OSC Adopts Restrained Interpretation Of ‘Public Interest’ Jurisdiction In Baffinland Case

Author:Mr Seumas Woods and Doug McLeod
Profession:Blake, Cassels & Graydon LLP
 
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On August 26, 2014, a panel of the Ontario Securities Commission released its decision in a high-profile enforcement proceeding brought by OSC Staff against Jowdat Waheed and Bruce Walter. Staff had made a series of allegations against Waheed and Walter, including allegations of insider trading and conduct contrary to the "public interest," arising out of a hostile take-over bid the respondents had commenced for Baffinland Iron Mines Corporation (Baffinland) in 2010. In a decision that sets out important guidance in respect of both the test for insider trading and the scope of the OSC's "public interest" jurisdiction, the panel dismissed all of Staff's allegations.

BACKGROUND

The events in issue date to early 2010. At that time, Baffinland was a junior mining company attempting to develop iron ore interests it held in Nunavut. In February 2010, Baffinland retained Waheed as a consultant to advise on strategic options for the company, including partnerships and financing options. Waheed served as a consultant until April 2010, but remained in contact with the company through the summer of 2010.

In September 2010, Waheed and his colleague Walter commenced a hostile take-over bid for Baffinland. The take-over bid triggered a bidding war for the company and ultimately resulted in a successful joint bid being made by Waheed and Walter, in conjunction with ArcelorMittal S.A., in early 2011.

On January 9, 2012, almost a year after the completion of the take-over of Baffinland, Staff issued a Statement of Allegations against Waheed and Walter alleging insider trading and conduct contrary to the "public interest." The insider-trading allegations were premised on allegations that at the time they commenced their bid in September 2010, Waheed and Walter were in possession of material non-public information about Baffinland that Waheed had allegedly obtained in the course of his work as a consultant earlier in 2010.

In addition to the insider-trading allegations, Staff alleged that Waheed and Walter had engaged in conduct "contrary to the public interest." The OSC has a general power to make orders that are in the "public interest" of upholding the principles of Ontario securities law. These "public interest" orders can include sanctions against individuals who have been found to have acted contrary to the public interest.

Staff made two overarching "public interest" allegations. First, Staff made what was essentially an additional insider-trading...

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