generally disclosed at the time that she learned of

them.

D.

Did Agueci Inform, and did Wing, Pollen, and/or Fiorini Purchase,

Northern Orion and/or Meridian Securities, with Knowledge of the

NNO Material Facts?

[336] As with the other allegations of this nature, Agueci takes the position that the

direct evidence, which should be preferred over inferences drawn from

circumstantial evidence, at most supports that she recommended to other

Respondents that they purchase a security or advised them that she was

purchasing a particular security. She relies upon ATI and Landen in support of

her submission that in Ontario, unlike in Alberta, advice from an insider to trade

is not material information (ATI, supra at paras. 63-64; Landen, supra at para.

97). Agueci submits that Staff have failed to establish on a balance of

probabilities that any of the Respondents who traded in the impugned securities

received material non-public information from her. Agueci notes that she had no

reason or motive to pass such information and received no benefit from the

alleged tipping.

1.

Wing and/or Pollen

[337] On Tuesday, June 12, 2007 at 11:54 p.m., Agueci called Wing for nine minutes.

On June 13, 2007 at 10:47 a.m., Wing placed an order to buy 50,000 shares of

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Northern Orion in the Pollen SG Account. The order was executed through BMO

Nesbitt Burns (“BMO”) at an average price of $5.665 and not through Fort

House. At 1:24 p.m. that day, Wing called Agueci for one minute. We note that a

one minute call may indicate no response, the call went to voice mail, or the call

was of a short duration. On June 14, 2007 at 10:33 a.m., Wing placed another

order to buy 50,000 shares of Northern Orion in the Pollen SG Account. Again,

the order was executed through BMO and filled at $5.90 per Northern Orion

share. Later that day, at 2:59 p.m., Wing called Agueci for one minute and

Agueci called him back twice, each occurring for one minute. At 3:42 p.m. Wing

called Agueci for three minutes. On June 15, 2007 at 9:45 a.m. Wing placed a

further order to buy 25,000 shares of Northern Orion in the Pollen SG Account,

which was executed through BMO and filled at $5.87 per Northern Orion share.

[338] On June 18, 2007, Wing placed an order to buy 20,000 Meridian shares in the

Pollen SG Account, which was executed through RBC Dominion Securities and

filled at $28.548 per Meridian share. On June 27, 2007 at 9:09 p.m., Yamana

and Northern Orion issued a joint press release that they had entered into a

business combination and concurrently made a proposal to Meridian for a three-

way combination. The following day Wing placed an order to sell all of Pollen’s

shares of Meridian. On October 23, 2007, Wing directed that all the Northern

Orion shares (now converted to Yamana) be sold.

[339] We find that Pollen’s aggregate purchases of Northern Orion and Meridian shares

in the amount of $1,313,462 were significant (Exhibit 1020). The fact that Pollen

had not bought Northern Orion and Meridian before is noteworthy, but not

conclusive. We agree that the impugned trades were not necessarily

uncharacteristic or unusually risky for Pollen. Pollen held commodity stocks at

the time. The trades were, however, highly profitable – 20% for Northern Orion

in four and a half months and 5% for Meridian in 11 days, which we find to be a

short timeframe for the size of the profit. We note that Wing did not sell his

Northern Orion shares shortly after the joint announcement on June 27, 2007.

However, his decision to hold the stock may have been due to a number of

factors and is not determinative.

[340] Wing testified that he liked the resource sector. He explained that Pollen bought

Northern Orion at a higher price on June 14, 2007 compared to the day before

because he liked the stock and it might have been at a higher price and volume,

which is usually a good sign something is happening with the company. We did

not find his testimony to be credible in this respect. The Toronto Stock Exchange

(“TSX”) trading data indicates that trading volume of Northern Orion on June 13

was 2.5 million shares, but that was not unusual. Volumes were over 3 million on

May 10, 17 and 23. On June 14, 2007 the trading volume was 1.3 million shares.

On June 15, 2007, the third day Wing directed purchases for Pollen, the volume

was less than the volume on June 13, 2007. These facts do not support Wing’s

explanation for buying more Northern Orion stock.

[341] We note that the three orders to buy Northern Orion and the one order for

Meridian were all placed at market, which in our view, demonstrates an intent to

buy quickly. Wing’s rush to fill Pollen’s orders of Northern Orion and Meridian

shares by placing market orders supportsthe inference that Agueci informed

Wing of the NNO Material Facts. Furthermore, Pollen’s purchases of both targets

(Northern Orion and Meridian) are strong circumstantial evidence that support

our finding that Pollen, through Wing, had knowledge of the NNO Material Facts.

77

This finding is bolstered by the fact that Pollen purchased Meridian shares only

after Meridian had been approached by Yamana and Northern Orion on June 15,

2007 and had responded positively.

[342] Wing relies on his compelled evidence of December 14, 2011 to argue that

shares of Northern Orion and Yamana were purchased by Pollen because the

CEO of Yamana had given a speech prior to June 2007 about looking at

acquisitions and there were rumors Yamana would pursue Northern Orion and

Meridian. Wing did not confirm this explanation in his direct testimony before us.

We do not accept Wing’s compelled evidence that he bought on the basis of

rumours, which were not corroborated with any evidence and did not explain the

timing of his purchases.

[343] Wing also testified that Friedli of SG Private was an experienced portfolio

manager, who provided him with investment advice. However, the evidence

supports that Wing instructed SG Private to purchase Northern Orion and

Meridian shares on behalf of Pollen. Wing could not recall if Friedli advised him

about the stocks at issue in this proceeding and there was no evidence before us

of such a suggestion from Friedli in relation to Northern Orion and/or Meridian.

The fact that SG Private was trading in Yamana and Meridian in 2007 generally is

not surprising, as they were a broker who was likely trading for many

clients/institutions. Further, Wing admitted that he directed 99% of the trades in

the Canadian sub-account of the Pollen SG Account.

[344] Wing submits that there was a 16-day delay between the time Staff alleges

Agueci learned of the NNO Material Facts and Pollen’s first purchase of Northern

Orion shares and a 21-day delay for Pollen’s first purchase of Meridian shares.

We do not accept this characterization. Wing acknowledged that he spoke to

Agueci on May 30-31, June 3-4 and June 11, 2007. We are persuaded that

Agueci learned of the NNO Material Facts beginning on May 28, 2007 and

continued to obtain further NNO Material Facts on June 8, 2007. At the latest by

June 8, 2007, Agueci knew the takeover offer was for all outstanding shares at a

price of $7.00 for Northern Orion and she knew of the approximate 20%

premium bid for Meridian. Further, McBurney was advised by Northern Orion’s

CEO of Meridian’s positive reaction to the proposed business combination by

email on Friday, June 15, 2007, which was accessible by Agueci. In our view, a

tipper need not alert a tippee to undisclosed material facts immediately after

receiving them. GMP approved the mandate to act as an advisor for Northern

Orion on June 12, 2007, but between May 28, 2007 and June 12, 2007, GMP

became increasingly involved in its mandate for Northern Orion and details of

Yamana’s proposal of a three-way business combination were becoming firmer

throughout the relevant period. By June 12, 2007, when Agueci spoke to Wing,

she knew that the likelihood of the transaction occurring had increased. In our

view, as an experienced market participant, Wing knew that he did not need to

rush to purchase Meridian, but rather wait until Meridian was approached on

June 15, 2007 to ascertain whether the second acquisition in Yamana’s proposal

would become more crystallized.

[345] Wing also submits that he and Agueci spoke every day and, therefore, trades

were bound to be in proximity to communications. We are not persuaded that it

was coincidental that he placed orders for purchases of Northern Orion and

Meridian shares on June 13, 14, 15 and 18, 2007. We are satisfied that the

timing of Wing’s and Agueci’s communications relative to the placement of the

78

orders and his rush to fill at market support the inference that Agueci informed

Wing of the NNO Material Facts.

[346] Wing takes the position that he did not try to hide Pollen’s Northern Orion

purchases and argues that he did not direct that the orders be placed through

BMO. We find that nothing turns on whether the words “passer chez BMO”,

written in SG Private’s records for Pollen’s Northern Orion purchase order, are an

instruction from Wing or a note of SG Private as to method of execution. In our

view, regardless of the impetus for that note, we find that Wing was hiding the

impugned purchases through Pollen’s SG Account, which he admitted that

Canadian authorities would not know was his trading activity. Wing also states

that the sales of Northern Orion shares (by then Yamana shares) and Meridian

shares were executed through Fort House. With respect to Pollen’s trading

activity through Fort House, Stephany confirmed that she did not know that

Wing had an indirect financial interest in trades of the SG Private account at Fort

House, nor that it was a trade execution account for Pollen. Wing did not provide

evidence that anyone at Fort House knew of his interest in that account.

[347] Wing also submits that he did not demonstrate a consciousness of guilt because

he did not sell Pollen’s Northern Orion shares (by then Yamana shares) until four

months after the June 27, 2007 announcement. In our view, the delay in selling

thosestocks does not assist our analysis because Wing, by his own admission,

liked resource stocks. Further, he did take a quick profit from Pollen’s Meridian

holdings on June 28, 2007, on the same day that Meridian published a coldly

worded press release relating to the proposed transaction at issue. Wing was

sophisticated enough to understand that the transaction between Meridian and

the combined Yamana/Northern Orion might not go forward on the basis of

Meridian’s response.

[348] Again, we acknowledge that there is no evidence that Wing has ever been

implicated in Commission enforcement proceedings over the course of his 35

year career, and he was aware of the consequences of insider trading in another

matter. Nevertheless, it remains our view that exposure to insider trading

investigations in the past does not assist us in determining whether Wing had

been informed of the NNO Material Facts in the circumstances of this case. While

Wing’s motivation for his impugned conduct is not clear to us, motive is not a

prerequisite to a finding of insider trading.

[349] Wing also submits that Staff has no explanation for why only two Respondents

traded in Northern Orion and that Pollen was the only Respondent who traded in

Meridian given that Agueci spoke to the other Respondents regularly between

June 3 and June 24, 2007. There have been no allegations or evidence to

suggest other Respondents, except Fiorini, traded in these securities. The onus is

on Staff to prove its case on a balance of probabilities. The Panel has considered

each transaction and the conduct of each Respondent separately. While similar

fact evidence may, if admitted and weighed with other relevant evidence,

support an inference that a respondent had knowledge of certain material facts,

an absence of similar fact evidence is not conclusive of the reverse. We are not

persuaded that a pattern is necessary to corroborate a finding that Wing directed

Pollen’s purchases of Northern Orion and Meridian shares with knowledge of

material facts.

[350] Agueci submits that, at most, the evidence would support that she

recommended stocks to the other Respondents. We are not satisfied that Wing,

79

an experienced and knowledgeable market participant, would have purchased a

stock based on a simple recommendation from Agueci.

[351] We infer, based on the combined weight of the evidence, that Agueci informed

Wing of the NNO Material Facts. We find that Agueci learned of the NNO Material

Facts beginning on May 28, 2007 and learned of additional information in

furtherance of the NNO Material Facts on June 8, 2007. Wing and Agueci spoke

on June 12, 2007 for nine minutes and on June 13, 2007 Wing placed an order

to buy 50,000 shares of Northern Orion in the Pollen SG Account. Wing

continued to purchase Northern Orion in both the Pollen SG Account over the

following two days, on June 14 and 15, 2007. Furthermore, on June 18, 2007,

Wing placed an order to buy 20,000 Meridian shares in the Pollen SG Account.

The purchases were very proximate to phone calls with Agueci, which supports

that Wing had the ability and opportunity to acquire knowledge of the NNO

Material Facts and that he executed well-timed purchases of Northern Orion and

Meridian shares. Furthermore, the aggregate purchase amount of $1,313,462

was significant even for Wing and Pollen. Finally, the trades were highly

profitable – at a 20% return for Northern Orion in four and a half months and

5% for Meridian in 11 days. The latter is a short timeframe for the size of the

profit.

[352] We are satisfied that there is clear and cogent evidence supporting a reasonable

inference that Agueci informed Pollen, through Wing, of the NNO Material Facts

on or before June 12, 2007 and that Wing directed purchases for Pollen of

Northern Orion shares on June 13, 14, 15, 2007 and Meridian shares on June 18,

2007, with knowledge of the NNO Material Facts while they were not generally

disclosed.

2.

Fiorini

[353] On June 12, 2007 at 4:56 p.m., Agueci emailed Fiorini: “coffee tomorrow?” and

he responded at 4:58 p.m. “nice to catch up” (Exhibit 566). On June 13, 2007,

Agueci emailed Fiorini stating “Hey Joe Joe...what time do you want to meet?”

and Fiorini responded “Am or pm?”, to which Ageuci said “pm...lunch time would

be great – 1:00?” (Exhibit 567). Approximately 30 minutes later, Agueci emailed

Fiorini again stating “Does 12:00 work or we can do later this afternoon after

your meeting...what time would that be?” (Exhibit 568).

[354] On June 14, 2007 at 10:17 a.m., Fiorini bought 6,000 shares of Northern Orion

for a total purchase amount of $35,476 (Exhibit 1020). In Agueci’s calendar she

has an entry for June 14, 2007 for a meeting with Joe at 2:00 p.m.

[355] Staff also submits that Agueci was an unidentified caller on Fiorini’s phone record

on June 13, 2007 at 11:56 a.m. Counsel for Agueci and Fiorini, respectively,

submit that an inference that calls from an unknown caller to Fiorini came from

Agueci is not sufficiently linked to the established primary facts.

[356] On June 29, 2007, two days following the joint Yamana/Northern Orion press

release, Fiorini sold his entire position in Northern Orion, for a profit of 3%.

[357] In our view, Fiorini’s purchase was not uncharacteristically large or risky by

comparison to other stocks he purchased in the same time frame, but was

significant relative to his then-salary of approximately $200,000. His return of

3% was profitable but not large for the time period he held the stock.

80

[358] The evidence tendered does not clearly establish whether Agueci and Fiorini

communicated prior to Fiorini’s purchase of Northern Orion shares on June 14,

2007. Also, while there is evidence that Agueci and Fiorini attempted to connect

prior to Fiorini’s purchase of Northern Orion shares, their emails do not reveal a

sense of urgency and are relatively innocuous. It is not clear from the emails

whether Agueci and Fiorini met for coffee on June 13, 2007, prior to Fiorini’s

purchase of Northern Orion shares, or on the following day as per the calendar

entry, which would have been after his purchase. Lastly, as the Panel places no

weight on unidentified calls, in our view it would be speculation or conjecture to

accept that an unidentified call to Fiorini on June 13, 2007 was a call from

Agueci.

[359] While we acknowledge that Fiorini’s purchase of Northern Orion shares was well-

timed relative to the joint Yamana/Northern Orion press release, we are not

satisfied that Staff provided clear, convincing and cogent evidence that Agueci

informed Fiorini of the NNO Material Facts and, therefore, we cannot find that

Fiorini’s conduct in connection with Northern Orion constituted insider trading

contrary to subsection 76(1) of the Act.

3.

Did Agueci breach subsection 76(2) of the Act?

[360] In light of our findings above, we conclude that Agueci informed Pollen, through

Wing, of the NNO Material Facts, contrary to subsection 76(2) of the Act and

contrary to the public interest.

E.

Was Pollen, through Wing, in a Special Relationship with Northern

Orion and/or Meridian?

[361] Staff submits that each of Wing and Pollen knew or ought reasonably to have

known, pursuant to subsection 76(5)(e) of the Act, that Agueci was a person in a

special relationship with Northern Orion and Meridian.

[362] We have found above that Northern Orion and Meridian were reporting issuers,

that Agueci was in a special relationship with each of Northern Orion and

Meridian under subsection 76(5)(c) of the Act and that each of Wing and Pollen

learned from Agueci material facts with respect to Northern Orion and Meridian

that had not been generally disclosed.

[363] Wing knew Agueci was the executive assistant to McBurney, Chairman of GMP in

the investment banking department. Wing also knew that GMP’s business

included M&A.

[364] Although Wing acknowledged he knew Agueci’s position as executive assistant to

McBurney, we find that Wing was evasive, during his testimony at the Merits

Hearing, when asked about knowing that Agueci would be in contact with

material non-public information or the details of her role. As an experienced

market participant, especially someone in the position of Ultimate Designated

Person and Chief Compliance Officer, Wing knew or ought reasonably to have

known that Agueci was in a special relationship with a number of issuers, given

her role in the investment banking department of GMP. When Agueci informed

him of the NNO Material Facts, Wing knew or ought reasonably to have known

Agueci was in a special relationship with Northern Orion and Meridian.

[365] Therefore, we find that Wing was a person in a special relationship with Northern

Orion and Meridian in accordance with subsection 76(5)(e) of the Act, by virtue

of the fact that he learned of the NNO Material Facts with respect to the

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reporting issuers, Northern Orion and Meridian, from a person in a special

relationship with the reporting issuers, Agueci, and he knew or ought reasonably

to have known that Agueci was in such relationships.

[366] Wing was admittedly the directing mind of Pollen and directed purchases of

Northern Orion and Meridian shares in the Pollen SG Account. Wing had sole

signing authority over the Pollen SG Account and was the only person who could

give instructions to trade in that account or to make withdrawals and deposits.

We concur that a directing mind’s knowledge is attributable to the corporation

(Goldpoint, supra at paras. 184 and 236). Therefore, since we have found that

Wing knew or ought reasonably to have known that Agueci was in a special

relationship with each of Northern Orion and Meridian, we find that Pollen knew

or ought reasonably to have known that Agueci was in a special relationship with

each of Northern Orion and Meridian as well. Therefore, Pollen was in a special

relationship with each of Northern Orion and Meridian, pursuant to subsection

76(5)(e) of the Act at the relevant time.

F.

Did Wing, Pollen and/or Fiorini Breach subsection 76(1) of the

Act?

[367] Staff submits that Wing and Pollen engaged in conduct contrary to subsection

76(1) of the Act.

[368] As stated above, we are satisfied that clear and cogent evidence supporting a

reasonable inference that Agueci informed Pollen, through Wing, of the NNO

Material Facts on or before June 12, 2007 and that Wing directed purchases for

Pollen of Northern Orion and Meridian shares with knowledge of the NNO Material

Facts on June 13, 14, 15 and 18, 2007. Having found that Wing and Pollen were

in a special relationship with each of Northern Orion and Meridian at the relevant

time, Pollen’s purchases of Northern Orion and Meridian shares on those dates

constituted insider trading, contrary to subsection 76(1) of the Act.

[369] Having found that there was not sufficient evidence to support a finding that

Agueci informed Fiorini of the NNO Material Facts, we cannot conclude that he

breached subsection 76(1) of the Act.

G.

Did Wing Authorize, Permit or Acquiesce in Pollen’s Non-

Compliance with the Act?

[370] By his own admission, Wing was the directing mind of Pollen. Wing is a person

for the purposes of section 129.2 of the Act because he is an individual and

furthermore, as the “protector”, he was also a “legal representative” of The

Honey Trust, which, in turn, was the owner of Pollen.

[371] We find that Wing directed purchases and sales of Northern Orion and Meridian

shares in the Pollen SG Account with knowledge of the NNO Material Facts. Wing

also had sole signing authority over the Pollen SG Account and was the only

person who could give instructions to trade in the Pollen SG Account and to

make deposits and withdrawals from it. We conclude that Wing, who authorized,

permitted or acquiesced in Pollen’s non-compliance with Ontario securities law,

should be held accountable for breaches of Ontario securities law (Goldpoint,

supra at paras. 184 and 236). Therefore, we find that Wing is deemed to also

have not complied with Ontario securities law, pursuant to section 129.2 of the

Act.

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H.

Did Agueci, Wing, Pollen and/or Fiorini Engage in Conduct

Contrary to the Public Interest?

[372] We find that Agueci’s violation of subsection 76(2) of the Act, by informing

Pollen, through Wing, of the NNO Material Facts constituteconduct contrary to

the public interest.

[373] We find Pollen’s purchases of Northern Orion and Meridian shares, through Wing,

were acts contrary to subsection 76(1) of the Act and constitute conduct

contrary to the public interest. Wing used the Pollen SG Account as a vehicle to

engage in insider trading. Therefore, Wing, as directing mind of Pollen and the

sole authority to place orders on behalf of Pollen to buy Northern Orion and

Meridian, acted contrary to subsection 76(1) of the Act and engaged in conduct

contrary to the public interest.

[374] We cannot find that Fiorini’s conduct in respect of Northern Orion was contrary to

the public interest.

I.

Conclusions

[375] We conclude that Agueci informed Pollen, through Wing, of the NNO Material

Facts, contrary to subsection 76(2) of the Act and contrary to the public interest.

We also find that Pollen, through Wing, purchased shares of Northern Orion and

Meridian, contrary to subsection 76(1) of the Act and contrary to the public

interest.

[376] Based on the evidence, we find that on May 28, 2007 through June 18, 2007:

1.

Northern Orion and Meridian were “reporting issuers” within the meaning

of the Act;

2.

as an employee of GMP, Agueci was a person in a special relationship with

Northern Orion and Meridian within the meaning of subsection 76(5)(c) of

the Act;

3.

4.

5.

the NNO Material Facts were facts that would reasonably be expected to

have a significant effect on the market price or value of Northern Orion

and Meridian securities and were therefore “material facts” with respect to

Northern Orion and Meridian, within the meaning of the Act;

Agueci informed Pollen, through Wing, other than in the necessary course

of business, of the NNO Material Facts before they had been generally

disclosed, contrary to subsection 76(2) of the Act and contrary to the

public interest;

Pollen, through Wing, learned of the NNO Material Facts from Agueci, and

knew or ought reasonably to have known that Agueci was a person in a

special relationship with Northern Orion and Meridian and, as a result, was

a company in a special relationship with Northern Orion and Meridian

within the meaning of subsection 76(5)(e) of the Act;

6.

7.

based on the foregoing, Pollen, through Wing, purchased Northern Orion

and Meridian securities with knowledge of the NNO Material Facts that had

not been generally disclosed, contrary to subsection 76(1) of the Act and

contrary to the public interest; and

Wing authorized, permitted or acquiesced in Pollen’s non-compliance with

Ontario securities law in respect of the purchases of Northern Orion and

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Meridian shares, such that Wing is deemed to also have not complied with

Ontario securities law, pursuant to section 129.2 of the Act.

[377] We are not satisfied that Agueci informed Fiorini of the NNO Material Facts,

contrary to subsection 76(2) of the Act or the public interest. Therefore, the

Panel is not satisfied that Fiorini purchased Northern Orion shares, contrary to

subsection 76(1) of the Act or the public interest.

VIII. HUDBAY - ANALYSIS AND FINDINGS ON ALLEGATIONS OF INSIDER

TRADING, TIPPING AND CONDUCT CONTRARY TO THE PUBLIC INTEREST

A.

Overview of the HudBay Transaction

[378] During the relevant period, July 1, 2007 to September 30, 2007, HudBay was a

reporting issuer in Ontario. In July 2007, HudBay was a Manitoba-based

company listed on the TSX with a market capitalization of approximately $3

billion and a producer of zinc, copper, gold and silver. At that time, Votorantim

Metals Inc. (“Votorantim”) was a large, privately-owned Brazilian company with

annual revenues of between $10 billion to $12 billion with interests and

production in zinc, nickel and steel, among others.

[379] As of and from December 2006, HudBay was developing a large cash position,

which, together with the then-active market for resource companies, made

HudBay an attractive takeover target. Speculation about a possible takeover bid

for HudBay existed in the marketplace throughout 2007. On December 8, 2006,

HudBay retained GMP to act for the special committee of the board of HudBay in

respect of an offer that HudBay then expected to receive. HudBay was added to

the GMP grey list and a file was opened at GMP but no offer was received at that

time. When Votorantim initially approached HudBay verbally in late June 2007

about a possible offer to acquire it, HudBay was added to the GMP grey list again

on July 3, 2007, but was removed from the GMP grey list on July 12, 2007

because the transaction appeared improbable due to a lack of responsefrom

Votorantim.

[380] On July 17, 2007, the CEO of HudBay received a confidential non-binding written

proposal from Votorantim to acquire 100% of the issued and outstanding shares

of HudBay for an all-cash consideration of between $30 and $32 per HudBay

share, which was a premium of approximately 26% over the 20-day average

price of $25.82 per HudBay share, subject to the completion of due diligence and

the negotiation and execution of a definitive agreement (the “Votorantim

Proposal”).

[381] The Chairman of HudBay, Allen Palmiere (“Palmiere”), called Wellings, Manager

of Investment Banking and Co-head of the Mining Group at GMP, on July 17,

2007 and informed him that HudBay had received the Votorantim Proposal and

communicated its terms to Wellings. Palmiere indicated to Wellings that HudBay

wanted to engage GMP to advise the special committee of the board of HudBay

in respect of the Votorantim Proposal. Wellings emailed McBurney about the

proposed deal at 1:07 p.m. that day and proceeded to place HudBay on GMP’s

grey list at 1:08 p.m. that day.

[382] On July 17, 2007, Wellings proceeded to contact Lazard Ltd. (“Lazard”), a

multinational M&A financial advisory firm, to determine whether it could assist

GMP in providing strategic advice to HudBay in respect of the Votorantim

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Proposal. On July 18, 2007 at 4:37 p.m., Palmiere forwarded the Votorantim

Proposal to Wellings.

[383] On July 19, 2007, Palmiere issued a notice of meeting of the HudBay board of

directors calling a meeting for July 23, 2007 at 9:00 a.m. to, among other

things, “review and discuss the confidential non-binding proposal dated July 17,

2007” (Exhibit 669). On July 20, 2007, Wellings emailed Palmiere a preliminary

valuation analysis on the basis of (i) premiums paid, (ii) price to cash flow, and

(iii) price to Net Asset Value, which Wellings testified meant that more value

should be attributable to HudBay so that the Votorantim Proposal could be fair

from GMP’s assessment.

[384] On July 26, 2007, when the market price for HudBay shares declined to $25.33

per shares, Wellings sent an email to Palmiere: “Markets getting killed the last

few days...$32 looking great now.” (Exhibit 692).

[385] On July 30, 2007, the special committee of independent directors of HudBay held

a meeting at which GMP and Lazard were formally retained. Blake, Cassels &

Graydon LLP (“Blakes”) was retained as legal advisor to HudBay and on August

2, 2007, Blakes delivered by email to Votorantim’s counsel a letter from the

Chair of the HudBay special committee, responding to the Votorantim Proposal

and attaching a first draft Confidentiality Agreement; a copy of Blakes’ email and

the HudBay letter were sent to Wellings on August 2, 2007. The HudBay

responseletter said that Votorantim’s Proposal and its interest in HudBay

“require careful consideration” and that as a preliminary response, the special

committee was “not satisfied that the indicative offer price” was sufficient

(Exhibit 638).

[386] Wellings was copied on an email of August 7, 2007, which indicated that by that

time HudBay anticipated that Votorantim would make a due diligence site visit

and HudBay was preparing to commit approximately $250,000 to establish a

virtual data room that would make it possible for Votorantim to conduct certain

due diligence on HudBay. On August 19, 2007, Credit Suisse, Votorantim’s

financial advisor, communicated to Wellings that Votorantim confirmed the dates

of September 7-9, 2007 for its site trip to Winnipeg and Flin Flon, Manitoba and

Wellings communicated that information to HudBay’s CEO and others on that

same day. On August 21, 2007, Wellings was sent an email, which stated that

the HudBay data room was expected to be usable within a few days.

[387] On August 22, 2007, Votorantim’s representative at Credit Suisse provided

Wellings with the Confidentiality Agreement signed by Votorantim. The final

schedule confirmed that Votorantim’s site visit of HudBay’s management offices

in Toronto and Winnipeg and mining properties in Flin Flon and Snow Lake areas

would occur between September 6 and 10, 2007.

[388] On September 11, 2007, HudBay and Votorantim were negotiating the terms of

a follow-up site visit and on September 12, 2007 the HudBay special committee

met via conference call.

[389] On September 18, 2007, Credit Suisse emailed Wellings indicating that they

were trying to confirm whether Votorantim would make a technical visit to Flin

Flon.

[390] By the next day, it appeared that the proposed transaction had fallen through.

On September 19, 2007 at 3:20 p.m. Wellings emailed members of the HudBay

85

special committee and others, on behalf of Palmiere, to advise that after

Votorantim’s board meeting, “it appears they won’t be proceeding to the next

stage” and “they couldn’t get to the value expectations” (Exhibit 640).

[391] HudBay was removed from GMP’s grey list on September 25, 2007.

[392] Agueci was on vacation from September 19, 2007 to October 1, 2007. She flew

from Toronto to London, England at 10:55 p.m. on September 19, 2007 and

returned to Toronto on October 1, 2007 at 12:20 p.m.

B.

Were there Material Facts Relating to HudBay that were Not

Generally Disclosed?

[393] The question that the Panel must answer is whether any of the alleged material

facts relating to HudBay, or some or all of them taken together, were material

facts that would reasonably be expected to have a significant effect on the

market price or value of HudBay securities, on the dates on which Staff allege

that Agueci tipped others and that Wing, Pollen, Fiorini, Fiorillo, Stephany,

Raponi, Iacono and Serpa purchased HudBay shares.

[394] Staff submits that the following were material facts with respect to HudBay that

were not generally disclosed at the relevant time: (a) HudBay’s CEO received the

Votorantim Proposal; (b) the terms of the Votorantim Proposal were that it was

to be an all-cash acquisition of 100 percent of the outstanding common shares of

HudBay; (c) the proposed acquisition price was $30-32 per HudBay share; and

(d) the price represented a premium of approximately 26% based on the then-

closing price of HudBay common shares.

[395] First, we considered whether HudBay’s CEO received the Votorantim Proposal.

Initially, Votorantim verbally approached HudBay with a possible offer to acquire

it. As a result of that approach, HudBay was added to the GMP grey list on July

3, 2007. Wellings testified that when “the CEO of Votorantim, did not come back

to HudBay in a timely fashion, we [GMP] took it off the grey list and the

transaction became improbable at that time.” (Merits Hearing Transcript of

December 13, 2013 at p. 32). On July 16, 2007, Agueci emailed Wellings with

the message “Please call Allen Palmiere – no urgency” (Exhibit 675). On July 17,

2007 at 1:07 p.m. Wellings emailed McBurney stating “hbm happening perhaps

tomorrow” (Exhibit 665). Wellings testified that the email to McBurney meant he

believed there was an offer coming for HudBay in short order. Wellings testified

that he believed Palmiere called him on July 17, 2007 and told Wellings that

Palmiere was in possession of the Votorantim Proposal. On July 18, 2007 at 4:28

p.m., Palmiere forwarded the Votorantim Proposal to the HudBay Board stating

“I just received the attached indicative offer letter”, which was dated July 17,

2007 (Exhibit 636). On July 18, 2007 at 4:37 p.m., Palmiere’s assistant

forwarded the Votorantim Proposal, dated July 17, 2007, to Wellings. We find

Wellings’ testimony credible that Palmiere was in possession of the Votorantim

Proposal on July 17, 2007 when he called Wellings. We find that as of July 17,

2007, HudBay’s CEO received the Votorantim Proposal (“HudBay Fact One”).

[396] We also considered whether the terms of the Votorantim Proposal included an

all-cash acquisition of 100 percent of the outstanding common shares of HudBay

at a price of $30-32 per HudBay share. The Votorantim Proposal dated July 17,

2007, and forwarded to Wellings on July 18, 2007, expressly stated “We are

prepared to purchase 100% of the issued outstanding shares of HudBay for

between C$30.00 and C$32.00 per share, on an all-cash basis, subject to the

86

terms and conditions contained herein” (Exhibit 667). We find that as of July 17,

2007, the terms of the Votorantim Proposal included an all-cash offer for all

outstanding common shares of HudBay at a price of $30-$32 (“HudBay Facts

Two and Three”).

[397] The last alleged material fact that we considered was whether the price to

acquire HudBay represented an approximate 26% premium based on the then

closing price of HudBay common shares. Evidence of trading data for HudBay

records a closing price of $27.25 on July 16, 2007. On July 18, 2007, Palmiere’s

email to the HudBay board expressly states that the top end of the range, a $32

offer, is a 26% premium to the 20-day average price of the stock. On July 20,

2007, Wellings emailed HudBay with the GMP valuation analysis of the

Votorantim Proposal, which shows a premium of 26% on a 20-day average price

at $25.82 for HudBay. We find that as of July 17, 2007, the price of Votorantim’s

offer to acquire HudBay represented an approximate 26% premium based on a

20-day average price of the stock (“HudBay Fact Four”, collectively with

HudBay Fact One and HudBay Facts Two and Three, the “Four HudBay Facts”).

[398] In light of the foregoing conclusions, we turn to the assessment of the

materiality of the Four HudBay Facts. In applying the objective market impact

test of materiality we consider whether the Four HudBay Facts would be

reasonably expected to significantly affect the market price or value of HudBay’s

securities (subsection 1(1) of the Act).

[399] The Four HudBay Facts above must be considered in context, including that: as

of December 2006, HudBay was developing a large cash position in a then-active

market for resource companies, which made HudBay an attractive takeover

target; initially, Votorantim verbally approached HudBay with a possible offer to

acquire it, which was considered serious enough to result in HudBay being placed

on the GMP grey list on July 3, 2007; on July 17, 2007, the offer and information

provided to Wellings was sufficiently firm that Wellings placed HudBay back on

the GMP grey list and reached out to Lazard for their international merger and

acquisition expertise in mining; by July 18, 2007, the HudBay board was aware

of the offer and the key terms; on July 23, 2007, HudBay struck a special

committee, which proceeded to hire both financial advisors and lawyers to advise

on the Votorantim Proposal; in the two weeks commencing August 7, 2007,

HudBay spent approximately $250,000 on a virtual data room to accommodate

Votorantim’s due diligence investigation of HudBay. Furthermore, the highest

corporate executive levels of both the acquirer and the target were actively

involved at critical stages of the Votorantim Proposal’s development. These are

indicative of the advanced stage of the transaction and support a finding that the

Four HudBay Facts were material.

[400] We find that HudBay Fact One, HudBay’s receipt of Votorantim’s Proposal to

acquire HudBay, would be reasonably expected to have a significant effect on the

market price of HudBay’s securities and, therefore, was a material fact as of July

17, 2007. We also find that the Four HudBay Facts, considered collectively, were

material facts (YBM, supra at para. 94; Donald, supra at para. 271; the

“HudBay Material Facts”).

[401] We also considered whether the HudBay Material Facts were generally disclosed

during the relevant period. We accept the testimony of Ciccone, Chief

Compliance Officer at GMP in 2007-2008, that issuers were placed on the GMP

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grey list when GMP obtained material non-public information about the issuer. As

noted above, HudBay was placed on the GMP grey list on July 17, 2007.

[402] The Votorantim Proposal was expressly stated to be “Confidential”. We note in

email communications of August 2007 that Wellings stressed the need to

maintain the confidentiality of the HudBay Material Facts. In his email of August

8, 2007 to the senior management of HudBay and HudBay’s counsel, after

HudBay management had received an inquiry from an international engineering

firm, which indicated that Votorantim had approached the engineering firm to

perform “due diligence on HudBay scheduled for early September”, Wellings

stated:

I have a call into CS [Votorantim’s financial advisors] and

have emailed my counterpart to say that these inquiries are

a little premature and...we would like to keep a lid on it as

long as we can in the interim...we have to watch it such that

we don’t invite leaks especially this early in a process...

(Exhibit 731)

Furthermore, in Wellings’ email of August 15, 2007 to Votorantim’s financial advisors, in

his response to the request by Votorantim to have six management personnel from

Votorantim attend the September site visits being arranged for HudBay’s operations in

Flin Flon, Wellings communicated: “...there is some concern over the number of bodies

going to Flin Flon...the concern is that too man [sic] bodies could cause a leak...couldn’t

the additional bodies just stay in Winnipeg and go through all the data...and go after

the deal is announced?” (Exhibit 746).

[403] We find that the Votorantim Proposal was never generally disclosed because

Votorantim was a private Brazilian company and ultimately decided not to

proceed with the acquisition of HudBay. Furthermore, there was also no mention

of Votorantim or the Votorantim Proposal in any of HudBay’s public filings from

December 1, 2006 to September 30, 2007. For these reasons, in our view the

HudBay Material Facts were not generally disclosed during the relevant period,

as contemplated by subsection 3.5(2) of NP 51-201 or otherwise.

[404] Wing submits that there was no material fact relating to HudBay that was not

generally disclosed during the relevant period and, in support of that submission,

relies on the trading in HudBay securities by officers and/or directors of HudBay

on July 4, 2007 to July 12, 2007 and an issue of options to a newly appointed

senior officer (Lantz) on August 24, 2007, which Wing submits would be contrary

to the Act and the TMX Rules if Votorantim’s interest in HudBay was material. In

respect of the first of those two submissions, our finding is that as of July 17,

2007, the Votorantim Proposal was sent to and received by HudBay and became

a material fact that was not generally disclosed as of that date, which is five to

thirteen days after the reported trades by officers and/directors of HudBay. We

note, in respect of the second of the two submissions, that the appointment of

Lantz as an officer of HudBay was approved by the board of HudBay on June 8,

2007 and was not to take effect until the retirement of another officer later that

summer. Regardless, this matter does not involve allegations against officers of

HudBay and, in our view, the conduct of those individuals is not determinative of

whether undisclosed material facts existed at the time that the Respondents

purchased HudBay shares.

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[405] We conclude that the HudBay Material Facts were material facts that were not

generally disclosed throughout the relevant time, from July 17, 2007 to

September 30, 2007.

C.

Agueci

[406] Staff submits Agueci engaged in conduct contrary to subsection 76(2) of the Act

by providing undisclosed material facts relating to HudBay to Wing, Pollen,

Fiorini, Fiorillo, Stephany, Raponi and Iacono.

1.

Was Agueci in a Special Relationship with HudBay?

[407] The Panel finds that Agueci was in a special relationship with HudBay pursuant to

subsection 76(5)(c) of the Act as of July 17, 2007.

[408] On December 8, 2006, HudBay retained GMP to act for the special committee of

the board of HudBay in respect of an offer that HudBay then expected to receive

and was added to the GMP grey list on that date. Subsequently, on July 17,

2007, HudBay called Wellings to inform him and GMP that HudBay had received

the Votorantim Proposal and approached GMP to advise the special committee of

the board of HudBay in respect of the Votorantim Proposal. Wellings proceeded

to email McBurney at 1:07 p.m. on that date and to place HudBay back on the

GMP grey list at 1:08 p.m. on that date. We find that GMP was in a special

relationship with HudBay under subsection 76(5)(b) of the Act because it was

engaged in business or professional activity with or on behalf of the reporting

issuer, HudBay. Accordingly, Agueci was in a special relationship with HudBay

pursuant to subsection 76(5)(c) of the Act during the relevant time because she

was an employee of GMP, which we found to be a company described in

subsection 76(5)(b) of the Act.

2.

Did Agueci have Knowledge of the HudBay Material Facts

Beginning on July 17, 2007?

[409] The testimony of multiple GMP executives supports that in July 2007 Agueci sat

in close proximity to the GMP deal team, including McBurney and Wellings, and

that she would have overheard conversations in their open concept office layout.

Certain emails and documents pertaining to the Votorantim Proposal were

accessible by her, as Agueci had access to McBurney’s emails and to the GMP

corporate directory. Wellings testified that Agueci was generally aware of

professional activities in the office, would answer his phone, would speak to

clients and had access to his emails.

[410] On July 17, 2007 at 1:07 p.m. Wellings emailed McBurney stating “hbm

happening perhaps tomorrow” (Exhibit 665). Wellings testified that the email to

McBurney meant he believed there was an offer coming for HudBay in short

order. On July 17, 2007 at 1:08 p.m. Wellings sent an email to GMP compliance

requesting that HudBay be placed back on the GMP grey list. The Votorantim

Proposal dated July 17, 2007, which was forwarded to Wellings on July 18, 2007,

expressly stated “We are prepared to purchase 100% of the issued outstanding

shares of HudBay for between C$30.00 and C$32.00 per share, on an all cash

basis, subject to the terms and conditions contained herein” (Exhibit 667). On

July 20, 2007, Wellings emailed HudBay with the GMP valuation analysis of the

Votorantim Proposal, which shows a premium of 26% on a 20-day average price

at $25.82 for HudBay.

89

[411] Based on the evidence, we are satisfied that Agueci had knowledge of the

HudBay Material Facts, including:

1.

HudBay Fact One - as of July 17, 2007, Agueci knew that HudBay’s CEO

received the Votorantim Proposal;

2.

HudBay Facts Two and Three - as of July 18, 2007, Agueci knew that

the terms of the Votorantim Proposal included an all-cash offer to acquire

all outstanding common shares of HudBay at a price of $30-$32 per

share;

3.

HudBay Fact Four - as of July 20, 2007, Agueci knew that the price of

Votorantim’s offer to acquire HudBay represented an approximate 26%

premium based on a 20-day average price of the stock, when GMP

prepared and submitted its preliminary evaluation of the Votorantim

Proposal to HudBay.

[412] We conclude that Agueci had knowledge of the HudBay Material Facts beginning

on July 17, 2007 and that those facts were not generally disclosed at the time

that she learned them. We also find that the HudBay Material Facts were

material facts that were not generally disclosed throughout the relevant time,

from July 17, 2007 to September 30, 2007.

[413] It is not clear from the evidence when Agueci learned that the Votorantim

Proposal was not going forward. Wellings emailed members of the HudBay

special committee on September 19, 2007 at 3:20 p.m. and reported that “it

appears they [Votorantim] won’t be proceeding to the next stage” and “they

couldn’t get to the value expectations” (Exhibit 640). There is evidence that

Agueci left for vacation in London and Rome in the evening of September 19,

2007 and returned to Toronto in the afternoon of October 1, 2007.

D.

Did Agueci Inform, and did Wing, Pollen, Fiorini, Fiorillo,

Stephany, Raponi, Iacono and/or Serpa Purchase, HudBay

Securities, with Knowledge of the HudBay Material Facts?

[414] As with the other allegations of this nature, Agueci takes the position that the