Finkelstein v OSC – Court of Appeal Upholds OSC

By Anita Anand and Tegan Valentine

On January 12, 2018 the Ontario Court of Appeal issued its ruling in Finkelstein v Ontario Securities Commission, and for the first time addressed the definition of a ‘person in a special relationship with an issuer’ in relation to insider trading and tipping  Finkelstein was a corporate mergers and acquisition lawyer in Toronto, who disseminated material non-public information about an impending transaction. The appeal in question is not Finkelstein’s, rather the appellants received information on the upcoming transaction from an accountant friend, who in turn had received the information from a close friend of Finkelstein.

The decision in Finkelstein turned on the definition of ‘person in a special relationship with an issuer’, and whether the appellants could be classified as having such a relationship. The Ontario Securities Act extends the chain of liability when a tipped person ‘knows or ought reasonably to have known’ that information came from a person or company in a special relationship with the issuer. Here, the court deferred to the previous finding of the tribunal and found that the appellants’ connection with the tipper, coupled with his standing as an investment advisor satisfied the ‘ought reasonably to have known’ requirements.

The ruling in Finkelstein will colour securities law moving forward. Not only is this case the first example of a ruling on the definition of ‘person in a special relationship with an issuer’ in relation to tipping, but it shows the high level of deference that appeals courts show to administrative tribunals in this area.

The complete ruling can be found here