Kitmitto | May 26, 2022

Capital

Tribunal

22nd Floor

22e étage

Markets

Tribunal

des marchés

financiers

20 Queen Street West

Toronto ON M5H 3S8

20, rue Queen ouest

Toronto ON M5H 3S8

Citation: Kitmitto (Re), 2022 ONCMT 12

Date: 2022-05-26

File No. 2018-70

IN THE MATTER OF

MAJD KITMITTO, STEVEN VANNATTA, CHRISTOPHER CANDUSSO, CLAUDIO

CANDUSSO, DONALD ALEXANDER (SANDY) GOSS, JOHN FIELDING AND

FRANK FAKHRY

REASONS AND DECISION

(Subsection 127(1) of the Securities Act, RSO 1990, c S.5)

Adjudicators: M. Cecilia Williams (chair of the panel)

Heather Zordel

Craig Hayman

Hearing:

By videoconference, October 5, 7, 9, 13, 14, 15, 16, 19, 21, 22, 23,

26, 27, 28, 29, 2020, November 2, 4, 5, 6, 12, 13, 16, 18, 19, 23,

25, 26, 27, 30, 2020, December 1, 2, 4, 7, 2020, February 24, 25

and 26, 2021; final written submissions received May 13, 2021

Appearances: Katrina Gustafson

For Staff of the Ontario Securities

Commission

Christina Galbraith

Ian Smith

For Majd Kitmitto

Andrew Guaglio

Christopher Kostopoulos

For Steven Vannatta

Alistair Crawley

Alexandra Grishanova

For Christopher Candusso and Claudio

Candusso

John Picone

For Donald Alexander (Sandy) Goss

Lara Jackson

Stephanie Voudouris

Frank Addario

Lynda Morgan

For John Fielding

For Frank Fakhry

Janice Wright

Greg Temelini

TABLE OF CONTENTS

REASONS AND DECISION OF THE MAJORITY (M. CECILIA WILLIAMS AND CRAIG

HAYMAN).......................................................................................................... 1

I.

OVERVIEW .............................................................................................. 1

II.

BACKGROUND.......................................................................................... 3

A.

B.

C.

D.

E.

F.

Kitmitto......................................................................................... 3

Vannatta........................................................................................ 3

Christopher Candusso...................................................................... 3

Claudio Candusso............................................................................ 3

Goss ............................................................................................. 3

Fielding ......................................................................................... 4

Fakhry........................................................................................... 4

G.

III.

PROCEDURAL AND EVIDENTIARY ISSUES .................................................... 4

A.

Motion to strike references to transcripts of compelled testimony of certain

respondents in the George Affidavit ................................................... 4

Request to include entire compelled evidence of the Candussos and

Vannatta........................................................................................ 7

Objection to the admissibility of certain phone records as evidence .......11

Confidentiality order.......................................................................13

Breach of the witness exclusion order ...............................................14

Other evidentiary issues..................................................................17

Adverse inferences................................................................17

B.

C.

D.

E.

F.

(a)

(b)

Adverse inference against Vannatta ...............................17

Adverse inference against Staff .....................................18

Similar fact and character evidence.........................................18

(a) Kitmitto .....................................................................19

i.

Kitmitto email to Christopher about Blackbook

Technologies.....................................................19

ii.

Kitmitto and Christopher noise complaint ..............19

iii.

Kitmitto’s July 4 Patient Home Monitoring email with

Goss ................................................................20

iv.

Alleged communications between Kitmitto and

Fielding about Amaya .........................................20

v.

Alleged “culture of non-compliance” at Aston Financial20

vi.

Kitmitto’s alleged “cavalier approach to confidentiality

and compliance” ................................................20

vii.

Whether Kitmitto opened the door to a character

attack ..............................................................20

(b)

Fielding......................................................................20

Breach of the rule in Browne v Dunn .......................................21

IV.

ISSUES AND ANALYSIS ............................................................................23

i

A.

B.

General issues...............................................................................23

Circumstantial evidence.........................................................23

The Act’s prohibition against tipping ........................................24

The Act’s prohibition against insider trading..............................24

Definition of a “material fact” .................................................25

Special relationship in general ................................................25

Credibility............................................................................27

“Conduct contrary to the public interest”..................................27

Analysis specific to each Respondent.................................................28

Kitmitto...............................................................................28

(a)

Did Kitmitto receive Amaya MNPI and, if so, on what date?

................................................................................28

i.

Period prior to April 29, 2014 meeting...................28

ii.

Period after the April 29, 2014 meeting.................29

(b)

(c)

Was Kitmitto in a special relationship with Amaya?...........30

Conclusion regarding whether and when Kitmitto received

MNPI and if he was in a special relationship at that time ...30

Vannatta .............................................................................30

(a)

Did Kitmitto tip Vannatta with the Amaya MNPI and did

Vannatta trade Amaya shares while in possession of that

information?...............................................................30

Was Vannatta in a special relationship with Amaya? .........33

Conclusions on tipping and trading.................................33

Did Vannatta mislead Staff?..........................................34

(b)

(c)

(d)

i.

Vannatta did not remember trading on May 14.......35

ii.

iii.

Vannatta had pre-cleared all of his Amaya trades ...35

Vannatta had provided brokerage statements to Aston

Asset Management Compliance............................35

iv.

Vannatta did not choose the 45-day range for his

Scotia transaction histories and had provided Aston

Asset Management Compliance with a transaction

history for his Scotia Regular account ...................36

(e)

Did Vannatta tip his relatives with the Amaya MNPI? ........36

i.

CV ...................................................................37

DU and NU........................................................37

KU...................................................................37

ii.

iii.

(f)

(g)

Conclusion on tipping...................................................38

Was Vannatta’s concealment of his Amaya trading from

Aston Asset Management abusive and / or does it engage an

animating principle of the Act........................................38

Christopher..........................................................................41

(a)

Did Kitmitto tip Christopher with the Amaya MNPI and did

Christopher trade Amaya shares while in possession of that

information?...............................................................41

Was Christopher in a special relationship with Amaya?......45

Conclusions on insider trading and tipping ......................45

Did Christopher tip Claudio with the Amaya MNPI?...........45

(b)

(c)

(d)

ii

(e)

Did Christopher mislead Staff? ......................................46

Claudio ...............................................................................47

Goss...................................................................................47

(a)

Did Kitmitto tip Goss with the Amaya MNPI and did Goss

trade Amaya shares while in possession of that information?

................................................................................47

Was Goss in a special relationship with Amaya?...............52

Did Goss tip Fakhry with the Amaya MNPI? .....................52

Did Goss tip his client Fielding with the Amaya MNPI?.......56

Did Goss tip his client FH with the Amaya MNPI?..............59

Conclusions regarding the allegations that Goss tipped

Fakhry, Fielding and FH................................................60

Did Goss recommend Amaya to his clients while he was in

possession of MNPI and, if so, was his conduct abusive of

the capital markets and /or did it engage an animating

principle of the Act ......................................................61

(b)

(c)

(d)

(e)

(f)

(g)

i.

AE ...................................................................61

TM...................................................................62

BB ...................................................................62

JU....................................................................62

FH ...................................................................62

BP ...................................................................63

TD...................................................................63

AJ....................................................................63

JM/TM..............................................................63

RP ...................................................................64

PK ...................................................................64

KT ...................................................................64

RB ...................................................................64

SO...................................................................65

JE....................................................................65

CS ...................................................................65

ii.

iii.

iv.

v.

vi.

vii.

viii.

ix.

x.

xi.

xii.

xiii.

xiv.

xv.

xvi.

xvii. WP...................................................................65

xviii. AC ...................................................................65

xix.

xx.

SC ...................................................................65

Fielding ............................................................66

Fakhry ................................................................................66

(a)

(b)

Was Fakhry in a special relationship with Amaya? ............66

Did Fakhry trade Amaya shares while in possession of the

Amaya MNPI? .............................................................67

Did Fakhry tip his client CB and his relatives NG and CG with

the Amaya MNPI?........................................................68

(c)

iii

i.

Client CB ..........................................................68

NG...................................................................68

CG...................................................................70

ii.

iii.

Did Fakhry recommend Amaya to his clients while he was in

possession of MNPI and, if so, was his conduct abusive of the

capital market and / or does it engage an animating principle of the

Act?....................................................................................71

(a)

(b)

(c)

ST and AI/ST..............................................................71

TP and GP ..................................................................71

MG............................................................................72

Fielding...............................................................................72

V.

CONCLUSION..........................................................................................72

REASONS AND DECISION OF HEATHER ZORDEL (DISSENTING IN PART)..................74

VI.

INTRODUCTION.......................................................................................74

VII.

KITMITTO DID NOT RECEIVE THE ALLEGED AMAYA MNPI ON APRIL 25 OR AT

THE APRIL 29, 2014 MEETING...................................................................76

VIII. STAFF DID NOT ESTABLISH ON A BALANCE OF PROBABILITIES THAT KITMITTO

TIPPED VANNATTA, CHRISTOPHER AND GOSS.............................................80

A.

B.

Kitmitto’s credibility........................................................................80

There were other potential sources of the alleged Amaya MNPI.............82

It is equally likely that Vannatta and Goss could have learned the

alleged Amaya MNPI from other sources at the Aston Asset

Management offices..............................................................82

Timeline of available information relating to Amaya ...................84

Publicly available information relating to Amaya demonstrates that

it was an investment with potential for growth........................108

Kitmitto did not tip Goss, Vannatta and Christopher with the alleged

Amaya MNPI ...............................................................................109

Donald (Alexander) Goss .....................................................109

Steven Vannatta.................................................................111

Christopher Candusso..........................................................113

Trading volume is not a determinative factor....................................115

Opportunity is not a determinative factor.........................................116

Profitability is not a determinative factor .........................................117

Adverse inferences.......................................................................117

There was no allegation that Kitmitto engaged in insider trading.........119

Conclusion ..................................................................................119

C.

D.

E.

F.

G.

H.

I.

IX.

STAFF DID NOT ESTABLISH ON A BALANCE OF PROBABILITIES THE

ALLEGATIONS LOWER DOWN ON THE TIPPING CHAIN OCCURRED ...............119

A.

Vannatta.....................................................................................119

Staff breached the witness exclusion order.............................120

Vannatta was not in a special relationship with Amaya.............121

iv

Vannatta’s insider trading allegations are not proven ...............122

Vannatta did not tip his relatives...........................................124

Vannatta did not mislead Staff..............................................125

Vannatta did not conceal his trading from Aston Asset Management

Compliance........................................................................128

Conclusion.........................................................................129

Christopher.................................................................................129

Christopher’s credibility .......................................................129

Evidence of opportunity is not conclusive ...............................129

Christopher was not in a special relationship with Amaya..........130

Christopher’s insider trading allegations are not proven............131

Christopher did not tip Claudio with the alleged Amaya MNPI ....133

Christopher did not mislead Staff ..........................................134

Conclusion.........................................................................135

Claudio.......................................................................................135

Goss ..........................................................................................135

Goss’s credibility.................................................................135

Goss had an early interest in Amaya and this was not based on a

tip from Kitmitto.................................................................136

Goss was not in a special relationship with Amaya...................138

Goss did not engage in insider trading, tipping and recommending

........................................................................................140

Conclusion.........................................................................146

Fakhry........................................................................................146

Fakhry’s credibility..............................................................146

Fakhry was not in a special relationship with Amaya ................148

Fakhry conducted his own research on Amaya and this was not

based on a tip from Goss .....................................................148

Fakhry’s insider trading, tipping and recommending allegations are

not proven.........................................................................152

Conclusion.........................................................................158

Fielding ......................................................................................158

B.

C.

D.

E.

F.

X.

CONCLUSION........................................................................................160

v

REASONS AND DECISION OF THE MAJORITY (M. CECILIA WILLIAMS AND

CRAIG HAYMAN)

I.

OVERVIEW

[1]

This proceeding involves allegations of insider tipping and trading in securities of

Amaya Gaming Group Inc. (Amaya) based on material non-public information

(MNPI) relating to Amaya’s acquisition of Oldford Group Limited (the

Acquisition). Oldford Group Limited is a private company that was the parent

company of the owner and operator of the PokerStars brand (PokerStars).

[2]

[3]

Our analysis covers whether information about the Acquisition was MNPI. The

Securities Act (the Act)¹prohibits certain individuals with MNPI (who are in a

special relationship with the issuer the subject of the MNPI) from telling others

about that information (tipping). Individuals with MNPI are also prohibited by the

Act from trading shares with the informational advantage of knowing the MNPI.

Staff alleges that beginning on April 25, 2014, Majd Kitmitto (Kitmitto) became

aware of MNPI about Amaya. Staff further alleges that between April 25 and

June 12, 2014 (the Relevant Period) MNPI was shared and insider tipping and

trading occurred, namely:

a.

b.

c.

Kitmitto, while in a special relationship, informed Steven Vannatta

(Vannatta), Christopher Candusso (Christopher) and Donald Alexander

(Sandy) Goss (Goss) about the Amaya MNPI;

Vannatta, while in a special relationship and in possession of Amaya

MNPI, bought Amaya shares and, in turn, communicated the Amaya MNPI

to certain family members who also bought Amaya shares;

Christopher, while in a special relationship and in possession of Amaya

MNPI, bought Amaya shares and, in turn, communicated the Amaya MNPI

to his father, Claudio Candusso (Claudio) (Claudio and Christopher are on

occasion referred to as the Candussos), who also bought Amaya shares

while in a special relationship and in possession of Amaya MNPI;

d.

Goss, while in a special relationship and in possession of Amaya MNPI,

bought Amaya shares and, in turn, communicated the Amaya MNPI to his

clients John Fielding (Fielding) and FH², and his assistant Frank Fakhry

(Fakhry);

e.

f.

Fielding bought Amaya shares while in a special relationship and in

possession of Amaya MNPI;

Fakhry, while in a special relationship and in possession of Amaya MNPI,

bought Amaya shares and, in turn, communicated the Amaya MNPI to his

relatives, CG and NG, and a client, CB; and

g.

Goss and Fakhry, while in a special relationship and in possession of

Amaya MNPI, recommended Amaya to certain of their clients.

[4]

Staff also alleges that Vannatta concealed his trading in Amaya from his

employer and misled Staff, and that Christopher misled Staff.

1

RSO 1990, c S.5 (the Act)

In order to protect the privacy of investors, their names and personal information have been

2

anonymized in these reasons.

1

[5]

For the reasons set out below we find that Staff has established that:

a.

Kitmitto tipped Vannatta, Christopher and Goss with the Amaya MNPI in

breach of s. 76(2) of the Act;

b.

Vannatta:

traded Amaya shares while in possession of the Amaya MNPI

contrary to s. 76(1) of the Act;

tipped certain family members with the Amaya MNPI in breach of s.

76(2) of the Act;

misled Staff contrary to s. 122(1)(a) of the Act; and

concealed his trading from his employer, which conduct engages an

animating principle of the Act and is abusive;

c.

Christopher traded Amaya shares while in possession of the Amaya MNPI

contrary to s. 76(1) of the Act;

d.

Goss:

traded Amaya shares while in possession of the Amaya MNPI

contrary to s. 76(1) of the Act;

tipped Fakhry with the Amaya MNPI in breach of s. 76(2) of the

Act; and

recommended Amaya to fifteen of his clients, while in possession of

the Amaya MNPI, which behaviour engages an animating principle

of the Act and is abusive;

e.

Fakhry:

traded Amaya shares while in possession of the Amaya MNPI

contrary to s. 76(1) of the Act;

tipped his relative NG and his client CB with the Amaya MNPI in

breach of s. 76(2) of the Act; and

recommended Amaya to five of his clients, while in possession of

the Amaya MNPI, which behaviour engages an animating principle

of the Act and is abusive.

[6]

We find, for the reasons set out below, that Staff has not established that:

a.

Christopher:

tipped Claudio with the Amaya MNPI contrary to s. 76(2) of the

Act; or

misled Staff contrary to s. 122(1)(a) of the Act;

b.

c.

Claudio traded Amaya shares while in possession of the Amaya MNPI

contrary to s. 76(1) of the Act;

Goss tipped:

Fielding with the Amaya MNPI contrary to s. 76(2) of the Act; or

his client FH with the Amaya MNPI contrary to s. 76(2) of the Act;

2

d.

e.

Fielding traded Amaya shares while in possession of the Amaya MNPI

contrary to s. 76(1) of the Act; or

Fakhry tipped his relative CG with the Amaya MNPI contrary to s. 76(2) of

the Act.

II.

BACKGROUND

[7]

The insider tipping and trading allegations relate to a group of individuals most

of whom knew each other and had close relationships. A description of the

individuals and their relationships during the Relevant Period are set out below.

A.

Kitmitto

[8]

[9]

Kitmitto was a senior analyst at Aston Hill Asset Management Inc. (Aston Asset

Management). He covered securities in the technology and gaming sectors.

Aston Asset Management’s parent company was Aston Hill Financial Inc. (Aston

Financial).

Kitmitto was an access person at Aston Asset Management. Aston Financial’s

personal trading policy, which applied to all employees, officers and directors of

Aston Financial and its affiliates and subsidiaries, defined “access person” as

someone who has regular access to non-public information regarding

transactions and compositions of the funds managed by Aston Asset

Management or one of its affiliates.

B.

Vannatta

[10] Vannatta, during the Relevant Period, was a portfolio manager at Aston Asset

Management who managed a global resource and infrastructure fund. He shared

an office with Kitmitto. Vannatta was also an access person. Vannatta was

registered with the Ontario Securities Commission (the Commission) as an

Advising Representative, Portfolio Manager, Investment Fund Manager and

Exempt Market Dealer.

C.

Christopher Candusso

[11] During the Relevant Period Christopher and Kitmitto were roommates, living in a

condominium owned by Claudio. They had met as university students in 2004.

Christopher knew that Kitmitto was an analyst at Aston Asset Management who

covered the gaming sector.

D.

Claudio Candusso

[12] Claudio is Christopher’s father. During the Relevant Period, Claudio practiced

dentistry in Sudbury, Ontario. Claudio and Christopher have a close relationship

and during the Relevant Period were in regular contact. Claudio and Kitmitto

were friends during the Relevant Period, and Claudio knew that Kitmitto worked

at Aston Asset Management.

E.

Goss

[13] Goss has been registered with the Commission since 1993. Goss, during the

Relevant Period, was an investment advisor at Aston Hill Securities (Aston

Securities), an affiliate of Aston Financial whose office was located next to

Aston Asset Management. Aston Securities and Aston Asset Management shared

a common reception.

3

F.

Fielding

[14] Fielding was a significant client of Goss at Aston Securities in 2014. He had been

Goss’s client at two previous brokerage firms since 2001. His investment

company is Dark Bay International Ltd. (Dark Bay). Fielding was a director of

Aston Financial from February 2014 to August 2016. Fielding was introduced to

Aston Financial through Goss.

G.

Fakhry

[15] Fakhry was Goss’s assistant at Aston Securities and at their previous employer.

Fakhry joined Aston Securities as an investment advisor in September 2013, two

weeks after Goss. In April 2014, Fakhry had a small book of business with a total

of eight clients. He has been registered with the Commission since 1999.

III. PROCEDURAL AND EVIDENTIARY ISSUES

[16] During the hearing the parties raised a variety of procedural and evidentiary

issues. Our reasons for our rulings on those issues are set out below.

A.

Motion to strike references to transcripts of compelled testimony

of certain respondents in the George Affidavit

[17] The parties agreed that the bulk of the evidence from Staff’s investigator

witnesses would be by affidavit. After Staff served the affidavits, the

respondents, Goss, Fielding, Kitmitto and Fakhry (the Moving Respondents)

brought motions to strike portions of two affidavits on the basis that those

portions referred to compelled evidence. The relief sought by these respondents

includes striking references to compelled evidence from Vannatta, Christopher

and Claudio. Staff subsequently advised that it was no longer relying on one of

the affidavits, so the only affidavit at issue is the affidavit of Christine George.

We refer to these motions, collectively, as the Compelled Evidence Motion.

[18] The central issue on the Compelled Evidence Motion was when Staff may tender

the compelled evidence. Staff sought to tender the compelled evidence through

the affidavits. In essence, at the beginning of Staff’s case. The Moving

Respondents submit that Staff may only tender the compelled evidence at the

end of Staff’s case. Further, Staff may only do so if the respondent whose

compelled evidence Staff intends to tender has chosen not to testify, which

choice, they submit, the respondent should not be forced to make until the end

of Staff’s case.

[19] We granted the Compelled Evidence Motion to strike out the parts of the George

affidavit that refer to the compelled evidence of the respondents, without

prejudice to Staff to use the compelled evidence as follows:

a.

the compelled evidence of a respondent may be used to cross-examine

that same respondent; and

b.

if a respondent does not testify, then Staff may tender portions of that

respondent’s compelled evidence as part of Staff’s case in-chief before the

close of Staff’s case.

[20] The Moving Respondents submit that Staff cannot rely on compelled evidence

given by a respondent who will testify (or has yet to make a decision to testify)

and who does not face an allegation of misleading Staff. However, the Moving

Respondents acknowledge that Staff may rely on compelled evidence in the

4

following circumstances: (1) if the respondent testifies at the hearing, to

impeach that respondent on cross-examination, or (2) if the respondent does not

testify, to tender that testimony as against that respondent at the conclusion of

its case, if permitted to do so by the Panel.

[21] The Commission has the power under the Act to compel evidence. Section 11

allows the Commission by order to appoint one or more persons to investigate

and, under s. 13, an investigator has the power to summon and enforce the

attendance of any person and to compel him or her to testify under oath or

otherwise and produce documents and other things. Investigation interviews

conducted under s. 13 are transcribed. The transcripts are referred to as

compelled evidence. Compelled evidence may be produced at a proceeding

under the Act (s. 17(6)(a)). Compelled evidence is a form of hearsay, which is

admissible in Commission proceedings.³

[22] The Moving Respondents submit that the Panel has discretion whether to admit a

respondent’s compelled evidence,⁴but that it may only be admitted in a manner

that is not unfair to that respondent.⁵The Moving Respondents submit that the

principles of natural justice and procedural fairness require that, as they are not

alleged to have misled Staff, they have the right to know the case against them

and the right to have an adequate opportunity to present their respective cases.⁶

If Staff is permitted to rely on their compelled evidence as part of its case in-

chief, the Moving Respondents submit, they will be unfairly deprived of that

opportunity.

[23] Staff submits that allowing the compelled evidence to be included in the George

Affidavit does not create any unfairness to the Moving Respondents; both a

respondent’s oral evidence and compelled evidence have been part of the

evidentiary record in other Commission proceedings. In addition, having the

compelled evidence as part of the evidentiary record neither deprives a

respondent of the right to decide whether to testify nor forces a respondent to

testify.

[24] The Moving Respondents can wait to decide whether to give oral evidence until

Staff’s case against them is complete. We agree in these circumstances that

including information from the compelled evidence in the George Affidavit may

give rise to a situation where a Moving Respondent feels their own oral evidence

is required to provide context or clarity, pre-empting their right to decide at the

end of Staff’s case whether to testify.

[25] The Moving Respondents submit that Staff’s proposal to refer to compelled

evidence in the George Affidavit is contrary to previous decisions of the

Commission and the Divisional Court,⁷and contrary to common practice before

the Commission. The Moving Respondents submit that the “Agueci procedure” is

the established practice for the Commission. In Agueci CT the Commission

decided that a respondent’s compelled evidence could only be used to cross-

3

Agueci (Re), 2013 ONSEC 45, (2013) 36 OSCB 12133 (Agueci CT) at para 113

Agueci CT at para 130; Donald (Re), 2012 ONSEC 26, (2012) 35 OSCB 7383 (Donald) at para 33

Agueci CT at para 127

Northern Securities Inc. (Re), 2013 ONSEC 48, (2014) 37 OSCB 161 at para 71

4

5

6

7

Donald at para 34; Agueci CT at paras 131 and 139; Fiorillo v. Ontario Securities Commission, 2016

ONSC 6559 (Div. Ct.) at para 114; Hutchinson (Re), 2019 ONSEC 36, (2019) 42 OSCB 8543

(Hutchinson) at para 43

5

examine that respondent and, where a respondent declines to testify, Staff could

enter portions of that respondent’s compelled evidence at the end of Staff’s

case.⁸

[26] In addition, the Moving Respondents submit that Agueci CT determined Staff

may only tender portions of the compelled evidence at the end of Staff’s case in

order to avoid unfairness that might come from Staff splitting its case.⁹

[27] Staff submits that the “Agueci procedure” is not the only approach for admitting

compelled evidence, as the Commission has adopted other procedures, both

before and after the Agueci CT decision. Staff cited two post-Agueci CT decisions

supporting the premise that compelled evidence can be provided in affidavit

evidence as part of Staff’s case in-chief. In our view, these cases can be

distinguished from the present case.

[28] In Meharchand¹⁰, the Panel admitted into evidence portions of the compelled

evidence that were contained in the affidavits filed by Staff and referred to

otherwise in the course of the hearing.¹¹The respondent objected to the use of

compelled evidence on the basis that the testimony was compelled, and the

respondent had thought that the purpose of the testimony was only to determine

whether enforcement proceedings should be brought, not for use as evidence. In

Meharchand, the Commission heard different arguments than those brought

forth in the present case and found it appropriate to admit the compelled

evidence.

[29] In addition, the process leading up to the use of affidavit evidence and compelled

evidence was different in Meharchand. Originally, the Meharchand merits hearing

was to proceed as a written hearing and the expectation was that this case

would be based on affidavit evidence. Oral evidence was not contemplated until

later in the process after the affidavit evidence was already prepared and when

the written hearing was converted back to an oral hearing.

[30] In Bradon Technologies Ltd.¹², the parties all agreed that the compelled evidence

of the respondents would be exhibits even though one of the respondents also

testified.¹³In the present case, there was no agreement between the parties on

marking the compelled evidence as exhibits as part of Staff’s case in-chief.

[31] Agueci CT, Staff submits, does not stand for the proposition that compelled

evidence may only be entered at the end of Staff’s case; rather it supports the

proposition that all of Staff’s case be in before a respondent’s case begins. In

Staff’s submission, this is exactly what they are doing.

[32] There is no one procedure under which compelled evidence may be admitted. We

have discretion to determine how and when compelled evidence may be

admitted in order to ensure a fair and efficient hearing.¹⁴

[33] We do not accept the Moving Respondents’s position that the type of allegations

in a proceeding should play a significant factor in our decision about when and

8

Agueci CT at paras 131 and 139

Agueci CT at para 131

2018 ONSEC 51, (2018) 41 OSCB 8434 (Meharchand)

Meharchand at para 55

2015 ONSEC 26, (2015) 38 OSCB 6763 (Bradon Technologies)

Bradon Technologies at para 50

Agueci CT at paras 130-131

9

10

11

12

13

14

6

how compelled evidence may be used in a hearing and admitted by a Panel. We

do not find that it is appropriate to restrict the Commission’s discretion in that

manner. How and when compelled evidence should be used at a hearing is the

discretion of each panel based on their determination of what is appropriate in

the circumstances to achieve a fair and efficient hearing.

[34] Staff states that the compelled evidence included in the George Affidavit is

“relevant background information” and introducing it at the beginning will lead to

an orderly and efficient presentation of Staff’s case. While it may be convenient

for Staff to introduce background information through references to the

compelled evidence in the George Affidavit it is not necessary. That evidence is

otherwise available to Staff in documentary evidence gathered during the

investigation, which can be referred to in the George Affidavit without any

reference to the compelled evidence.

[35] To conclude, consistent with the Commission’s decision in Agueci CT, our

decision to strike references to the compelled evidence from the George Affidavit

was without prejudice to Staff’s ability to use the compelled evidence of a

respondent to cross-examine that same respondent and to tender portions of the

compelled evidence of a respondent that chooses not to testify.

[36] We also did not permit Staff to use the compelled evidence of one respondent

against a different respondent. Specifically, during Staff’s cross-examination of

Kitmitto, Staff sought to use Fakhry’s compelled evidence to highlight a

difference in understanding between Kitmitto and Fakhry regarding Kitmitto’s

role at Aston Asset Management. Staff was aware that Fakhry intended to

testify.

[37] We ruled that Staff’s proposal to put Fakhry’s compelled evidence to Kitmitto

was inconsistent with our earlier ruling that the compelled evidence of a

respondent could only be used to cross-examine that same respondent.

B.

Request to include entire compelled evidence of the Candussos

and Vannatta

[38] Our ruling on the Compelled Evidence Motion provided that, should a respondent

choose not to testify, Staff may tender portions of that respondent’s compelled

evidence as part of Staff’s case in-chief before the close of Staff’s case.

[39] Just prior to Staff closing its case and upon reviewing the excerpts of the

compelled evidence that Staff intended to tender as part of their case should the

respondents not testify, the Candussos and Vannatta advised that they did not

intend to testify and asked that their entire compelled evidence, rather than

excerpts of them, be included as evidence. The Candussos and Vannatta submit

that their entire compelled evidence is required to ensure that we are not

missing any potentially probative evidence and context.

[40] We ruled that the Candussos’s and Vannatta’s full compelled evidence may not

be entered into evidence. With respect to providing context, we recognized that

other excerpts may be relevant in addition to the excerpts referred to by Staff,

and we encouraged the parties to come to an agreement about any additional

contextual excerpts.

[41] Following this ruling, Christopher and Claudio decided to give oral testimony and

Vannatta decided not to testify.

7

[42] Staff submits that the Panel’s ruling on the Compelled Evidence Motion applied to

all of the respondents. Therefore, what the Candussos and Vannatta are seeking

is a revocation or variation of the Panel’s previous ruling under s. 144 of the Act.

[43] A s. 144 order is only granted when it is not prejudicial to the public interest.

Staff submits that such an order should not be granted to cater to the

respondents’s shifting positions. Staff submits that the Candussos and Vannatta

benefited from the arguments made by the Moving Respondents on the

Compelled Evidence Motion and from the Panel’s resulting decision and should

not now be allowed to change their position to achieve a different outcome.

[44] According to the Candussos and Vannatta, the original Compelled Evidence

Motion was about the timing of the introduction of the transcripts and not the

content. The new issue raised is whether the Panel receives either the entire

transcript or enough of it such that the Panel is not missing any potentially

probative evidence and context. In addition, they submit, the appropriate time

for this issue to be addressed is when the respondents must make their election

whether to testify. They are not, therefore, foreclosed from making this request

at a later stage in the hearing by virtue of not having identified this as an issue

at the time the Compelled Evidence Motion was argued.

[45] The Candussos and Vannatta are not foreclosed from raising this issue because

they did not identify it at the time of the Compelled Evidence Motion. The issue

before us on the Compelled Evidence Motion was Staff’s use of excerpts or

paraphrases from the transcripts in the George Affidavit filed at the opening of

Staff’s case. We accept that Christopher, Claudio or Vannatta would not have

turned their minds at that stage of the merits hearing, without having heard

Staff’s case against them, to whether they would choose to testify, and if they

were to elect not to testify, what excerpts from their transcripts might be

entered as part of Staff’s case.¹⁵

[46] We do not agree that a s. 144 order is required in this instance. We do not

consider this request to constitute a variation of our ruling on the Compelled

Evidence Motion. A panel may hear submissions on a different issue related to

the same evidence or category of evidence that had been the subject of an

earlier ruling by the panel during the same merits hearing.

[47] The Candussos and Vannatta submit that including their entire compelled

evidence in Staff’s evidence is a matter of procedural fairness. Including only

excerpts could result in an incomplete record, which could result in an unfair

outcome. The Candussos and Vannatta argue that Staff’s proposed excerpts do

not include material evidentiary points, background information that is necessary

to support proper inferences and that Staff has excluded certain denial

statements made by the Candussos and Vannatta.

[48] By excluding such information, the Candussos and Vannatta argue that Staff has

usurped the Panel’s discretion by preventing the Panel from considering the

totality of the compelled evidence. Failure to include the entire compelled

evidence could, therefore, force one or all of Christopher, Claudio or Vannatta to

testify to clarify an incomplete record, contrary to their best interests.

15

It was only at the end of the day on October 30, 2020 that Staff provided the respondents with the

excerpts of the compelled transcripts that they intended to rely on if a respondent decided not to

testify.

8

[49] Staff submits that the rationale for admitting inculpatory portions of hearsay

statements is that, unlike self-serving hearsay statements, inculpatory

statements are inherently reliable. In addition, Staff submits that allowing the

entire compelled evidence to be introduced would result in a violation of Staff’s

procedural rights. Our ruling on the Compelled Evidence Motion had, Staff

argues, a significant impact on how Staff prepared and presented their case.

[50] The Candussos and Vannatta submit that the Commission has allowed a

respondent’s entire compelled evidence to be introduced as part of Staff’s case in

other cases, including in Agueci CT, Hutchinson and Azeff Merits.

[51] We do not find the Commission’s decisions referred to by the Candussos and

Vannatta of assistance in our analysis. In Agueci CT, the panel did not hear

submissions on the issue of whether the whole compelled evidence should be

introduced by Staff as opposed to excerpts. In Hutchinson, the entire compelled

evidence of an absent respondent was introduced into evidence because the

Panel found that in the specific circumstances the compelled evidence of the

absent respondent was potentially relevant to matters in issue for the

respondents that were present.¹⁶This is not the situation before us. In Azeff

Merits, excerpts of compelled evidence were admitted for two of the

respondents, and the compelled evidence for another respondent was read into

evidence.¹⁷The decision does not specify if, in the latter case, the entire

compelled evidence was admitted in full or just excerpts were read in. As such

this case was of limited assistance in our analysis.

[52] In addition, the Candussos and Vannatta submit that Staff’s intent to file only

inculpatory excerpts of their transcripts is contrary to the “whole statement”

rule. In the criminal context, the “whole statement” rule is that if the Crown

plans to introduce an accused’s statement the entire statement must be

introduced as evidence, the good and the bad being admitted for their truth.

Once introduced the “whole statement” is admissible for any purpose.¹⁸

[53] There is no reason, the Candussos and Vannatta submit, to depart from the

criminal law context approach in an administrative law setting. The approach is

particularly apt in the securities law context, they submit, where respondents are

compelled to attend an interview with limited notice of the issues and no

documentary disclosure.

[54] Staff submits that the position of the Moving Respondents on the Compelled

Evidence Motion was that the “Agueci procedure” was the proper procedure to be

followed, and only midway through the hearing did Staff become aware, for the

first time, that the Candussos and Vannatta take the position that a criminal law

principle, the whole statement principle, applies to the Commission. Staff

submits that different considerations apply in a criminal law context, i.e. the

right to remain silent and the right against self-incrimination, that are not

applicable in an administrative law setting. Staff submits that the Mallory

decision, relied on by the Candussos and Vannatta, is rooted in the right to

16

Hutchinson at para 53

Azeff (Re), 2015 ONSEC 11, (2015) 38 OSCB 2983 (Azeff Merits) at paras 26 and 30

R v Mallory, 2007 ONCA 46 at paras 203-205

17

18

9

remain silent, whereas under the Statutory Powers Procedure Act¹⁹(SPPA) a

respondent has no such right.

[55] Commission proceedings, Staff submits, are more akin to civil litigation. The

Rules of Civil Procedure²⁰specifically provide for a party to lead portions of

statements by adverse parties that favour their case.²¹In that instance, an

adverse party may request, under Rule 31.11(3), that the judge direct the

introduction of other evidence that qualifies or explains the part that had been

introduced.²²Staff submits that these rules make clear that the “whole

statement” rule is not applicable in civil litigation and, similarly, should not be

incorporated into administrative law proceedings.

[56] Also, Staff submits that case law has clarified that there are limits to the

evidence that an opposing party may introduce that “qualifies or explains” the

portions of statements being proffered. In Anderson v St. Jude Medical, Inc.,²³

the Court determined that Rule 31.11(3) permits the opposing party to request

that additional evidence be read in. However, neither party has an unqualified

right to read in evidence and the opposing party does not have the right to

control the content of the adverse party’s evidence. The Court explained that if

the evidence read in fairly represents an answer to the question asked, no

qualification or explanation will be necessary or permitted.²⁴

[57] Staff also refers to the decision in Graat v Adibfar²⁵where the court cautioned

about being aware of attempts to misuse Rule 31.11(3), "including seeking to

use the qualifying read-in provision to avoid taking the stand to testify at trial”.²⁶

[58] Lastly, Staff submits that including the Candussos and Vannatta’s entire

compelled evidence effectively turns these respondents into “witnesses” that

aren’t actually testifying in person and would deny Staff their right to cross-

examine these respondents under s. 10.1 of the SPPA. Whereas if the Candussos

and Vannatta provided affidavit evidence, Staff would be able to cross-examine

them. The Candussos and Vannatta are the key and only witnesses for their own

cases and their evidence goes to central issues in the case against each of them.

Staff submits that the credibility and veracity of the evidence of the Candussos

and Vannatta are squarely at issue and if they have evidence they wish to lead

(even if it’s in their compelled evidence), then cross-examination is “required for

a full and fair disclosure of all matters relevant to the issues”.

[59] While we note in a few rare instances compelled evidence in its entirety has been

admitted as evidence at the Commission either on consent or due to the specific

circumstances of that case, the “whole statement” rule from the criminal law

context is not, in our view, generally applicable to Commission proceedings. The

criminal law principles of the right to remain silent and the right against self-

incrimination are not applicable in an administrative proceeding setting.²⁷As

19

RSO 1990, c S.22

RRO 1990, Reg 194 (the Civil Rules)

Civil Rules, r 31.11

Civil Rules, r 31.11(3)

2010 ONSC 1824, [2010] O.J. No. 6028 (Anderson)

Anderson at paras 14, 19 and 20

2013 ONSC 1690, [2013] O.J. No. 1336 (Graat)

Graat at para 10

20

21

22

23

24

25

26

27

Agueci CT at paras 118-120

10

recognized by the Supreme Court of Canada, a securities commission proceeding

is regulatory in nature and not criminal.²⁸

[60] The risk of an incomplete record and an unfair outcome as a result are

appropriately addressed through the adverse party’s ability to identify other

excerpts that explain or qualify those excerpts put forward by Staff for inclusion

in the record. This is exactly the process that Staff proposed to follow. If, after

reviewing the excerpts Staff proposed to introduce, any of the Candussos and

Vannatta had any concerns about insufficient inclusion of explanatory or

qualifying excerpts they would have been able to raise those concerns with the

Panel.

[61] While a compelled interview under s. 13 of the Act involves questioning of the

interviewee by a Commission investigator, it is not the equivalent of cross-

examination of a respondent by Staff during a merits hearing or by other parties

adverse in interest who are not present at that interview. We agree that in these

circumstances requiring Staff to include the Candussos’s and Vannatta’s entire

compelled evidence would go beyond providing context and clarification to

statements relied on by Staff and instead enable them to provide evidence that

could not be tested on cross-examination.

C.

Objection to the admissibility of certain phone records as evidence

[62] Goss challenged the admissibility of certain phone records tendered by Staff as

evidence on the basis that their authenticity was not established and they are

not the best evidence of what Staff seeks to prove (the Contested Records).²⁹

Kitmitto, Fielding and Fakhry adopted Goss’s position and submissions on the

challenge.

[63] The central issue is whether the requirements of the Ontario Evidence Act³⁰

(OEA) in s. 34.1 as to authentication and best evidence must be met for the

Contested Records to be admissible in this proceeding. We decided, for the

reasons below, that the Contested Records were admissible.

[64] Goss submits that s. 34.1 of the OEA is a mandatory prerequisite to the

admission of electronic records and governs admissibility of these records in a

Commission proceeding. Goss submits that Staff has failed to meet those

requirements as Staff did not file any evidence from the creators of the

Contested Records or anyone else who had custody of them before they were

provided to Staff, despite the opportunity to do so. Therefore, Goss submits that

the Contested Records are inadmissible.

[65] The statutory scheme created by s. 34.1 of the OEA for the admission of

electronic records applies, in Goss’s submission, by virtue of s. 15(3) of the SPPA

which addresses conflicts between the SPPA and other statutes.

[66] Subsection 15(3) of the SPPA provides that nothing in s. 15(1) of the SPPA,

which grants broad discretionary power to the Commission to admit relevant

documentary evidence, “overrides the provisions of any Act expressly limiting

28

British Columbia (Securities Commission) v Branch, [1995] 2 SCR 3 at para 34, citing Pezim v.

British Columbia (Superintendent of Brokers), [1994] 2 SCR 557 at 589

29

The specific Document IDs for these phone records are OSC0002141; BLA1000699; BLA1000700;

BLA1000701; BLA1000702; BLA1000703; BLA1000704; BEL0000007; ROG0000031; ROG0000032;

ROG0000050; and ROG0000217.

30

RSO 1990, c E.23

11

the extent to or purposes for which any … documents or things may be admitted

or used in evidence in any proceeding.” Goss submits that the OEA is such an

Act.

[67] Staff submits that the admissibility of evidence, including electronic records, in

Commission proceedings is governed by s. 15(1) of the SPPA, which is designed

to avoid the technical rules of evidence that would apply in a court proceeding.

[68] By analogy, Staff refers to the Ontario Court of Appeal decision in EllisDon Corp v

Ontario Sheet Metal Workers’ and Roofers’ Conference³¹on the issue of whether

the parties in an administrative proceeding before the Ontario Labour Relations

Board had to comply with the technical requirements of the business records rule

in s. 35 of the OEA. The Court of Appeal held that the rules for admitting

evidence in the Ontario Labour Relations Act, 1995³²applied, not the OEA Rules.

[69] The wording in the Ontario Labour Relations Act, 1995, Staff submits, closely

resembles that in s. 15(1) of the SPPA in that it allows the Ontario Labour

Relations Board to “accept such oral or written evidence as it in its discretion

considers proper, whether admissible in a court of law or not.”³³The Court of

Appeal adopted the Divisional Court’s interpretation of this provision in the same

matter: “these provisions mean exactly what they say. Boards and arbitrators

are not bound by the rules of evidence and thus have a broad discretion

regarding the admissibility of evidence”.³⁴

[70] Further, Staff submits, s. 15(3) of the SPPA should not be interpreted to mean

that s. 34.1 of the OEA applies to the Contested Records. Subsection 15(3) of

the SPPA operates to preserve limitations on admissibility that are contained in

other legislation. Section 34.1 of the OEA is not a limitation. Rather it is an

enabling provision which provides a means to authenticate electronic records

despite common law rules of evidence which might otherwise be a bar to

admission of such records in a court. Subsections 34.1(5) and (5.1) of the OEA,

Staff submits, modify the best evidence rule to clarify and streamline the process

for admitting these records and s. 34.1(7) creates a presumption of integrity

where certain evidence is established.

[71] In addition, Staff submits, s. 34.1(2) of the OEA provides that s. 34.1 does not

displace the SPPA framework. Subsection 34.1(2) states that the section does

not modify any statutory rule relating to the admissibility of records, except the

rules relating to authentication and best evidence. Staff submits that s. 15(1) of

the SPPA is a statutory rule relating to the admissibility of records; it does not

establish a protocol for authenticating records.

[72] Section 34.1 of the OEA does not apply to the Contested Records at issue in this

proceeding. We adopt the conclusion of the Court of Appeal in EllisDon that s. 15

of the SPPA means what it says. The Commission, under s. 15 of the SPPA, may

admit any document, whether admissible as evidence in court, that is relevant to

the subject matter of the proceeding.

[73] The Contested Records are relevant to this proceeding. Staff’s allegations are

that certain of the respondents tipped other respondents about the Amaya MNPI

31

2014 ONCA 801 (EllisDon)

SO 1995, c 1, Sch A

EllisDon at para 32

EllisDon at para 33

32

33

34

12

and that certain of the respondents also advised clients to trade Amaya while in

possession of the Amaya MNPI. Therefore, communications, including records of

telephone conversations, among the respondents and between certain of the

respondents and their clients are relevant to this proceeding.

[74] Staff’s evidence, that the Contested Records were provided in response to Staff’s

requests made to identified providers (Rogers, Bell and Aston Securities),

relating to identified individuals (Kitmitto, Goss, Fielding and Fakhry), covering

identified time periods within the Relevant Period, was not challenged in cross-

examination. We, therefore, exercise our broad discretion under s. 15 of the

SPPA to admit the Contested Records into evidence.

[75] Goss submits that the Contested Records are unreliable because of some

discrepancies between the Contested Records. Those discrepancies include a call

appearing on an account summary but not on an account invoice, a call between

Fakhry and Goss on a specific date that is reflected as lasting a different period

of time on their respective records, two calls from Fielding to Goss that overlap

in time. We conclude that the identified discrepancies do not make the entire

records unreliable. None of the issues highlighted by Goss involved a record that

was material to any of our findings.

D.

Confidentiality order

[76] During the hearing, confidentiality issues were raised with respect to certain

exhibits. We noted that exhibits 209 and 210 contained Fakhry’s medical

information and we asked the parties to consider whether those exhibits should

be confidential and whether there were other confidentiality concerns that had to

be addressed. The parties were instructed to identify any exhibits over which

they sought a confidentiality order, provide copies of any proposed redacted

exhibits and provide further written submissions in support of the confidentiality

order sought. Staff consented to the reductions sought.

[77] Kitmitto, the Candussos, Goss and Fielding sought the redaction of personal

information for themselves, their families and their clients in exhibits including

home addresses, personal phone numbers, bank account and trading account

numbers, bank branch addresses, social insurance numbers, driver’s license

numbers, dates of birth and signatures on the basis that this information

exposed them and their families and/or their clients to the risk of identity theft

and/or fraud. These respondents submitted that redacting this personal

information and using overlay text describing generally the redacted content

allows the reader to understand the nature of the redacted content, while

balancing the competing interests of the open court principle and the

respondents’s privacy interests.

[78] In addition to the confidentiality request relating to the two exhibits containing

Fakhry’s medical information, Fakhry also sought the redaction of social

insurance numbers, addresses, telephone numbers, and bank account and

trading account numbers of individuals who were not parties to this proceeding

in seven different exhibits. These documents were adduced as part of Fakhry’s

case and did not relate at all to the other respondents.

13

[79] In our view, the relief sought was appropriate and we issued our order on June

7, 2021.³⁵

[80] Under Rule 22(4) of the Rules and subsection 2(2) of the Tribunal Adjudicative

Records Act, 2019³⁶, a Panel may order an adjudicative record to be kept

confidential, if it determines that “intimate financial or personal matters or other

matters contained in the record are of such a nature that the public interest or

the interest of a person served by avoiding disclosure outweighs the desirability

of adhering to the principle that the record be available to the public.”³⁷

[81] With respect to the medical information, the Commission has previously

acknowledged that disclosure of medical information may infringe on privacy and

avoiding the disclosure of those medical specifics which are not relevant to the

proceeding outweighs the desirability that the medical information be made

available to the public.³⁸Therefore we ordered that exhibits 209 and 210 be

marked as confidential.

[82] We also find that the redactions requested were appropriate. The redactions

balanced the principle of transparency and risk of harm, avoiding the disclosure

of intimate financial and personal matters for both non-parties and certain of the

respondents.

[83] With respect to the redactions relating to non-parties, the redactions were

consistent with the approach set out in s. 3 of the Commission’s Practice

Guideline which requires parties to use reasonable efforts to limit the disclosure

of personal information. We also note that Staff had already redacted much of

this information beforehand, but some respondents identified instances where

redactions were missed.

[84] With respect to redactions relating to the personal information of Kitmitto,

Christopher, Claudio, Goss and Fielding, in this specific case we were persuaded

by the concerns raised with respect to the risk of identity theft and/or fraud and

we find that the objective of transparency is adequately served by having the

personal information redacted with overlay text to explain the nature of the

redaction. We note that Fakhry did not request redactions related to his own

personal information. The redactions requested by Fakhry related only to

personal information of non-respondents and Staff consented to the redactions

not having overlay text as the redactions were not relevant to the allegations.

[85] Therefore, we ordered that the exhibits and document IDs listed in Appendix A of

our June 7, 2021 Order be marked as confidential and only redacted versions are

available to the public.

E.

Breach of the witness exclusion order

[86] At the outset of the hearing we made an oral order excluding all witnesses,

including Staff’s witnesses, from attending the hearing. We also issued a caution

to all witnesses that, after testifying, they were not to speak with any other

witnesses about their testimony. Vannatta takes the position that Staff breached

the witness exclusion order and this prejudiced him.

35

(2021) 44 OSCB 4953

SO 2019, c 7, Sch 60 (TARA)

TARA, s 2(2)(b)

36

37

38

Debus (Re), 2020 ONSEC 20, (2020) 43 OSCB 6577 at para 13

14

[87] The purpose of a witness exclusion order is to preserve a witness’s testimony in

its original state and prevent a witness from tailoring their evidence.³⁹Such

orders ensure that the witness does not hear the evidence of other witnesses

before it is their turn to testify. This in turn ensures that a witness does not

change their story or is better able to anticipate, and thereby reduce the

effectiveness of, the cross-examination based on hearing what was discussed at

the hearing with other witnesses.⁴⁰

[88] Vannatta submits that Staff breached the witness exclusion order when

conducting a pre-hearing preparation of Aston Asset Management’s Compliance

Officer, Rnjak, on October 20, 2020. Prior to that date Staff’s lead investigator,

George, had testified and had been cross-examined by Vannatta. Vannatta

alleges that some of George’s testimony was communicated to Rnjak.

[89] At the hearing, Staff had initially taken the position that the handwriting at the

top of the transaction histories for Vannatta’s TFSA and RRSP accounts was

Vannatta’s. During George’s cross-examination, Vannatta raised the issue of

whose handwriting was on the transaction histories. George testified that she

acknowledged that the handwriting looked different from Vannatta’s handwriting

on other documents and that this could be clarified with Rnjak when he testifies

as it was possible that he may have printed Vannatta's name on the top of the

document.

[90] Subsequent to George’s cross-examination, on October 20, 2020, Staff held a

preparation meeting with Rnjak. After this meeting, on October 20, 2020, Staff

emailed Vannatta to inform him that Rnjak would testify that the handwriting on

Vannatta’s TFSA and RRSP transaction histories was Rnjak’s. This was a new

fact.

[91] Vannatta raises the issue that Rnjak’s anticipated evidence had changed to

include this new fact only after George’s testimony. Vannatta submits that the

notes of the October 20 meeting should be disclosed to get to the bottom of the

new information and to assess whether there had been a breach of the witness

exclusion order.

[92] We ordered disclosure of the October 20 notes pursuant to Staff’s continuing

disclosure obligation. In response to our order, Staff disclosed notes from both

an initial preparation session with Rnjak on September 30, 2020 and the October

20, 2020 preparation session.

[93] Upon reviewing the content of the preparation sessions’s notes, Vannatta argues

that Staff breached the witness exclusion order by:

a.

telling Rnjak that there were pre-clearance forms with no associated

approval email from Rnjak and it might come up in the hearing;

b.

asking Rnjak about the handwriting on Vannatta’s transaction histories

which appears different from other writing by Vannatta on other

documents; and

39

Sopinka, Lederman & Bryant, The Law of Evidence in Canada, 5th ed (Toronto: LexisNexis Canada,

2018) at §16.34; Fuerst, Sanderson & Firestone, Ontario Courtroom Procedure, 5th ed (Toronto:

LexisNexis Canada, 2020) at 850-851

40

Sopinka, Lederman & Bryant at §16.34

15

c.

with respect to the Slemko review (an internal review at Aston Asset

Management in 2016 lead by their then president, Slemko), advising

Rnjak of questions asked of George in cross-examination relating to gaps

in Rnjak’s record keeping and Vannatta’s defence being that Rnjak lost

documents that Vannatta had provided.

[94] Vannatta submits that these breaches were serious, the information provided to

Rnjak during the October 20, 2020 preparation meeting allowed Rnjak to tailor

his evidence and therefore we should give no weight to Rnjak’s evidence, draw

an adverse inference against Staff regarding their case against Vannatta and

dismiss the allegations against Vannatta.

[95] We find that Staff did not breach the witness exclusion order. While counsel are

prohibited from telling a witness what evidence has been given, they are

permitted to discuss documents and issues that have been covered in the

hearing to date. We conclude that Staff did not provide Rnjak with any of

George’s evidence.

[96] On the first alleged breach of the witness exclusion order relating to the approval

emails for the pre-clearance forms, Staff appears to have covered this issue with

Rnjak at both the September 30 and October 20 sessions. The notes from

September 30 state that Staff reviewed with Rnjak what he had said during his

compelled interview and informed Rnjak that he said “… he sent email [sic] every

single time but process later in his evidence says something different about

paper pre-clearance.”⁴¹In the October 20 preparation session Staff notes that

they told Rnjak “I want to make sure you’re aware there are docs where

preclearance form and no associated email and that might come up”.⁴²This

statement by Staff does not communicate any evidence given by George.

[97] With respect to the second alleged breach relating to whether the handwriting on

the Scotia transaction histories differed from other samples of Vannatta’s

handwriting, the October 20 preparation session notes clearly indicate that Staff

told Rnjak that Staff noticed the handwriting appeared to be different.

[98] The issue of the apparently different handwriting was part of Vannatta’s cross-

examination of George prior to the October 20 preparation session. George’s

acknowledged that the handwriting looked different and that this should be

clarified with Rnjak. She speculated that Rnjak might have written Vannatta’s

name on the one document.

[99] Staff did not share this speculation with Rnjak. They pointed out to him that the

handwriting, which was demonstrably different, appeared to be different. Rnjak

then volunteered to Staff that he wrote Vannatta’s name on the one document to

remember from whom he’d received it. As no evidence was shared by Staff with

Rnjak, we find no breach of the witness exclusion order in this instance.

[100] With respect to the third alleged breach, the October 20 preparation notes show

that Staff shared with Rnjak information about questions from George’s cross-

examination so that Rnjak knew what to expect on his cross-examination. The

questions related to gaps in Rnjak’s record keeping and Vannatta’s defence being

that Rnjak lost documents Vannatta had provided. In the October 20 meeting

41

Exhibit 96, Amaya Witness Notes, Sept 30 at 2

Exhibit 97, Proofing Session with Sasha Rnjak on Oct 20, 2020 (Rnjak Oct 20 Witness Prep

42

Session) at 3

16

Staff tells Rnjak he is “[p]robably going to get questions designed to say your

record keeping had gaps or was vague”⁴³and that “…its likely that [V]annattas

[sic] defense is that he gave you docs and lost them, might be suggested, [sic]

might be suggested procedures confusing or you didn’t enforce properly”⁴⁴.

[101] In R v Singh⁴⁵the Court agreed that sharing with an excluded witness a question

that was asked in Court was a breach of the witness exclusion order, albeit a less

significant breach than disclosing the answer given in response.

[102] Staff submits that we should distinguish R v Singh from the present case

because the witness exclusion order in that case expressly stated that questions

asked were not to be shared with excluded witnesses.

[103] We agree with Staff that R v Singh may be distinguished on that basis. More

fundamentally, however, the purpose of a witness exclusion order is to prevent

testimony from the hearing being shared with a pending witness so that the

witness has an opportunity to alter or tailor their evidence. In none of the three

instances cited by Vannatta did Staff share details of George’s testimony.

Therefore, we do not agree that the witness exclusion order has been breached.

F.

Other evidentiary issues

Adverse inferences

(a)

Adverse inference against Vannatta

[104] Staff asks that we draw an adverse inference against Vannatta for his failure to

testify. Staff takes the position that it is established law that the Panel may draw

an adverse inference against a respondent who fails to testify, as it amounts to

an implied admission that their evidence would not have been helpful to their

case. Staff submits that the threshold for a panel to draw such an inference is

low and that Staff need only establish a prima facie case against the respondent

who did not testify.

[105] In prior cases, the Commission has drawn an adverse inference in respect of a

respondent who failed to testify.⁴⁶

[106] We find that the combined evidence regarding the allegations that Vannatta

tipped his relatives about the Amaya MNPI, traded Amaya shares while in

possession of the MNPI, concealed his trading from Aston Asset Management

Compliance and misled Staff is sufficient for us to draw conclusions without

drawing an adverse inference against him for not testifying. For the reasons

more particularly set out in our analysis of the allegations against Vannatta, we

therefore decline to draw such an inference.

43

Rnjak Oct 20 Witness Prep Session at 7

2018 ONSC 5230 at paras 34-37

Sextant Capital Management Inc., 2011 ONSEC 15, (2011) 34 OSCB 5829 at paras 245-246;

44

45

46

Hutchinson at paras 64-65, 215, 268, and 388; Money Gate Mortgage Investment Corporation (Re),

2019 ONSEC 40, (2020) 43 OSCB 35 at paras 71 and 77; Mega–C Power Corporation, 2010 ONSEC

19, (2010) 33 OSCB 8290 at paras 275-276

17

(b)

Adverse inference against Staff

[107] Certain of the respondents submit that we should draw an adverse inference

against Staff.

[108] Vannatta submits that an adverse inference (among other remedies) ought to be

drawn against Staff’s case with respect to Vannatta as a result of Staff’s breach

of the witness exclusion order. We dealt with the witness exclusion order

argument in Section III.E. above.

[109] Goss and Kitmitto take the position that adverse inferences should be drawn

because Staff did not call numerous third parties to testify on various issues.

[110] Goss submits that an adverse inference should be drawn against Staff, as Staff

did not call FH, Goss’s client, as a witness. Goss takes the position that Kitmitto

did not pass MNPI on to Goss and that it was his client FH that came across the

information (which was not MNPI) and passed it on to Goss. In addition, Goss

asserts that Staff could have called other individuals that they interviewed during

the investigation to testify, and the fact that Staff did not call them reflects that

their evidence would not have been supportive of Staff’s case.

[111] Kitmitto submits that an adverse inference should be drawn against Staff for not

calling certain Aston Asset Management employees including Ben Cheng

(President of Ashton Financial and the Co-Chief Investment Officer of Aston

Financial and Aston Asset Management), AH, SR or LQ to testify. Specifically,

Staff did not call Cheng as a witness, however Staff does seek to rely on Cheng’s

settlement agreement with respect to certain facts. Kitmitto submits that the fact

that Staff is seeking to use the settlement agreement without calling the

individual who entered into it shows that Staff was afraid of what would come

with calling this witness. Further, Kitmitto submits that this supports the

inference that calling any of the other Aston Asset Management employees who

possessed MNPI, and especially Cheng, would have resulted in evidence that was

unfavourable to Staff.

[112] It is settled law that a respondent is not entitled to dictate the nature and scope

of an investigation.⁴⁷Staff has prosecutorial discretion to put forward the case

they deem appropriate. It is the panel’s responsibility to determine if the

evidence tendered by Staff establishes the allegations against the respondents.

We draw no adverse inference against Staff for their decisions about what

witnesses to call in this proceeding.

[113] With respect to the Cheng settlement agreement, we recognize that a settlement

is a negotiated document, not based on evidence, and we put no weight on it.

Similar fact and character evidence

[114] Kitmitto and Fielding take the position that Staff is improperly relying on similar

fact evidence or evidence of disposition or character.

[115] There is a general rule excluding admission of evidence of disposition or

character. Similar fact evidence is an exception to that general exclusionary rule.

With respect to similar fact evidence, the onus is on the party seeking to rely on

47

Azeff (Re), 2012 ONSEC 16, (2012) 35 OSCB 5159 at para 284

18

it to establish on a balance of probabilities that the probative value of the

evidence on a particular issue outweighs its potential prejudice.⁴⁸

[116] Kitmitto submits that Staff has relied on the following similar fact and bad

character evidence:

a.

b.

c.

d.

e.

f.

Kitmitto’s email to Christopher regarding Blackbook Technologies;

alleged communications between Kitmitto and Fielding about Amaya;

the noise complaint at Kitmitto’s and Christopher’s apartment;

the July 4 Patient Home Monitoring email chain with Goss;

the alleged “culture of non-compliance” at Aston Financial; and

Kitmitto’s alleged “cavalier approach to confidentiality and compliance”.

[117] In addition, Kitmitto submits that he never opened the door to an attack on his

character by putting it in issue. He simply denied the allegations.

[118] Fielding submits that Staff is legally wrong to ask the Panel to consider the acts

of all respondents collectively in deciding whether Staff met the burden of proof

against him. Fielding also emphasizes that it is unclear what portion of the

evidence Staff is proposing to use against Fielding and how it meets the test in R

v Handy. In the absence of an articulated position by Staff, Fielding asserts that

the Panel should not accept Staff’s invitation to take a “kitchen sink” approach to

the evidence and to reason backwards that something happened.

[119] Staff’s position is that the evidence in question is not similar fact or character

evidence. The evidence in question is, Staff argues, either part of the pleadings

in this proceeding or part of the circumstantial evidence of their case against the

respondents.

[120] In the alternative, Staff argues that, should the Panel decide that the evidence in

question is similar fact and/or character evidence, it should be admitted because

its probative value outweighs its potential prejudicial effect.

[121] We address each of Kitmitto’s and Fielding’s submissions in turn.

(a)

Kitmitto

i. Kitmitto email to Christopher about Blackbook

Technologies

[122] Kitmitto’s email to Christopher regarding Blackbook Technologies contained no

confidential or inside information and we give it no weight.

ii.

Kitmitto and Christopher noise complaint

[123] We also give no weight to the evidence about the noise complaint regarding

Kitmitto’s and Christopher’s condominium. In our view the potential prejudice of

the noise complaint evidence outweighs any probative value it may have.

48

R v Handy 2002 SCC 56 at para 55

19

iii.

Kitmitto’s July 4 Patient Home Monitoring email with

Goss

[124] As regards the July 4 email chain with Goss about Patient Home Monitoring,

Kitmitto did not add Goss to the email chain and, therefore, it is irrelevant and

we give it no weight in our analysis about the allegations against Kitmitto.

iv.

Alleged communications between Kitmitto and

Fielding about Amaya

[125] With respect to the alleged communications between Kitmitto and Fielding we

consider this to be neither similar fact nor character evidence. We address this

new allegation by Staff in our analysis of the rule in Browne v Dunn below.

v.

Alleged “culture of non-compliance” at Aston Financial

[126] Regarding Staff’s evidence about the alleged weak culture of compliance in the

offices of the Aston Financial companies, we do not consider this to be similar

fact evidence. Rather, in our view, it is part of the circumstantial evidence that

we must consider and weigh in this case. We make specific reference in our

analysis to this evidence where it has factored into our analysis and decisions.

vi.

Kitmitto’s alleged “cavalier approach to confidentiality

and compliance”

[127] As regards Kitmitto’s alleged “cavalier approach to confidentiality and

compliance”, we also do not consider this similar fact or bad character evidence.

We consider such evidence part of the fabric of circumstantial evidence we need

to consider and weigh in arriving at our decision and include reference to that

evidence in our analysis where appropriate.

vii.

Whether Kitmitto opened the door to a character

attack

[128] Given that we have determined that the evidence by Kitmitto is not similar fact

or character evidence, we do not need to address whether Kitmitto opened the

door to a character attack.

(b)

Fielding

[129] Fielding argues that the Commission’s decisions in Hutchinson, Azeff Merits and

Agueci Merits support his position that we should not, when considering the

allegations against him, consider the trading in Amaya during the Relevant

Period by the other respondents.

[130] We disagree. In each of Hutchinson, Azeff Merits and Agueci Merits, the panel

was dealing with alleged insider tipping and trading in a number of different

securities. Staff, in those cases, argued that the panel should consider the

alleged activity with respect to all of the transactions when determining if a

respondent had engaged in the alleged tipping or trading.

[131] The panels in each of those cases declined to do so, because there were

sufficient dissimilarities between transactions that the prejudicial effect would

outweigh the probative value.⁴⁹In Hutchinson, to take just one example, three of

the respondents were not alleged to have traded in the same subset of

49

Hutchinson at paras 152-154; Azeff Merits at paras 8-10; Agueci (Re), 2015 ONSEC 2, (2015) 38

OSCB 1573 (Agueci Merits) at paras 71-75

20

transactions as any other respondent, and the timing of two of the respondents’s

impugned trading was inconsistent.⁵⁰

[132] This is not the case here. In the circumstances of this case, the pattern of

trading by each of the respondents in Amaya shares during the Relevant Period

supports an inference that any one of them may have engaged in insider trading

and we find this more probative than prejudicial.

[133] Regarding Fielding’s submission that it is not clear what portion of the evidence

Staff is proposing to use in its case against Fielding we find no lack of clarity on

this point. Staff’s position is that the trading in Amaya by this group of

individuals, including Fielding, during the Relevant Period was more likely than

not insider trading as a result of insider tips. All of the respondents had a

connection to Kitmitto, who possessed MNPI about Amaya. The respondents’s

trading in Amaya, the culture at Aston Financial and the pattern of

communications amongst the respondents, including Fielding and his advisor

Goss, are, Staff submits, part of a mosaic of circumstantial evidence. Staff

submits that circumstantial evidence supports a conclusion it was more likely

than not that Kitmitto tipped Goss about the Amaya MNPI, and Goss then shared

it with Fielding, who in turn bought shares of Amaya.

[134] While we find no lack of clarity in what evidence in Staff’s case applies to

Fielding, for the reasons set out in our analysis of the allegations against Fielding

in Section IV.B.8, we do not find such evidence sufficient to draw the inferences

that Goss tipped Fielding about the Amaya MNPI and that Fielding bought Amaya

shares while he had that information.

Breach of the rule in Browne v Dunn

[135] The rule in Browne v Dunn⁵¹requires that if a party is going to rely on evidence

that contradicts a witness, then, in fairness, that evidence needs to be put to the

witness during cross-examination to allow that witness the opportunity to explain

the contradiction.

[136] Kitmitto submits that Staff did not ask Kitmitto about certain aspects or theories

of its case during Kitmitto’s cross-examination, specifically, that:

a.

Kitmitto provided information about his planned Amaya meeting to Goss

prior to April 29, 2014;

b.

the April 29 meeting of Aston Asset Management and Amaya management

ended before 1:54 pm and whether the President of Canaccord, the dealer

acting for Amaya, sent his 1:51 pm email to Kitmitto while they were still

in the meeting;

c.

Kitmitto tipped Goss or Fielding about the May 8 delay of the May 12

target announcement date for the Acquisition. Kitmitto testified that he

did not tell anyone other than Cheng and certain other Aston Asset

Management employees about the delay of the initial target date for the

announcement of the transaction;

d.

Kitmitto tipped Fielding by keeping him updated on the progress of the

Acquisition;

50

51

Hutchinson at para 153

1893 CanLII 65, (1893) 6 R 67 (UK HL)

21

e.

f.

Kitmitto updated Goss about the Acquisition on June 4 and that Goss then

passed that information along to Goss’s client AE; and

the sequence of calls involving Kitmitto, Goss and Fielding on June 5

indicate that Kitmitto must have passed information about the Acquisition

to Goss despite evidence that these individuals were working on other

potential investment opportunities at the same time.

[137] At the hearing, we asked whether Kitmitto was alleging a breach of the Browne v

Dunn rule. Kitmitto explained that this was more of a general fairness point

about the weight that could be attributed to the evidence and whether Kitmitto

had a fair opportunity to respond to Staff’s theory.

[138] Fielding submits that Staff breached the Browne v Dunn rule because Staff’s

theory that Goss transferred MNPI about Amaya to Fielding either in person at

the AHF offices on the afternoon of April 29, 2014, or over the phone at 1:54

p.m. or 1:56 p.m. was never put to Fielding during cross-examination. Fielding

also points out that the July 22, 2014 email which was said to contain

confidential information was never put to Kitmitto or to someone from

Canaccord, the dealer representing Amaya regarding the Acquisition, where the

email originated.

[139] Staff submits that there is no issue of fairness as Kitmitto and Fielding were

aware of the allegations against them and they denied those allegations. In

addition, Staff submits there is no breach of the rule in Browne v Dunn when

Staff does not put every aspect of Staff’s theory to a respondent.⁵²

[140] We find that Staff did not breach the rule in Browne v Dunn.

[141] Given that Kitmitto was not alleging a breach of the rule in Browne v Dunn, there

is no need for us to address all of the points in paragraph 136 above or to

conduct a full analysis of the principle established by Browne v Dunn for those

points. On the issue of whether Kitmitto had a fair opportunity to address Staff’s

theory of the case against him, subject to the exception we address in paragraph

142, we agree with Staff that Kitmitto had notice of the allegations against him

and he denied those allegations. Therefore, there was no unfairness to Kitmitto.

[142] However, while not a breach of Browne v Dunn, we address here Staff’s new

allegation raised at the hearing that Kitmitto updated Fielding about the

announcement delays. The Statement of Allegations states that Fielding received

updates about the Acquisition “from Goss and others”. This vague language is

insufficient, in our view, to support the conclusion that Staff intended this as a

reference to Kitmitto. We, therefore, decline to consider Staff’s new allegation

raised at the hearing about communications relating to updates about the

Acquisition from Kitmitto to Fielding because it was not clearly articulated in the

Statement of Allegations.

[143] With respect to Fielding, we accept his evidence that he was not in the Aston

Financial office on April 29, 2014 and that Goss had not tipped him about the

Acquisition. Therefore, there is no need to address whether Staff breached the

rule in Browne v Dunn by not putting these aspects of their case to Fielding

during cross-examination. We give no weight in our analysis to the July 22, 2014

email as this was outside of the Relevant Period.

52

R v McCarthy, 2015 NWTSC 18, [2015] N.W.T.J. No. 24 at paras 34-41

22

IV.

ISSUES AND ANALYSIS

[144] We turn now to our analysis of Staff’s allegations against the respondents. We

begin by reviewing issues potentially relevant to all, or to specific groups of

respondents. The issues we need to decide specific to each Respondent are set

out in their respective sections below.

A.

General issues

[145] We address in turn below the following issues that are potentially relevant to all,

or to specific groups of respondents:

a.

b.

c.

d.

e.

f.

circumstantial evidence;

the Act’s prohibition against tipping;

the Act’s prohibition against insider trading;

the definition of “material fact”;

special relationships;

credibility; and

g.

“conduct contrary to the public interest”.

Circumstantial evidence

[146] In many cases the elements of insider trading and tipping must be proven by

circumstantial evidence rather than direct evidence, because “the only persons

who have direct knowledge of relevant communications are the wrongdoers

themselves.”⁵³Circumstantial evidence can “fill an evidentiary gap” created by

the absence of direct evidence.⁵⁴

[147] As explained in Hutchinson, a panel may draw inferences from circumstantial

evidence but those inferences “must be reasonably and logically drawn from a

fact or group of facts established by the evidence, should be drawn from the

combined weight of the evidence and cannot be drawn from speculated facts.”⁵⁵

[148] Also as explained in Hutchinson, for an inference to be drawn it does not need to

be the only possible, the most obvious or the most easily drawn inference. Staff

will not have met its burden of proof “if the circumstantial evidence equally

supports two opposing inferences, one in favour of Staff and one in favour of a

respondent.”⁵⁶

[149] Insider trading and tipping cases are “established by a mosaic of circumstantial

evidence which, when considered as a whole, leads to the inference that it is

more likely than not that the trader, tipper or tippee possessed or communicated

material non-public information.”⁵⁷This requires the panel to “assess each piece

of evidence on its own, to determine whether the evidence deserves weight,

53

Hutchinson at para 60, citing Azeff Merits at para 43

Hutchinson at para 60, citing Finkelstein v Ontario Securities Commission, 2016 ONSC 7508 (Div Ct)

54

(FinkelsteinDiv) at para 19

55

Hutchinson at para 61

Hutchinson at para 62

Azeff Merits at para 47

56

57

23

whether it supports a finding of fact, and if so, whether that fact alone or

together with other facts then supports a suggested inference”.⁵⁸

The Act’s prohibition against tipping

[150] Staff alleges that all of the respondents except Claudio and Fielding engaged in

tipping contrary to s. 76(2) of the Act.

[151] Subsection 76(2) of the Act prohibits a person in a special relationship with an

issuer from informing another person, other than in the necessary course of

business, of a material fact or material change with respect to the issuer that has

not been generally disclosed.

[152] The respondents alleged to have engaged in tipping do not argue that the

alleged tip was in the ordinary course of business.

[153] Therefore, in order to establish each of its tipping allegations, Staff must prove

all of the following:

a.

b.

c.

the alleged tipper informed the other party of a material fact or change

about Amaya;

at the time the material information was communicated, the material fact

or change had not been generally disclosed; and

the tipper was in a special relationship with Amaya.

The Act’s prohibition against insider trading

[154] Staff alleges that all of the respondents except Kitmitto engaged in prohibited

insider trading.

[155] The Act’s prohibition against insider trading aligns with two of the four

fundamental purposes of the Act; namely, to provide protection to investors from

unfair, improper or fraudulent practices, and to foster fair, efficient and

competitive capital markets and confidence in the capital markets. As set out in

Hutchinson, the prohibition exists for three principal reasons:

a.

fairness requires that all investors have equal access to information about

an issuer that would likely affect the market value of the issuer’s

securities;

b.

c.

insider trading may undermine investor confidence in the capital markets;

and

capital markets operate efficiently on the basis of timely and full

disclosure of all material information.⁵⁹

[156] Subsection 76(1) of the Act prohibits a person in a special relationship with an

issuer from purchasing or selling securities of the issuer with knowledge of a

material fact or material change that has not been generally disclosed.

[157] In order to establish its allegation that a respondent engaged in prohibited

insider trading, Staff must therefore prove each of the following elements:

a.

the respondent purchased or sold securities of the issuer;

58

59

Hutchinson at para 63

Hutchinson at para 97; Act, s 1.1

24

b.

at the time of the purchase or sale, the respondent had knowledge of a

material fact or material change about the issuer;

c.

the material fact or material change had not been generally disclosed; and

d.

at the time of the purchase or sale, the respondent was in a special

relationship with the issuer.

[158] With respect to the second element, proof of knowledge of the information is

sufficient. Staff does not have to prove that a respondent made use of the

information when trading shares.⁶⁰

[159] Knowledge may be inferred based on circumstantial evidence of the person’s

ability and opportunity to acquire the information and the characteristics of the

person’s trading.

[160] Prior Commission decisions have set out a non-exhaustive list of characteristics

that may suggest knowledge of material facts:

a.

b.

c.

timely trades;

unusual trading patterns;

unusually risky trades, including because they represent a significant

percentage of the portfolio;

d.

e.

highly profitable trades; or

a first-time purchase of the security.⁶¹

Definition of a “material fact”

[161] None of Staff’s allegations in this case relates to a material change, as opposed

to a material fact. For convenience, the balance of these reasons will omit any

reference to material change.

[162] To establish a contravention of the insider tipping prohibition, Staff must prove

that the tipper communicated a “material fact”. Similarly, to establish a

contravention of the insider trading prohibition, Staff must establish that a

person traded with knowledge of a “material fact”.

[163] “Material fact” is defined, in s. 1(1) of the Act, as a fact that significantly affects

or would reasonably be expected to have a significant effect on, the market price

or value of such securities.

[164] Materiality is to be determined objectively, accounting for all the relevant

circumstances. Several facts may be material when considered together, even

when one or more of the facts do not appear to be material when considered

alone.⁶²

Special relationship in general

[165] The prohibitions against insider trading and tipping both require the

determination of whether a person was “in a special relationship” with an issuer.

The definition of special relationship in s. 76(5) of the Act specifies the various

60

Hutchinson at para 101, citing Donald at para 261

Hutchinson at para 121; Suman (Re), 2012 ONSEC 7, (2012) 35 OSCB 809 at para 307; Azeff

61

Merits at para 45

62

Hutchinson at para 119

25

relationships that would qualify. The relationships relevant to this case are those

set out in s. 76(5)(b) for Kitmitto and s. 76(5)(e) for the other respondents.

[166] A person is in a special relationship within the meaning of s. 76(5)(b) if the

person is engaging, considering or evaluating engaging, or proposes to engage in

any business or professional activity with or on behalf of an issuer.

[167] Under s. 76(5)(e), a person is in a special relationship if the person learns about

a material fact regarding an issuer from another person in a special relationship

and knows or ought reasonably to know that the other person is in a special

relationship. Subsection 76(5)(e) provides that successive tippees may also be in

a special relationship and it does not require proof that the alleged tippee was

aware of the identity of the initial tipper.⁶³

[168] The special relationship definition requires that Staff establish both an

“information connection” (i.e. that the tippee learned of a material fact from a

person in a special relationship) and a “person connection” (i.e. that the tippee

knew or ought reasonably to have known that the tipper was in a special

relationship).⁶⁴

[169] With respect to the person connection, and the question of whether a tippee

ought reasonably to have known that the tipper was in a special relationship, the

Commission has identified several factors to be considered:

a.

b.

c.

d.

the relationship between the tipper and the tippee;

the professional qualifications of the tipper and of the tippee;

the specificity of the MNPI that is conveyed;

the time elapsed between the communication of the MNPI and the trading

by the tippee;

e.

intermediate steps taken by the tippee before trading, to verify the

information received;

f.

whether the tippee has traded the issuer’s securities before; and

g.

whether the tippee’s trade was significant in the context of the tippee’s

portfolio.⁶⁵

[170] Depending on the factual context and the actors involved, some factors may be

more persuasive than others and the weight to be accorded to each factor will

also vary. What is important is that the overall weight given to the aggregate of

all the factual criteria compels the decision maker to conclude that it is more

probable than not that the tippee ought to reasonably have known that the MNPI

received originated from a knowledgeable person, i.e. one who was in a special

relationship.⁶⁶

[171] We address whether each of the respondents, for which such a determination is

necessary, was in a special relationship in our analysis of each respondent.

63

Finkelstein v Ontario Securities Commission, 2018 ONCA 61 (FinkelsteinCA) at para 49

FinkelsteinCA at paras 44-49

FinkelsteinCA at para 48

Azeff Merits at para 65

64

65

66

26

Credibility

[172] It is a well-established principle that credibility is best tested by the consistency

of the evidence with the preponderance of probabilities presented in the case.⁶⁷

[173] It is not necessary for us to come to an overarching decision about any one

witness’s credibility. It is possible to find a witness credible in some respects but

not in others. We address the credibility of the respondents in their respective

sections of our analysis.

“Conduct contrary to the public interest”

[174] The phrase “conduct contrary to the public interest” does not appear in the Act.

The concept arises from the opening words of s. 127 of the Act, which gives the

Commission authority to make “orders if in its opinion it is in the public interest

to make the….orders”. The Commission has, on occasion, found it in the public

interest to issue an order in the public interest even in the absence of finding a

contravention of Ontario securities law.⁶⁸

[175] In the Statement of Allegations, Staff makes two types of public interest

allegations. The first is when there is an alleged breach of the Act and it is also

alleged that this same conduct is not in the public interest. The second is when

there is a stand-alone allegation that conduct is not in the public interest absent

a breach of Ontario securities law.

[176] With respect to the first type of public interest allegation, in our view it is

necessary for the Statement of Allegations to establish some basis for why the

alleged conduct relating to a breach of the Act also justifies a separate finding

that the conduct engages an animating principle of the Act and / or is abusive at

the same time.⁶⁹In the absence of any such basis, where we find that the

alleged conduct contravened Ontario securities law, we need not go further to

consider the alleged public interest allegation.⁷⁰

[177] For the reasons set out in our analysis below we find that Staff has established

their allegations that:

a.

b.

c.

each of Kitmitto, Vannatta, Goss and Fakhry tipped others with the Amaya

MNPI contrary to s. 76(2);

each of Vannatta, Christopher, Goss and Fakhry traded Amaya while in

possession of the Amaya MNPI contrary to s. 76(1); and

Vannatta mislead Staff contrary s. 122(1)(a).

However, in the absence of any basis in the Statement of Allegations as to how

this conduct also engages an animating principle of the Act and / or is abusive,

we find that Staff has not established that this conduct, in addition to being a

breach of Ontario securities law also supports a public interest allegation.

[178] For the reasons set out in our analysis below we find that Staff did not establish

their allegations that:

67

Springer v Aird & Berlis LLP, (2009) 96 OR (3d) 325 at para 14

Donald at paras 323-325; Agueci Merits at paras 174-175 and 715-717 ; Rowan (Re), 2008 ONSEC

68

12, (2008) 31 OSCB 6515 (Rowan) at paras 158-160

69

See for example Donald at paras 323 and 324 where the panel justified separate findings when the

conduct engages an animating principle of the Act and / or is abusive.

70

MOAG Copper Gold Resources Inc (Re), 2020 ONSEC 3, (2020) 43 OSCB 907 (MOAG) at para 57

27

a.

Fielding traded Amaya shares while in possession of the Amaya MNPI

contrary to s. 76(1) (because we found that Goss did not tip Fielding);

b.

c.

d.

Christopher tipped Claudio with the Amaya MNPI contrary to s. 76(2);

Christopher misled Staff contrary to s. 122(1)(a); or

Claudio traded Amaya shares while in possession of the Amaya MNPI

contrary to s. 76(1) (because we found that Christopher did not tip

Claudio).

Staff has also alleged that this conduct engages an animating principle of the Act

and / or is abusive.

[179] Similar to our finding above, the Statement of Allegations is also deficient with

respect to this group of alleged conduct as it does not lay out any basis in

support of the public interest allegations. Therefore, we find that Staff has not

established these public interest allegations.

[180] As regards the second type of public interest allegation, stand-alone public

interest allegations absent any breach of Ontario securities law, Staff alleges that

Vannatta’s concealing his trading in Amaya shares from Aston Asset

Management Compliance, and Goss’s and Fakhry’s recommending Amaya to

their clients while in a special relationship with Amaya and in possession of

Amaya MNPI is conduct that engages an animating principle of the Act and / or is

abusive. We address these specific allegations in the sections below applicable to

each of these respondents.

B.

Analysis specific to each Respondent

Kitmitto

(a)

Did Kitmitto receive Amaya MNPI and, if so, on what

date?

[181] Staff submits that Kitmitto received MNPI about Amaya beginning on April 25,

2014. We do not agree. While the information Kitmitto received on April 25 and

April 28, 2014 was confidential, it did not, in our view, meet the definition of a

“material fact”.

[182] However, we find that Kitmitto did receive MNPI about Amaya at the April 29,

2014 meeting with Amaya management.

i.

Period prior to April 29, 2014 meeting

[183] On April 25, 2014, Kitmitto was told by SA of Canaccord, who was representing

Amaya, that Kitmitto could meet Amaya management and be brought over the

wall about a potential transaction if he signed a non-disclosure agreement.

Kitmitto agreed that afternoon to meet with Amaya management on April 29,

2014. The following Monday, April 28, 2014, Kitmitto received the non-disclosure

agreement, which referred to Amaya’s “consideration of a strategic transaction”.

At this point the only information Kitmitto had was that Amaya was considering a

strategic transaction. The non-disclosure agreement was marked “privileged and

confidential” and Kitmitto agreed, on cross-examination, that the information

about Amaya’s potential transaction was confidential.

[184] Information that there was a “potential transaction” (April 25) or that Amaya

was “considering a strategic transaction” (April 28), in our view, could not

reasonably be expected to have a material effect on Amaya’s share price

28

because there was still uncertainty and a lack of specificity about the potential

transaction. This is also consistent with the approach taken by the British

Columbia Securities Commission in Jin⁷¹, where it was found that a non-

disclosure agreement did not constitute material non-public information.

ii.

Period after the April 29, 2014 meeting

[185] At the meeting with Amaya management at 1 pm on April 29, 2014, Kitmitto

learned that Amaya had negotiated the Acquisition of PokerStars. Kitmitto also

learned the details of the Acquisition, including through a slide deck he received

at the meeting. Those details included:

a.

b.

the US $4.3 billion purchase price with a breakdown of funding sources;

Amaya would fund the Acquisition with $100 million in cash, $2.9 billion in

debt financing, $800 million through offering convertible preferred shares,

and $600 million through an equity offering;

c.

d.

e.

f.

the involvement of Deutsche Bank, Barclays, Macquarie, Blackstone and

GSO Capital Partners LP;

US $150 million of indicated demand for the equity offering had been

made at $20 per share;

New Jersey had given a “green light” for PokerStars to operate there after

the transaction; and

a timeline, which indicated an anticipated announcement date of May 12,

2014.

[186] Looking objectively at the relevant facts above, the information Kitmitto received

at the April 29, 2014 meeting about the Acquisition was material. Amaya’s

purchase of PokerStars had been negotiated and included the purchase price,

financing details and a target announcement date. PokerStars was seven or eight

times larger than Amaya. The $20 equity financing price was triple Amaya’s

trading high of $6.87 on that day. Knowledge of the Acquisition could, we find,

have been reasonably expected to have a material effect on Amaya’s share price.

[187] Therefore, we conclude that the Acquisition was a material fact. While some of

these facts were not 100% certain at the time and the transaction was

contingent on certain steps and financing being put in place and finalized, we

note that the Commission has in the past acknowledged that 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.⁷²Considering the players involved and the magnitude of the

transaction, in our view there was a considerable indicia of interest in this

transaction at the time and the information about the potential Acquisition was

material.

[188] Staff alleges that the material information about the Acquisition, that Kitmitto

learned on April 29, had not been generally disclosed. This was not disputed by

any of the respondents. There was no evidence before us to suggest otherwise.

71

Jin (Re), 2014 BCSECCOM 194 (Jin) at paras 49-52

Agueci Merits at para 112. See also Donald at para 205, citing the Divisional Court in Donnini

72

(2003), 177 OAC 59 (Div Ct) at para 17 that recognized that material facts can include speculative

or contingent events.

29

Therefore, we find that the material information about Amaya that Kitmitto

learned on April 29 had not been generally disclosed and was, therefore, MNPI.

(b)

Was Kitmitto in a special relationship with Amaya?

[189] Kitmitto was an analyst covering the gaming sector for Aston Asset Management.

He was responsible for assessing investment opportunities for the Aston Asset

Management funds and making recommendations about investments to the fund

managers.

[190] The purpose of the April 29, 2014 meeting with Amaya management and

representatives of Canaccord, the dealer marketing the Acquisition for Amaya,

was to present Aston Asset Management with the opportunity to participate in

financing the Acquisition.

[191] Once Kitmitto learned about the Acquisition at that meeting, Kitmitto was

considering, on behalf of Aston Asset Management, whether to engage in

business with Amaya. This meeting took place starting at 1:00 pm however the

end time is not clear. In any event, we find that as of April 29, 2014 when the

meeting ended Kitmitto was in a special relationship with Amaya under s.

76(5)(b) of the Act.

(c)

Conclusion regarding whether and when Kitmitto

received MNPI and if he was in a special relationship

at that time

[192] Therefore, as of April 29, 2014 once the 1:00 pm meeting with Canaccord ended,

Kitmitto was in possession of MNPI while in a special relationship with Amaya.

We must now determine whether Kitmitto tipped others with this MNPI about the

potential Acquisition.

[193] We address whether Kitmitto tipped Vannatta, Christopher and Goss in the

sections about each of those other respondents.

Vannatta

(a)

Did Kitmitto tip Vannatta with the Amaya MNPI and

did Vannatta trade Amaya shares while in possession

of that information?

[194] Vannatta bought shares of Amaya on April 29, 2014 at 12:23 pm, prior to

Kitmitto’s 1:00 pm meeting with Amaya management, and on May 6, and May

14, 2014. Given our finding that Kitmitto did not have Amaya MNPI until his

meeting on April 29, 2014, we find that Vannatta’s April 29, 2014 trade was not

insider trading and did not breach s. 76(1) of the Act. Therefore, we have not

included Vannatta’s April 29^thtrading in our insider trading analysis.

[195] We find that Staff has established that it is more likely than not that Kitmitto

tipped Vannatta about the Amaya MNPI and that Vannatta bought Amaya shares

on May 6 and 14, 2014 while he had that information from Kitmitto.

[196] Kitmitto testified that he did not tip Vannatta about the Amaya MNPI. We do not

accept this evidence. We find that Kitmitto’s cavalier attitude towards the

handling of confidential information during the Relevant Period, which we

describe below, combined with the other circumstantial evidence about Vannatta

described in this section, establishes on a balance of probabilities that Kitmitto

told Vannatta about the Amaya MNPI.

30

[197] Kitmitto participated in a Bloomberg persistent chat⁷³with Vannatta and SA, the

dealer employee from Canaccord, who brought Kitmitto into the Amaya

Acquisition discussions. It was through this persistent chat that Kitmitto was

invited by SA to participate in a meeting with Amaya management, advised he

could sign a non-disclosure agreement and be brought over the wall on a

transaction, confirmed the date and time of the meeting with Amaya

management, and confirmed the signed non-disclosure agreement would be

delivered to Amaya at the meeting on April 29, 2014.

[198] Kitmitto agreed that this information was confidential. Yet all of it was shared in

the Bloomberg discussion group that included his office mate and friend,

Vannatta, with no apparent attempt by Kitmitto to ensure the information was

not visible or available to Vannatta.

[199] Vannatta was more likely than not aware of Kitmitto’s and SA’s discussion on the

persistent chat about Kitmitto potentially going over the wall regarding Amaya

because shortly after Kitmitto wrote in the chat that he would take the meeting

(April 25, 2014 at 1:37 pm), Vannatta responded (April 25, 2014 at 1:42 pm) to

an earlier Kitmitto post about Vannatta receiving a golf invitation.

[200] On April 25 at 1:36 pm, Kitmitto knew he could sign a non-disclosure agreement

with Amaya to be brought over the wall and he confirmed with SA that he would

take the meeting with Amaya management on April 29. At 1:47 pm on April 29,

2014, Kitmitto sent an email to one of Aston Asset Management’s equity traders

instructing the trader to buy 200,000 Amaya shares for two of the Aston Asset

Management funds. Kitmitto’s evidence was that it was Cheng who decided what

the funds bought and sold, it was an immaterial trade, the trade was likely based

on instructions Kitmitto had received the previous day from Cheng, and that it

was possibly to replace an earlier sale of 200,000 Amaya shares from the funds.

[201] Staff does not allege that this trade was an illegal insider trade. We mention it

here only as it relates to our assessment of the allegations that it is more likely

than not that Kitmitto shared MNPI about Amaya with his colleague and friend,

Vannatta.

[202] Even if we were to believe, which we do not, that Kitmitto would wait until the

middle of the following day to execute trading instructions from Cheng, the fact

that Kitmitto, once he had received confidential information about Amaya, would

instruct the Aston Asset Management funds to buy Amaya shares, supports in

our view an inference that Kitmitto’s attitude towards compliance lacked rigour.

Combined with the other circumstantial evidence discussed below relating to

Vannatta, Christopher and Goss, Kitmitto’s instructing the funds to buy Amaya

after he had received confidential information supports the further inference that

it is more likely than not that Kitmitto tipped these respondents.

[203] The evidence on which we base our finding that it is more likely than not that

Kitmitto tipped Vannatta after Kitmitto’s meeting with Amaya management on

April 29 is:

73

This is a feature of Bloomberg that lets one or more users maintain ongoing forums for sharing

information. It serves as an ongoing chat room.

31

a.

Vannatta shared a small office with Kitmitto, they could occasionally hear

each other’s conversations and Vannatta had to go around Kitmitto’s desk

to leave the office;

b.

c.

d.

Vannatta socialized with Kitmitto, at and after work, and they also went to

the gym together and spoke every day;

Vannatta knew that Kitmitto was an analyst covering technology and

gaming, including Amaya;

Vannatta’s phone and chat records show that he was in the Aston Asset

Management office the afternoon of April 29, 2014, the date Kitmitto

learned about the Acquisition. Vannatta made calls from his cell phone on

April 29 from Toronto. In addition, on April 29 Vannatta responded to a

chat invitation to go for drinks by saying that he had to attend the internal

education session at 4:00 pm that afternoon;

e.

f.

Vannatta had the opportunity to learn about the Acquisition from Kitmitto

by virtue of their professional and social relationships, and their physical

proximity at Aston Asset Management;

Vannatta’s Amaya trading was uncharacteristic:

he managed a resource fund and most of his personal trading

between January 1, 2012 and June 30, 2014 was in the energy and

resource sectors; and

Amaya was the only gaming stock Vannatta purchased during the

Relevant Period and the only stock he traded between April and

May 2014;

g.

Vannatta’s trading was risky:

he spent more money buying Amaya than he did on any other

issuer between January 1, 2012 and June 30, 2014;

the $31,616 he spent on Amaya was half the amount he invested

in stocks in 2013 and represented a significant amount relative to

his salary of $90,000 and bonus of $45,000 in 2014;

Vannatta was experiencing financial issues at the time of his

trading. Vannatta owed $20,878 on his line of credit, was at his

limit on his credit card, had car payments and student and other

loan payments; and

Vannatta used $8,000 of borrowed funds to buy Amaya;

h.

Vannatta’s trading was timely:

he only bought Amaya shares during the Relevant Period and did

not sell until after the June 12, 2014 announcement, despite the

increase in Amaya’s share price during the period creating

opportunities to realize a profit;

Kitmitto’s understanding was the Acquisition would be announced

on May 12, 2014. On May 8, Kitmitto was informed the

announcement was being delayed to May 21. We find it was more

likely than not that Vannatta was aware of these dates from

Kitmitto when he traded in Amaya on May 6 and May 14 as in both

32

cases trades were made a few days prior to the expected

announcement date; and

there is no evidence before us about any alternative basis for

Vannatta’s interest in buying Amaya; and

i.

Vannatta’s trading was profitable:

Because we have found that Vannatta’s April 29 purchase of Amaya

was not made with the benefit of MNPI, we have deducted that

trade from Staff’s profit calculation for Vannatta. By our calculation,

Vannatta made a profit of $54,435, a 277% return, on his two

Amaya purchases in May 2014. This was his second largest profit

on the 13 securities Vannatta bought between January 1, 2012 and

June 30, 2014 and sold before December 31, 2015.

[204] We find that Vannatta had an opportunity to learn about the Acquisition because

of his personal and professional relationship with Kitmitto and the circumstances

of how and when Kitmitto learned of the Amaya MNPI. While opportunity to

acquire knowledge of MNPI is not, in and of itself, sufficient to establish that

tipping occurred, knowledge can be inferred based on “circumstantial evidence of

opportunity to acquire knowledge of a material undisclosed fact, combined with

evidence of well-timed and profitable trades”.⁷⁴

[205] We conclude that Vannatta’s opportunity to learn about the Acquisition,

combined with our findings that Vannatta’s trading in Amaya was timely,

uncharacteristic and profitable, and that he concealed his trading from Aston

Asset Management Compliance (see Section IV.B.2(g)) and misled Staff (see

Section IV.B.2(d)), supports the inference that it is more likely than not that

Kitmitto tipped Vannatta about the Acquisition and Vannatta bought Amaya

shares while he had that information.

(b)

Was Vannatta in a special relationship with Amaya?

[206] We also find, based on the above evidence, that Vannatta was in a special

relationship with Amaya. We conclude that Staff has established both the

“information connection” (Vannatta learned about the Amaya MNPI from Kitmitto

who was in a special relationship with Amaya) and the “person connection”

(Vannatta knew or ought reasonably to have known that Kitmitto was in a

special relationship with Amaya), given:

a.

b.

Vannatta’s and Kitmitto’s personal and professional relationship;

the timeliness, uncharacteristic nature, and riskiness of Vannatta’s

trading;

c.

the steps Vannatta took to conceal his trading from Aston Asset

Management Compliance (see Section IV.B.2(g)); and

d.

Vannatta’s misleading statements to Staff (see Section IV.B.2(d)).

(c)

Conclusions on tipping and trading

[207] For the reasons given above, we find that it is more likely than not that Kitmitto

tipped Vannatta in breach of s. 76(2) of the Act and Vannatta engaged in insider

74

Agueci Merits at para 68

33

trading for the trades of May 6, and May 14, 2014 in breach of s. 76(1) of the

Act.

(d)

Did Vannatta mislead Staff?

[208] Vannatta was interviewed under oath by Enforcement Staff on October 19, 2016

and August 16, 2017. Staff alleges that, in these interviews, Vannatta misled

Staff, contrary to s. 122(1)(a) of the Act, by claiming he:

a.

b.

did not know he traded Amaya securities on May 14, 2014;

had pre-cleared his April 29, May 6, and May 14, 2014 trades in Amaya

with Aston Asset Management Compliance;

c.

d.

e.

had submitted brokerage statements for each of his three Scotia accounts

to Aston Asset Management Compliance for the period of April to June

2014;

did not intentionally select a 45-day range on the transaction histories for

his Scotia RRSP and TFSA accounts that he provided to Aston Asset

Management Compliance; and

had provided Aston Asset Management Compliance with a transaction

history for his Scotia Regular account for April and May 2014.

We deal with each of these statements in turn below.

[209] Subsection 122(1)(a) of the Act makes it an offense for any person to make a

statement to a person appointed to make an investigation or examination under

the Act that, in a material respect is misleading or untrue or does not state a fact

that is necessary to make the statement not misleading.

[210] In Agueci Merits, the panel cites two decisions that are particularly helpful in

interpreting what constitutes an offence under s. 122(1)(a). First, the Court of

Appeal decision in Wilder where the court noted that “[i]t is difficult to imagine

anything that could be more important to protecting the integrity of capital

markets than ensuring that those involved in those markets, whether as direct

participants or as advisors, provide full and accurate information to the OSC”.⁷⁵

Second, the Commission in Da Silva stated that “[e]vasion, obfuscation, and

untruth in responding to Staff inquiries serves to hinder Staff’s performance of

their responsibilities to monitor and enforce compliance with Ontario securities

law; such conduct is an obstacle to effective regulation of the capital markets.”⁷⁶

[211] We also note that in Wilder the Court of Appeal considered an allegation under s.

122(1)(a) of the Act and acknowledged that the Act gives the Commission a

number of options on how to proceed and that s. 122(1) does not create an area

of exclusive jurisdiction for the courts and may also be addressed before the

Commission.⁷⁷

75

Agueci Merits at para 636, citing Wilder v Ontario (Securities Commission) (2001), 53 OR (3d) 519,

[2001] O.J. No. 1017 (ON CA) (Wilder) at para 22

76

Agueci Merits at para 636, citing Da Silva (Re), 2012 ONSEC 32, (2012), 35 OSCB 8822 at para 7,

citing Hennig (Re), 2008 ABASC 363 at para 1296

77

Agueci Merits at para 635 citing Wilder at para 22

34

i.

Vannatta did not remember trading on May 14

[212] Vannatta told Staff that he did not remember he had traded Amaya shares on

May 14, 2014 in his Scotia Regular account. We find that it is more likely than

not that this statement was untrue, consistent with our finding that Vannatta

concealed his May 14 trade from Aston Asset Management Compliance.

[213] Aston Asset Management Compliance had transaction histories for only two of

Vannatta’s three trading accounts at Scotia, the TFSA and RRSP accounts but not

the Regular account. Vannatta admitted during his compelled interview that

Aston Asset Management Compliance could only have obtained copies of the

transaction histories for his trading accounts from Vannatta.

[214] Vannatta could not explain during his compelled interview how he failed to

include his Scotia Regular account, where he executed his May 14 Amaya trade,

in his certified list of accounts he provided to Aston Asset Management

Compliance in July 2014.

[215] We conclude that Vannatta intentionally failed to provide a transaction history for

his Scotia Regular account and to list that account on his certificate and then

attempted to evade Staff’s questions about the May 14 trade by claiming not to

recall it.

ii.

Vannatta had pre-cleared all of his Amaya trades

[216] Vannatta told Staff that he had pre-cleared his trades on April 29, May 6, and

May 14, 2014. There were no pre-clearance forms for these trades and no

evidence of approvals from Rnjak for these trades. Vannatta’s position is that

Rnjak lost or disposed of the pre-clearance forms and that Rnjak’s procedures

were lax resulting in Rnjak not always approving requested trades by email.

Given our conclusion that Vannatta intentionally concealed his trading from

Aston Asset Management Compliance, we conclude that it is more likely than not

that Vannatta also did not attempt to pre-clear any of this trading in Amaya

shares. We therefore do not accept Vannatta’s statement that he did pre-clear

the trades.

iii.

Vannatta had provided brokerage statements to Aston

Asset Management Compliance

[217] Vannatta’s position is that he provided brokerage statements to Aston Asset

Management Compliance but that they must have been lost or disposed of.

There were no brokerage statements for Vannatta in evidence. Rnjak was unable

to remember if he provided original documents to the earlier internal review and

what then happened to those records. Vannatta suggests it is as likely that

Vannatta provided the statements and they were collected as part of that review

and then lost.

[218] We find that, given our finding that Vannatta concealed his trading from Aston

Asset Management Compliance, it is more likely than not that Vannatta failed to

give his brokerage statements to Aston Asset Management Compliance as part of

that concealment. We therefore find that Vannatta did mislead Staff on this

point.

35

iv.

Vannatta did not choose the 45-day range for his

Scotia transaction histories and had provided Aston

Asset Management Compliance with a transaction

history for his Scotia Regular account

[219] Vannatta told Staff that he did not intentionally set a 45-day range for the

transaction histories for his Scotia RRSP and TFSA accounts that he provided to

Aston Asset Management Compliance and that he had given Aston Asset

Management Compliance a transaction history for his Scotia Regular account. We

find the confluence of the following factors leads us to find that these statements

are more likely than not untrue:

a.

b.

c.

Aston Asset Management Compliance only had transaction histories for

two of the three accounts, which Vannatta admitted could only have come

from him;

the only accounts Vannatta listed in the certificate he provided to Aston

Asset Management Compliance were the same two accounts for which

transaction histories were provided;

When Vannatta accessed his Scotia account to print transaction histories

to give to Aston Asset Management Compliance all three of his accounts

were listed, and Vannatta had no explanation for why he would not have

seen his Scotia Regular account; and

d.

In response to Rnjak’s request for brokerage statements in late June

2014, Vannatta provided transaction histories for his RRSP and TFSA

accounts dated June 26, 2014 with a 45-day range that effectively

resulted in his April 29 and May 6 trades not being included in the

histories and failed to provide a transaction history for his Regular account

where, even if he had selected the 45-day his May 14 trade would have

been evident.

[220] We conclude that it is more likely than not that Vannatta misled Staff about his

trading during Staff’s investigation.

[221] We find that each of these statements was material to Staff’s investigation of

potential insider trading and tipping in Amaya shares during the Relevant Period

and, at the time, and in light of the circumstances, were misleading, contrary to

subsection 122(1)(a) of the Act.

(e)

Did Vannatta tip his relatives with the Amaya MNPI?

[222] Staff alleges that Vannatta tipped his brother CV, his cousin DU and DU’s wife

NU, and another cousin KU. We have determined that the Acquisition was MNPI

about Amaya, and that Vannatta was in a special relationship with Amaya. To

find that Vannatta tipped his relatives, the sole remaining factor Staff must

establish is that Vannatta informed his relatives of the Amaya MNPI. We find, for

the reasons below, that Vannatta did inform his relatives because their trading

was timely, profitable and either uncharacteristic or opportunistic.

[223] Staff did not lead any evidence of telephone calls or emails between Vannatta

and any of his relatives. However, given the other circumstantial evidence in

support of Vannatta having tipped his relatives, the lack of direct evidence is

overcome by the significant circumstantial evidence.

36

[224] In addition to the individual factors listed below for each of Vannatta’s relatives,

we consider the fact that all four of them traded in Amaya during the Relevant

Period starting on April 30, 2014, the day after we found Vannatta to have

learned about the Amaya MNPI, a significant factor in arriving at our conclusion

on this point.

i.

CV

[225] CV had previously bought shares of Amaya in August 2013 and sold them in

October of that year. He did not buy any other gaming stock and, in 2014, did

not invest in Amaya until the Relevant Period. CV bought 380 Amaya shares on

April 30, 2014, one day after Vannatta learned of the Acquisition. CV held onto

his Amaya shares until after the announcement on June 12, 2014. We find CV’s

trading to be opportunistic.

[226] The amount CV invested in his Amaya shares was more than he spent to

purchase any other security in the January 1, 2012 to June 30, 2014 time

period. In addition, CV’s significant profit from his Amaya trade was the highest

from any trading he did during this two-year period.

ii.

DU and NU

[227] DU is Vannatta’s cousin. NU is DU’s wife. DU had not previously owned Amaya or

any other gaming security. Similar to CV, NU had previously invested in Amaya,

buying in November 2013 and selling in February 2014. NU did not buy the

securities of any other gaming industry company. Nor did she buy Amaya prior

to the Relevant Period when Amaya’s share price dropped, post the release of

their 2013 results, or in response to an April 24 article in the Globe and Mail that

provided a favourable view of Amaya, stating it was “not quite the gamble it was

just over a month ago”.

[228] The day after Vannatta learned about the Acquisition, April 30, 2014, DU and NU

began buying Amaya shares. Between April 30 and June 10, DU acquired 9,002

Amaya shares. DU sold 150 Amaya shares on June 10 and then sold the

remainder of his shares between June 16 and July 7, following the June 12

announcement. DU bought 480 Amaya shares on June 23 and sold them on July

8 for a small profit. NU started buying Amaya shares on April 30 and by May 23

had acquired 4,401 shares. NU sold all of her Amaya shares on July 8.

[229] The amount DU spent on his Amaya purchases during the Relevant Period was

the highest amount he spent on any security during the January 1, 2012 to June

30, 2014 time period. The amount that NU spent on her 2014 purchases of

Amaya was the highest that she spent on any security in that same time period.

The profits each of DU and NU made on their trading in Amaya shares were the

largest profits each of them earned on trading any other security in the January

2012 to December 2014 period.

iii.

KU

[230] KU is another of Vannatta’s cousins. He had not purchased shares of Amaya, or

any other gaming industry security, prior to the Relevant Period. KU made one

purchase of 900 Amaya shares on May 28, 2014. He sold all of his shares after

the June 12 announcement, earning a significant profit. The amount KU spent on

his Amaya shares was the largest investment he made in the securities market

in the January 1, 2012 to June 30, 2014 time period.

37

(f)

Conclusion on tipping

[231] Based on the circumstantial evidence relating to the timing of the trades, the

uncharacteristic and/or opportunistic nature of the trades and the profit made,

we infer that it is more likely than not that Vannatta tipped CV, DU, NU and KU.

(g)

Was Vannatta’s concealment of his Amaya trading

from Aston Asset Management abusive and / or does

it engage an animating principle of the Act

[232] Staff alleges that Vannatta’s engaged in conduct that was both abusive of the

capital markets and a failure to adhere to high standards of conduct expected of

him as a registrant, thereby engaging an animating principle of the Act, because

he concealed his trading in Amaya securities from Aston Asset Management

Compliance.

[233] The specific components of Staff’s allegations on this point are that Vannatta:

a.

b.

c.

failed to pre-clear his April 29, May 6, and May 14, 2014 Amaya trades

with Aston Asset Management Compliance, contrary to Aston Financial’s

Personal Trading Policy;

failed to submit monthly or quarterly brokerage statements for his three

Scotia accounts to Aston Asset Management Compliance, contrary to

Aston Financial’s policy;

in response to Aston Asset Management’s June 2014 internal review into

employee and fund trading in Amaya securities, Vannatta:

failed to provide Aston Asset Management Compliance with

brokerage statements for his three Scotia accounts, saying they

were unavailable;

provided transaction histories to Aston Asset Management

Compliance for his Scotia RRSP and Scotia TFSA accounts, which

purportedly covered the period of March 25, 2014 to June 25, 2014

but, as a result of Vannatta’s manipulation only showed trading for

the 45-day period prior to June 26, 2014 (thereby concealing his

April 29, 2014 purchase of Amaya securities in his Scotia RRSP

Account, and his May 6, 2014 purchase of Amaya securities in his

Scotia TFSA Account); and

failed to provide to Aston Asset Management Compliance with a

transaction history for his Scotia Regular account, the account he

used for his May 14, 2014 purchase of Amaya; and

d.

with respect to the July 2014 Aston Asset Management Compliance

request to provide a certificate listing all of his brokerage or trading

accounts, Vannatta signed and submitted a false and incomplete

certificate. Vannatta listed his Scotia RRSP and TFSA Accounts but made

no mention of his Scotia Regular Account on the certificate.

[234] Vannatta’s evidence, read in from his compelled interview by Staff, was that he

did fill out pre-clearance forms and leave them on Rnjak’s desk, he did not recall

providing transaction histories to Rnjak and he did not recall selecting the 45-day

period for his two account transaction histories.

38

[235] Vannatta argues that Aston Asset Management Compliance either lost or

destroyed his pre-clearance forms and the brokerage statements for all of his

Scotia accounts. He submits this argument is supported by Rnjak’s inability to

independently recall the events of 2014 without being shown documents to

refresh his memory, Rnjak’s inability to remember the details of the Slemko

review in 2016 (including what documents were provided to external counsel and

what became of those documents), and Staff’s alleged breach of the witness

exclusion order that allowed Rnjak to tailor his evidence about Vannatta.

[236] Vannatta further submits that the 45-day range for the transaction histories that

were provided to Aston Asset Management Compliance were just as likely to be

the result of human error as an intent to conceal. Bawden, Senior Compliance

Officer for Scotia iTrade, gave evidence that the 45-day range was a default

setting that would result regardless of whether any other period was selected by

the user. According to Bawden, there is a button to override the default setting,

however when asked about it Bawden was unable to locate it during his

testimony based on the materials put before him.

[237] We do not accept Vannatta’s arguments. We find that it is more likely than not

that Vannatta concealed his trading from Aston Asset Management Compliance

based on the following evidence, that includes the same confluence of factors

that led us to conclude that Vannatta misled Staff:

a.

Aston Asset Management’s internal review of trading in Amaya occurred in

July 2014 and included the July 8, 2014 email and memorandum to all

access persons to provide brokerage statements for all of their

brokerage/trading accounts for April through June 2014 and to sign a

certificate identifying all of their brokerage/trading accounts;

b.

c.

in response to that request Vannatta provided a signed and dated

certificate that excluded his Scotia Regular account, which he had used for

the May 14, 2014 Amaya trade;

in his compelled interview Vannatta confirmed that transaction histories

for his Scotia accounts were accessed online through his account and

conceded that Rnjak could only have received copies of transaction

histories for Vannatta’s Scotia RRSP and TFSA accounts from Vannatta.

Whether Rnjak wrote Vannatta’s name on the top of the transaction

histories is irrelevant in our view; the evidence before us was there was

no way Rnjak could have obtained these documents other than from

Vannatta and Vannatta admitted this during his compelled interview with

Staff;

d.

e.

Vannatta also stated in his compelled interview that despite being able to

see a list of all of his accounts when he logged into his Scotia account, he

could not remember why he provided Aston Asset Management

Compliance with a certificate that did not include his Scotia Regular

account;

Aston Asset Management Compliance requested brokerage statements on

July 8, 2014. Aston Asset Management did not provide brokerage

statements for any of Vannatta’s three Scotia accounts to Staff during the

investigation. The transaction histories in Aston Asset Management’s

possession for Vannatta’s Scotia RRSP and TFSA accounts are dated June

26, 2014. Vannatta’s April 29, 2014 Amaya trade was in his Scotia RRSP

39

account. His May 6, 2014 Amaya trade was in his Scotia TFSA account. By

requesting transaction histories for these accounts on June 26 with the

45-day default period (May 12) the reports would not include the April 29

and May 6 trades. While we have found that Vannatta’s April 29, 2014

trade was not an insider trade, we refer to it here as it is relevant to the

analysis of whether Vannatta concealed his trading from Aston Asset

Management Compliance;

f.

had Vannatta provided a transaction history for his Scotia Regular account

dated June 26, 2014, as the other transaction histories were dated, it

would have shown the May 16, 2014 Amaya trade. We infer this is why

Vannatta did not provide Aston Asset Management Compliance with a

transaction history for the Scotia Regular account or include the account

in his certified list of accounts; and

g.

in Rnjak’s June 17, 2014 email to Killeen about Aston Asset Management’s

internal review of Amaya trading, Rnjak refers to Kitmitto’s and SR’s

request for pre-clearance to trade Amaya on April 25, 2014, the placing

and lifting of the restriction on Amaya and one Aston Asset Management

fund’s trade in Amaya on June 13 after the restriction was lifted. There

was no reference in this contemporaneous document to any other request

for pre-clearance to trade Amaya or trades in Amaya during this period.

[238] While we do not consider Vannatta’s April 29 Amaya share purchase in our

analysis of the insider trading allegation against him, Vannatta’s apparent efforts

to conceal his April 29, 2014 Amaya purchase from Aston Asset Management

Compliance indicates that he was aware his friend and office mate, Kitmitto, was

being brought over the wall on a strategic transaction involving Amaya and that

Vannatta thought trading on that information was inappropriate and had to be

concealed.

[239] We find that the combination of Vannatta’s signed certificate that does not list

the account where he conducted the May 14, 2014 trade, the lack of a

transaction history for that account, and Aston Asset Management’s possession

of transaction histories (which they could only have obtained from Vannatta) for

his two other Scotia accounts, printed on a date with a date range that

effectively excludes his April 29 and May 6, 2014 Amaya trades, establishes it is

more likely than not that Vannatta concealed his trading in Amaya from Aston

Asset Management Compliance.

[240] The Commission has previously found that the integrity of the regulatory

framework for registrant firms depends upon the adherence to appropriate

compliance structures and that circumventing one’s employer’s compliance

function is conduct contrary to the public interest.⁷⁸The Commission has

highlighted the public interest in registrants being honest and of good reputation

and in registrants acting in accordance with the concepts of honesty, integrity

and fair dealing among classes of investors.⁷⁹

[241] We find that Vannatta’s circumvention of Aston Asset Management’s compliance

function to conceal his trading in Amaya directly engages the fundamental

principles of securities regulation, specifically s. 2.1, paragraph 2. iii. that

78

Agueci Merits at para 175; Rowan at para 160

Agueci Merits at para 126 citing Danuke (Re), (1981) 2 OSCB 31c at 43c

79

40

requires the maintenance of high standards of fitness and business conduct to

ensure honest and responsible conduct by market participants. This includes

registrants such as Vannatta. As a registrant and an access person with a

registrant, Vannatta ought to be held to a higher standard of conduct and his

conduct fell below the high standard expected of him.

[242] We also find that Vannatta’s conduct was abusive of the capital markets. In

Agueci Merits, the Commission found an employee of a registered firm to have

engaged in abusive conduct when she placed trades in a secret account she hid

from the firm and impersonated her mother when making trades.⁸⁰We find

Vannatta’s hiding his trading in Amaya from his employer to be equally abusive.

[243] Although we find that Vannatta’s conduct is both abusive and engages an

animating principle of the Act, either finding is a sufficient basis for our

conclusion that Staff has established this public interest allegation against

Vannatta.

Christopher

[244] We found that Kitmitto was in a special relationship with Amaya and that the

Acquisition was MNPI about Amaya. Therefore, the issues we need to decide

regarding Christopher are:

a.

did Kitmitto tip him about the Amaya MNPI and did he trade Amaya

securities while he had that information;

b.

c.

d.

was he in a special relationship with Amaya as defined in s. 76(5)(e);

did he tip Claudio about the Amaya MNPI; and

did he mislead Commission staff?

(a)

Did Kitmitto tip Christopher with the Amaya MNPI and

did Christopher trade Amaya shares while in

possession of that information?

[245] Christopher and Kitmitto were close friends with a relationship originating in

university. They were roommates from 2011 and in 2014 they lived together in a

condominium owned by Claudio. The two spoke daily and socialized regularly.

Christopher and Kitmitto knew each other’s families and Kitmitto had visited

Christopher and Claudio at Claudio’s home.

[246] Both Christopher and Kitmitto testified that they did not regularly discuss stocks

that Kitmitto was covering. Kitmitto did, however, occasionally mention stocks to

Christopher that he thought might be of interest to Christopher. Both Kitmitto

and Christopher testified that Kitmitto brought Amaya to Christopher’s attention

in 2013 because of Christopher’s interest in gaming and sports betting.

[247] Christopher testified that he tended to rely on his own research for investment

decisions, including Stockhouse posts and BNN.

[248] Christopher had a business degree. In 2014 he operated two businesses, a

cosmetics business and a walk-in bathtub distribution business, from which he

earned an annual income of $85,000. Christopher had never worked in the

securities industry nor acquired any securities industry qualifications.

80

Agueci Merits at para 716

41

[249] Christopher knew that Kitmitto worked as an analyst for Aston Asset

Management, which he understood to mean that Kitmitto researched different

companies in the gaming and tech industry and provided recommendations to

fund managers.

[250] Christopher had a history of trading. Starting in 2009, Christopher used an

annual dividend from Claudio’s professional dentistry corporation to buy shares.

Claudio testified that he set up the dividends to support Christopher’s trading in

a Tax-Free Savings Account. The annual dividend was based on the maximum

allowable TFSA contribution of $5,000 to $5,500.

[251] Christopher invested almost all of the dividends he received in one or two stocks

which he held for several months before selling all his holdings and making a

new investment. Prior to 2014, Christopher invested in small cap mining and

resource stocks. He and Claudio shared investment ideas and typically invested

in the same stocks. In 2012, both Christopher and Claudio suffered significant

losses in their portfolios associated with some investments in the mining /

resource sector recommended by Christopher.

[252] Claudio did not pay a dividend to Christopher in 2012 or 2013. Claudio and

Christopher both testified that the gap in dividend payments was in part due to

the general market downturn’s impact on Claudio’s professional finances and in

response to their investment losses. Christopher did not trade any securities

during this same period because he had no funds to invest.

[253] Christopher testified that he was interested in Amaya because it was one of the

few gaming companies listed on the TSX and he thought it had a lot of potential

because of its strategy of seeking a global audience and obtaining regulatory

approvals for online gaming in the United States.

[254] According to Christopher, by the time he invested in Amaya on May 8, 2014 he

knew that Amaya:

a.

was one of the few gaming companies listed on a Canadian stock

exchange;

b.

c.

had won the stock of the year award in January 2014;

had made several significant acquisitions, through which it had entered

into lucrative supply agreements and obtained contracts with US state

governments that started to legalize online gambling;

d.

was being rumoured on Stockhouse to continue to grow through

acquisition;

e.

f.

was discussed in the April 24, 2014 Globe and Mail feature article;

was mentioned in the Calvinayre.com article of April 29, 2014 which was

also commented on in a Stockhouse post on May 3, 2014;

g.

was mentioned as one of the three gambling stock picks in a Motley Fool

article posted on Stockhouse on May 2, 2014; and

h.

was discussed on several occasions on BNN market calls.

[255] Christopher testified that, based on all his research over the preceding 6 months,

and watching the price movements in Amaya in April 2014, he decided to buy

Amaya on May 8, 2014. At that time, according to Christopher, he knew a