This story arose out of a joke: could Whistler Blackcomb get charged with insider trading, simply for putting out news releases?
The answer, it turns out, is yes, if it doesn’t put material releases through SEDAR first. It certainly forces the company to adjust its communication strategies to ensure they don’t get in trouble.
It feels like Whistler Blackcomb is undergoing the same learning process I’ve had to in order to cover this issue.
Company must watch communications now that it is publicly traded
By Jesse Ferreras, Pique Newsmagazine
November 26, 2010
Whistler Blackcomb Holdings Inc. is slowly adapting to life as a public company, an adjustment that reaches as far as its communications department.
Now that the company is trading on the Toronto Stock Exchange it has to pay closer attention to securities regulations so as not to give an unfair advantage to certain investors.
Tabetha Boot, a communications manager for Whistler Blackcomb, said the company is following all procedures necessary for a public company.
“Whistler Blackcomb Holdings Inc. is the public company and it will comply with all securities and TSX disclosure and insider trading requirements,” she said in the e-mail.
What changes is the company’s communications strategies. Whistler Blackcomb can no longer simply put news releases out to the general public as it did before – that act alone can be seen as insider trading, or giving an unfair advantage to certain individuals that may be interested in investing in the company.
Any news release deemed “material” is posted to SEDAR.com, the website for the System for Electronic Document Analysis and Retrieval (SEDAR), which is used for electronically filing most securities-related information with Canadian securities regulatory authorities. It will also now put out its news releases through Canadian News Wire, along with its regular media distribution lists.
Securities regulations themselves are administered on a provincial basis, with the Securities Act regulating investments and transactions performed in British Columbia. The B.C. Securities Commission is the agency responsible for regulating trading in securities within the province.
Cristie Ford, a law professor at the University of British Columbia, said in an interview that there are four elements associated with insider trading under B.C.’s Securities Act.
First, you need to be in a special relationship; you need to have received material information because you were in that relationship; you need to have performed a transaction; and the material information you received can’t have been generally disclosed.
“Normally when something happens, with a company, they have a disclosure requirement,” Ford said. “If it’s a material change, if it’s substantial enough, something a reasonable investor would want to know, then the company would be required to issue a press release and then a material change report.”
A news release would be attached to the file and then it would show up on a data filing system like SEDAR. Once the information is disclosed through that channel, people in a special relationship are in the same position as everyone else.
Penalties for insider trading can vary. There are Criminal Code provisions that can result in imprisonment and fines and there’s a quasi-criminal provision under the Securities Act. Normally the Securities Commission would act on infractions first, but if it went to court then charges would have to be brought by Crown prosecutors.
Penalties, as outlined in the Securities Act, can see an individual liable for a fine of not less than any profit made through the trade; no more than $3 million; or no more than triple any profit made through the transaction.