Lengthy Jail Sentence for Inside Trader
A thirty-nine month prison sentence was issued following Canada’s first ever criminal conviction for insider trading under the Criminal Code of Canada. The accused plead guilty in November 2009 and was sentenced in January 2010.
The accused and his co-accused who went to law school together began an insider trading scheme where one person obtained secret info about corporate transactions and then tipped the other. The recipient of the tips traded on the tips. The two of them shared the profits. There were a total of 46 trades involving Canadian and US publicly traded companies.
The charges involved were
- (i) fraud (for the trades completed before the new Criminal Code insider trading provisions were enacted),
- (ii) illegal insider trading contrary to the Criminal Code and,
- (iii) money laundering contrary to the Criminal Code.
What is illegal insider trading under the Criminal Code?
Section 382.1 of the Criminal Code was introduced in 2004. This section of the Code prohibits insider trading and tipping. The offence is punishable by a maximum prison term of 10 years. To secure a conviction under this provision, the Crown must prove that the accused “knowingly used inside information.”
An individual may also be prosecuted under the Securities Act for insider trading. Under the Securities Act, imprisonment is limited to five years less a day. The prosecutor is only required to prove that the individual was in possession of knowledge that was not generally disclosed to the public.
If you are charged, or you think you may be charged, with insider trading or other securities-related offences, you should speak to an experienced criminal defence lawyer before you speak to police, the Crown or securities authorities. Remember, what you say to your lawyer is protected by solicitor – client privilege. There is no protection for information you share with your accountant. In fact, accountants are frequently compelled to testify against their clients accused of white collar crimes.
