Allegations of trading based on privileged information - Court of Québec dismisses AMF's appeal

Securities Decisions and Freeze and cease trade orders

Montréal – On September 21, 2016, Judge Martine L. Tremblay of the Court of Québec, district of Montréal, dismissed the appeal filed by the Autorité des marchés financiers (the "AMF") in connection with a decision issued on October 23, 2014 by the Bureau de décision et de révision (the "Bureau"), now known as the Financial Markets Administrative Tribunal (the "Tribunal").

In June 2012, the AMF requested that the Bureau impose administrative penalties on Daniel Pharand, Jacques GagnonThe respondent Jacques Gagnon should not be confused with Jacques Gagnon who holds certificate No. 113392 in damage insurance (broker) and is attached to Hub International Québec Limitée. , Éric DupontThe respondent Éric Dupont should not be confused with Éric Dupont who holds certificate No. 135119 and pursues activities as a dealing representative (investment dealer) and derivatives dealing representative with Desjardins Securities Inc. , Louis Paquet and Louise BlaisThe respondent Louise Blais should not be confused with Louise Blais who holds certificate No. 103410 and pursues activities as a dealing representative (mutual fund dealer) with Desjardins Financial Services Firm Inc. as well as on the Fonds d'intervention économique régional (FIER) Cap Diamant inc.

The proceedings involved stock market trades carried out between April and June 2008 in securities of Arura Pharma inc. by Daniel Pharand, Jacques Gagnon and the FIER. The AMF claimed that these trades were carried out while the respondents held information that had not been disclosed to the public, namely, the extent of Arura Pharma's financial troubles. At the time of the facts at issue, Éric Dupont and Louis Paquet were members of the FIER's investment committee and Louise Blais was Vice-President, Investments, and a member of the FIER's oversight committee.

In its decision of October 2014, the Bureau concluded that the circumstantial evidence presented by the AMF did not constitute preponderant proof that respondents Éric Dupont, Louis Paquet, Louise Blais and the FIER had carried out trades based on privileged information.

The Bureau also concluded that the same information should be qualified as privileged for respondents Daniel Pharand and Jacques Gagnon , who admitted to the facts of the case. The Bureau thus imposed penalties of $5,000 and $20,000 on them, respectively, following the parties' joint recommendation.

In September 2016, Judge Tremblay, who was asked to rule on the appeal of these decisions, confirmed the conclusions of the Bureau on the grounds that they were reasonable and thus dismissed the appeals filed by the AMF and by Daniel Pharand.

The AMF and Daniel Pharand subsequently applied to the Québec Court of Appeal in November 2016 for leave to appeal the decision of the Court of Québec.

Judge Martin Vauclair of the Québec Court of Appeal refused the AMF's application for leave to appeal the decision by Judge Tremblay because he was not convinced that the case should be submitted to a second level of appeal.

However, as the Bureau had concluded that the other respondents in the case had not held privileged information, the Court of Appeal, following the AMF's consent, allowed Daniel Pharand's appeal and reversed the decision of the Bureau.

The Autorité des marchés financiers (the "AMF") is the regulatory and oversight body for Québec's financial sector.

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