Legal Feeds Blog
- But higher penalties may not be the best deterrent for securities offenders
The sanctions levied against a former Bay Street lawyer for insider tipping are part of a bigger trend of awarding higher penalties for securities transgressions, a Toronto lawyer says.
|Prompt prosecution coupled with strong market prohibitions, can have a far greater deterrence effect than steep fines, says Shawn Irving.|
Finkelstein also received a 10-year-ban from trading and acquiring securities, with the exception of doing so for select registered accounts.
“There seems to be a general trend at the OSC and other securities regulators to order greater [amount] of administrative penalties and cost awards particularly in the last five years,” says Osler, Hoskin & Harcourt LLP partner Shawn Irving.
In March, an OSC panel found Finkelstein had tipped his friend, an investment adviser at CIBC, about impending takeover deals. That friend, Paul Azeff, then purchased shares associated with those deals and recommended his friends and family do the same, the commission found.
“As the instigator of the subsequent insider trading by others in disregard of his duties of confidentiality and of the high standard of probity towards the capital markets expected of a mergers and acquisitions lawyer, Finkelstein’s transgressions must be considered to be at the upper end of severity,” wrote commissioners Alan Lenczner and AnneMarie Ryan.
Securities regulators are “certainly of the view that the imposition of administrative penalties and significant cost awards can serve an important deterrent role,” Irving says, but “I’m not convinced of that.”
An approach that focuses on getting securities offenders off the streets sooner is a better approach, Irving adds.
“In so many of these cases, years and years and years pass between when the alleged breach is alleged to have occurred and when there’s ultimately a hearing and then a decision,” he continues. “All the while, the alleged offenders are able to continue to act.”
Irving adds the impact of prompt prosecution on the personal and professional reputation of transgressors, coupled with strong market prohibitions, can have a far greater deterrence effect than steep fines.
In Finkelstein’s case, OSC enforcement staff had sought a lifetime trading ban, a lifetime exclusion as a director and officer of a reporting issuer, and an administrative penalty in the amount of $1.5 million. The ultimate award reflects the panel’s attempt to strike a balance, according to Irving.
The panel was also cognizant of the respondents’ personal situation, says Irving.
“In the case of Mr. Finkelstein, the panel certainly took into account his age, that he had a young family, the significant professional and reputational damage the proceeding and the decision had on him, and the fact that it was unlikely he’d ever work in a major law firm again and therefore he would have a significantly diminished earning potential,” he says.
Finkelstein’s lawyer Gordon Capern did not immediately respond to a request for comment but reports say his client plans to appeal the OSC panel’s findings as well as the sanctions.
Sydney tar ponds court action shut down after 11 years, Canadian Press
As leaked data from extramarital affair web site Ashley Madison continues to bubble up like toxic waste, the company is firing off copyright takedown notices to stop file sharing and social networking sites like Twitter from propagating customer and internal information.
|Sending out copyright takedown notices is like ‘trying to put the toothpaste back in the tube,’ say IP lawyers. (Photo: Chris Wattie/Reuters)|
“This is just another company trying to put the toothpaste back in the tube.”
In fact there is no copyright in “basic facts” such as company and personal information, says Noel Courage, a partner with Bereskin & Parr LLP. There can be, however, some copyright in how the information is “organized and laid out” by Ashley Madison.
The use of takedown notices has not historically had much success and comes with some perils as well, especially when applied in the United States.
“The music industry has not been able to solve its copyright problems by over a decade of takedown notices, even though it has clear copyright,” says Courage. “Ashley Madison will continue to find the data popping up online like a persistent STD outbreak. Of course, taking links and web pages down after the fact is also cold comfort to a middle-aged man already banished to the couch.”
Issuing takedown notices to reporters and news organizations is “overzealous,” says May Cheng, partner with Fasken Martineau DuMoulin LLP.
“There is an exception to copyright infringement for ‘news reporting’ under the fair dealing exceptions in Canada, for example,” she says.
“The U.S. and Canada have somewhat similar copyright laws, but as with most intellectual property laws, the U.S. law is more stringent and offers generally better remedies for infringement.”
Bucholz recalls a 2004 American case he was involved in in which internal e-mails from the archive of an electronic voting machine company were leaked during an election year and posted online. The e-mails expressed concern about security issues with the voting machines. The company, Diebold, used the U.S. Digital Millennium Copyright Act to try and get the material taken offline.
“There are provisions in that legislation that allow a party to challenge the notice and recover punitive costs if there has been an abuse of the takedown procedures,” he says.
The case — OPG v. Diebold — was a similar situation where there was a security breach and the party whose material was put online was casting about to find any legal tool they could to try and stop the information from getting out without a lot of attention paid to whether the material was copyrighted.
A U.S. district judge in California ruled the plaintiffs’ publishing of the e-mails was clearly fair use “because there was no commercial harm and no diminishment of value of the works” in republishing them. Diebold was found to have misrepresented its copyright control, putting it in violation of the DMCA, leaving it liable for court costs and damages.
With respect to the user information, Bucholz points out that copyright only applies to “original expressions fixed in a tangible medium.”
“It’s very difficult to imagine how a collection of people’s addresses and names could reach that level of originality to even attract copyright protection in the first place,” says.
The problem is that even under the U.S. copyright regime, considered to be the most robust, Ashley Madison would have to establish a good faith belief the things they are complaining about are actually copyrighted.
“The notices must state that the complaint is being made under penalty of perjury and I would be very nervous if I were a lawyer for a company that was making that kind of statement under these circumstances,” adds Bucholz.
“The idea you would be able to send a number of sternly worded letters to address this — I don’t think there is a great cost-benefit analysis, but it could be they also need to be shown to be doing something,” he says. “We may yet hear that it’s what a ‘reasonable company’ might do in the circumstances.”
New Brunswick man fights for his right to buy beer in Quebec, Canadian Press
The question of whether to accredit Trinity Western University’s planned law school is back on the agenda with the B.C. Supreme Court considering a judicial review application in the case this week.
|The language around conception in the covenant, says Kendra Milne, is a concern given the implications for reproductive rights and access to abortion care.|
Among the interveners is West Coast LEAF, which says it’s seeking to an advance a less talked-about issue in the case: women’s equality.
The university’s community covenant, says director of law reform Kendra Milne, creates “another access barrier” to women through language requiring students to “treat all persons with respect and dignity, and uphold their God-given worth from conception to death.” The language around conception, she says, is a concern given the implications for reproductive rights and access to abortion care.
The hearings in Vancouver will run for five days before Chief Justice Christopher Hinkson. In its submissions in the case, Trinity Western says “in the context of an evangelical Christian community,” its community covenant is “neither surprising nor offensive.”
“It is part of TWU’s Christian philosophy of education, which integrates academic learning, spiritual formation and moral character development in a manner consistent with TWU’s view of biblical faith.”
It also argues the law society’s decision to deny accreditation was contrary to the Legal Profession Act.
While 74 per cent of B.C. lawyers who participated in the October 2014 referendum voted against accreditation, Trinity Western argues it wasn’t in line with s. 13 of the act that deals with implementing resolutions of special meetings.
Among other things, it provides that a resolution of a special meeting of the LSBC isn’t binding on the benchers unless several conditions are present. One of them, according to the section, is a referendum in which one-third of all members in good standing vote and two-thirds of those participating voted in favour of the resolution. But the law society doesn’t have to conduct such a referendum unless it hasn’t implemented the resolution within 12 months of a general meeting on the issue and it receives a petition signed by at least five per cent of the members asking for a vote.
In this case, 12 months hadn’t passed from the June 2014 resolution directing the benchers to declare Trinity Western not an approved faculty of law, Trinity Western noted in its submissions.
Besides West Coast LEAF, other interveners in the B.C. case include the Canadian Council of Christian Charities; the Christian Legal Fellowship; the Justice Centre for Constitutional Freedoms; and OUTlaws.
In a news release ahead of the hearing, Trinity Western expressed confidence it would prevail in light of a recent Nova Scotia court decision in its favour.
“While the Nova Scotia decision is now under appeal, it has set an important precedent in protection of freedoms for all religious communities in Canada,” it said.
In Ontario, however, the court recently upheld the Law Society of Upper Canada’s decision to deny accreditation, and Milne expresses confidence the result will be similar in her province. There’s a “strong case,” she says, “to have that decision upheld.”
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A Hamilton, Ont. lawyer ousted from his position on the federal Cross-Cultural Roundtable on National Security this spring has received a letter from the government thanking him, but not explaining his suspension.
|'I just want them to clear my name so I can have some closure and move on,' says Hussein Hamdani.|
“Your participation over the past ten years has contributed to the success of the Roundtable in establishing a long-term dialogue with communities on emerging developments in national security matters and their impact on Canada’s diverse society.
“We would like to convey our appreciation for your efforts,” it closes.
Hamdani says he received the letter earlier this week, although it is dated July 30. He had served on the roundtable — meant, according to its website, “to engage Canadians and the Government of Canada in a long-term dialogue on matters related to national security” — since 2005. He learned of his suspension from the volunteer group only through media reports this spring, he says.
“The irony of all this is this is the only piece of communication I received at all from the federal government,” he says.
The letter makes no mention of the reasons given for his suspension by Blaney’s office to news media this spring. In late April, a news report by Quebec broadcaster TVA called attention to statements Hamdani had made while a university student, and alleged he had links to “Islamist organizations.” In response to the allegations, a spokesman for Blaney said he was being suspended “pending a review of the facts” around his alleged involvement in “radical ideology.”
Hamdani calls allegations that he is sympathetic to or connected to militant Islam “ridiculous and baseless.” He says he wrote an e-mail to Blaney’s office asking for an explanation, but received nothing in reply.
“The media was saying I was suspended, and so I assumed I was suspended. I wasn’t getting any responses back. They couldn’t be bothered to send me a simple note,” he says.
He says he also stopped receiving communication about upcoming meetings of the roundtable, which normally meets every three months.
“I think the wish was that I had died. There was no communication at all whatsoever,” written or verbal, about his termination until he received the letter, says Hamdani.
He says he thinks the real reason for his suspension was his open criticism of Bill C-51, and his support for the Liberal party; he hosted a fundraiser this spring, he says, that was attended by Liberal leader Justin Trudeau.
He says he has considered suing the government for defamation, but decided not to after talking to his family about it.
“We just decided it’s just not worth it at this point — it’s going to get dragged in the courts for years,” he says. “I just want them to clear my name so I can have some closure and move on.”
Calls to Blaney’s office were not returned before deadline.
Ex-PMO lawyer continues testimony at Duffy trial today, Canadian Press
The government of Kathleen Wynne is being urged to move quickly to negotiate with First Nations who may be impaired by the semi-privatization of Hydro One — or risk legal action that would stymie the $15-billion deal and lead potentially to years of delay.
|An injunction barring further sales processes, or a judicial review, may be in order if the government won’t negotiate, says Alex Monem.|
On July 3, the province passed an omnibus bill that frees the Crown corporation from numerous regulatory obligations and provides for the sale of 60 per cent of assets over the course of multiple public offerings.
Alex Monem, a partner at Pape Salter Teillet LLP, which represents First Nations affected by the decision, says no legal action has yet been taken, but an injunction barring further sales processes, or perhaps a judicial review, may be in order if the government refuses to negotiate.
“I think there is probably enough here, in law and in facts, that a credible injunction action can be brought, and it will obviously cause delays and problems for the privatization efforts,” he says. “So I think it would be very prudent for them to take a pause and engage in one or a number of processes to attempt to resolve this issue.”
Monem says it’s surprising that First Nations groups were not brought to the negotiating table earlier on, given the social policy considerations laid out in the April report by former Toronto-Dominion CEO Ed Clark, who advised the province on the sale.
“We know that the government was sensitive to certain issues, like the issues of the workers and the unions, and that specific reference was made in Clark’s final report that these issues would have to be resolved prior to any concrete steps being taken, so Ontario clearly had its mind turned to broader policy issues and broader stakeholder issues.”
Monem says First Nations groups are likely worried that policies put in place by Hydro One to engage with local aboriginal groups — whether it comes to crafting joint partnerships or shaping environmental policies — will be scrapped under private corporate ownership.
“In a new Hydro One that has significant private ownership, it’s a real open question about what will happen to the past grievance policies or any policy that has broader social policy objectives.”
“I suspect that aboriginal communities would seek [an ownership stake and representation] along with other things to give them confidence that, in the privatized Hydro One world, past issues and future developments would be dealt with in a way that are sensitive, respectful and accommodating of their rights and interests.”
The issue is scheduled to be raised again in an economic development meeting between government officials and the Union of Ontario Indians in Thunder Bay later this month.
Monem, however, suggests while it may be politically expedient to attempt to consult through a collective aboriginal body, such as the union or the Chiefs of Ontario, such collective consultation will do little to resolve concerns for particular First Nations communities.
“That may not address all the issues,” he says. “There will be a number of communities, both Métis and First Nations, that believe they have specific issues that will not be fully addressed through a collective consultation process. So even in circumstances where Ontario takes the most direct path forward now, they might find that it will not satisfy all legitimate interests and they may not have backed themselves out of the problem that they have today.”
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