Regulators push for tougher illegal insider trading sanctions

By Doug Watt | November 12, 2003 | Last updated on November 12, 2003
2 min read

(November 12, 2003) A task force set up to examine illegal insider trading in Canada is recommending increased sanctions against those who violate insider trading laws and is calling on Ottawa for assistance. The task force, comprised of representatives from three provincial securities regulators and three self-regulatory organizations, released its report today.

“Published academic research supports the position that the incidence of illegal insider trading will be reduced through successful enforcement of insider trading laws with severe penalties,” said Ontario Securities Commission chair David Brown in a speech this morning in Toronto.

However, sanctions vary among the provinces, he said, and due to Sarbanes-Oxley a “substantial” gap has opened between the maximum terms of imprisonment in the United States and Canada.

Earlier this year, the Ontario government increased securities violation penalties, raising maximum prison terms to five years and fines to $5 million.

Brown says deterrence would be bolstered significantly by passage of the federal government’s Bill C-46, which would establish new criminal code offences of illegal insider trading and tipping.

The task force, formed last year, also recommends the formation of a national working enforcement group, including regulators and the RCMP, to focus solely on illegal insider trading.

As well as deterrence, the report focuses on two other main areas: prevention and detection.

“Prevention includes measures to contain non-public information to as small a group as possible,” Brown said. “It recommends measures they can take to avoid situations in which information spills out and is taken advantage of.”

Specifically, the report calls for strict adherence to information containment practices by senior management, corporate directors, lawyers and accountants.

On the detection issue, the report recommends the development of an electronic database of integrated trade and client data to make it easier to uncover illegal insider trading. It also suggests setting up educational programs to raise the profile of illegal insider trading in Canada and to encourage market participants and the public to provide tips and complaints.

Related News Story

  • Regulatory task force to examine insider trading
  • The report says that although there is a public perception that illegal insider trading is prevalent and increasing in Canada, it’s difficult to establish its extent, due to “data limitations.”

    However, academic research consistently produces evidence of trading on inside information around the world. “There is no reason to believe that Canadian markets would not also be victimized by these activities,” the report states.

    Indeed, Brown admitted to reporters after his speech that studies show a substantial run-up in volume and price of trades in Canada before a merger or acquisition announcement. “That could consistent with illegal insider trading,” he said. “It could also be consistent with us in Canada not containing information very well.”

    It’s estimated that regulators currently spend more than $8 million annually on identifying, investigating and prosecuting illegal insider trading.

    Filed by Doug Watt,,


    Doug Watt