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- Difficult to prove someone has engaged in insider trading - October 17, 2024
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By LegalMatters Staff • The buying or selling of stocks or other securities by people who have access to non-public, material information about a company is called insider trading. It is a crime because this information could affect the stock price once it becomes known.
“It gives those with privileged information an unfair advantage over other investors,” says Ottawa criminal lawyer Céline Dostaler. “It also undermines market integrity and fairness by exploiting confidential information for personal gain.”
She notes that insider trading is regulated at both the federal and provincial levels, with the Canadian Securities Administrators (an umbrella organization of Canada’s provincial and territorial securities regulators) enforcing regulations meant to counter the activity.””
“According to Ontario’s Securities Act, an insider of a public company includes directors or officers of a publicly traded firm,” says Dostaler. “An insider can also be a person or company that has beneficial ownership, control or direction of securities of a public firm.
She says the maximum prison sentence for insider trading is 10 years for charges treated as indictable offences.
“People can also face fines of up to $5 million for each conviction, or triple the profit made or loss avoided,” says Dostaler.
She notes that proving someone is guilty of insider trading is challenging for regulators and prosecutors.
“In many cases, the evidence is circumstantial as opposed to direct evidence, such as a recorded conversation or a written communication,” says Dostaler. “Investigators must piece together a series of events, transactions and relationships to show an insider passed along information that benefitted themselves or others.”
