A recent decision of Québec's Financial Markets Administrative Tribunal, Autorité des marchés financiers c. Gauthier,1 dealt with insider trading allegations around an asset management firm's proposed takeover of a Canadian energy company, Napec. Specifically, the Tribunal explored the threshold that a proposed transaction must meet in order to be considered material non-public information.
The Autorité des marchés financiers alleged that one respondent — Gauthier, an employee of one of Napec's lending banks — disclosed privileged information about Napec's impending privatization to another respondent (as well as to other friends during social gatherings), who then purchased a significant number of the company's shares, in contravention of sections 187 to 189 of Québec's Securities Act.
In its analysis, the Tribunal observed that an acquisition must have reached a certain level of transactional certainty for information about that transaction to be considered material. This principle echoes the probability/magnitude test first established by the United States Supreme Court in Basic Inc. v. Levinson and subsequently accepted in Canadian jurisdictions.
For an in-depth analysis of the Tribunal's decision, read the full Update by Osler's Fabrice Benoît and Sophie Courville.
Footnote
1. Autorité des marchés financiers c. Gauthier, 2024 QCTMF 26.
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